India Decisively Dismantles 47 Years Of State Monopoly In Coal Mining As PM Modi Launches Auction For 41 Coal Blocks

Prime Minister Narendra Modi today (Jun 18) launched the auction process for 41 coal blocks for commercial mining, a move that opens India's coal sector for private players, The PM described it as a major step in the direction of India achieving self-reliance.

"Allowing private sector in commercial coal mining is unlocking resources of a nation with the world''s fourth-largest reserves," the PM pointed out.

The PM said that this auction process will result in major revenues to states and create employment besides developing the far-flung areas.

At present, despite being the world's fourth-largest producer (it produced 729 million tonnes in 2019-20) , India is also the second-largest importer of the dry-fuel (estimated imports of around 135 million tonnes)

The auctions follows a series of steps initiated by the Modi government to end the near monopoly of Coal India in the mining. India nationalised its coal industry in 1973 allowing domestic coal to be mined only by public sector companies.

On May 16, Union Finance Minister Nirmala Sitharaman announced commercial mining of coal by the private sector, ending government monopoly on the sector. In her fourth tranche of the economic package, she said commercial mining will be done on revenue sharing mechanism instead of the regime of fixed rupee/tonne.

In a bid to open up the coal mining sector to attract global bidders for auctions and boost FDI in mining and remove end user restrictions, the Union Cabinet in January this year promulgated the Mineral Laws (Amendment) Ordinance 2020. The ordinance made amendments to the Coal Mines (Special Provisions) Act, 2015.

In August 2019, the Modi government approved 100% FDI via the automatic route for coal mining.

Major global coal mining firms, which were so far forbidden from mining coal in India, can now invest in Indian coal sector. Indian firms too can invest in a commodity business where domestic supply falls short of the demand, opening up an opportunity to substitute 135 MT coal imports

According to estimates by the coal ministry, the commercial mining of these 41 blocks is expected to generate approximately INR 33,000 crore of capital investment in the country over the next five to seven years and contribute INR 20,000 crore revenues annually to the state governments. It will also lead to employment generation for more than 2.8 lakh people - direct employment to approximately 70,000 people and indirect employment to approximately 2.1 lakh people, as per the government.

Upon attainment of peak rated capacity of production of 225 million tonnes, the government said, these mines will potentially contribute about 15 per cent of the country’s projected total coal production in 2025-26, the Coal ministry said.

According to rating agency Crisil. the government's move to open up commercial coal mining could halve the annual expenditure incurred on importing non-coking coal to as much as Rs 45,000 crore because of substitution through domestic production. In fiscal 2020, India imported an estimated 180-190 million tonnes (MT) of non-coking coal costing over Rs 90,000 crore.