KOLKATA (miningweekly.com) – In a bid to rein in the spiralling coal import bill, affected as it is by the double whammy of rising import volumes and the weakening of the rupee, the Indian government is considering tweaking captive mining restrictions to ease supply-side pressures.

The Indian government has initiated consultations with relevant Ministries to allow for excess production, from captive mines allocated to various user industries like power generation and steel production, to be sold to Coal India Limited (CIL) to increase supplies in the domestic market.

According to an official in the Coal Ministry, various industries which had been allocated coal mines for captive consumption only, could be permitted to increase production beyond their own requirements for sale to CIL.

However, the official added that the key issue to such a relaxation having its intended effect would be the pricing of coal sold to CIL. If such pricing were to be based on import parity prices, the government could face opposition on the grounds that this would provide additional fiscal benefit to private sector captive coal miners.

To avoid such a controversy, the coal sales from captive miners would have be conducted through an administered price regime, which, again, may not offer any incentive for the captive miner to increase production beyond their own requirements, the official said.

However, in view of the rising imports of coal and the total import bill on that account worsening, owing to a steady weakening of the rupee against the dollar, the government was desperate to explore every avenue of increasing domestic supplies.

Warning against the rising import bill on account of coal, and its negative impact on the steadily widening current account deficit (CAD), chairperson of the Prime Minister’s Economic Advisory Council, C Rangaranjan, said that coal imports had increased by 40% to 110-million tonnes, drawing down $18-billion from foreign exchange (forex) reserves, double the value from a year ago.

The Indian rupee, which was currently at an historical low at Rs 59.68 to a dollar, has depreciated 4% against the dollar since early this month and 10% since May.

Coal Ministry officials said the coal import bill would increase sharply and put further pressures on the forex reserves and the CAD even if imports in volumes terms were to remain at the same level as last year of 110-million tonnes.