The government of India has recently introduced a material policy change as part of its ‘Atmanirbhar Bharat Abhiyan’, opening-up coal mining activities to the private sectoralmost after 5 decades .
India has among the largest coal reserves in the world. But the quality of its coal is poor – because of high ash content, it produces less energy and more pollution per tonne than Indonesian and Australian coal, which dominate the world market.
A short history of Coal Mining in India
In 1973, the resource was nationalised, with all coal mines owned by Coal India Limited. As India liberalized its economy, the government allowed private companies to mine coal for captive use –i.e, coal can be used as raw material for their own industrial unitsand not for commercial sale
Well, a discretionary and unregulated allocation process spawned corruption in the sector, as companies paid bribes to government functionaries to get mining rights.
And the father of all scam, the coal allocation scam or ‘Coalgate’ engulfedthe UPA government in 2012 estimating total loss of Rs. 1.86 lac crore to the economy
To change the allocation process of mines and to bring transparency government passed a new law in 2015, which would allow companies to compete for a scarce natural resource through open bidding
So, what was changed?
The first round of auctions in 2015 saw winning prices with many firms placed aggressive bids. In the years that followed, some of the winning companies turned bankrupt and the coal blocks did not come into operation. Excel Projections didn’t worked well for them..
Meanwhile, India’s coal imports rose to 242 million tonnes in 2019-20. Imagine largest producer of coal being the net importer of coal. Weird Right ?
In March this year government decided to raise domestic coal production and bring down imports and save foreign exchange, by ending the captive coal regime and clearing the path for commercial coal mining.
Since this new policy paves way for commercial mining, there will be no restrictions on sale or utilisation of coal. This should incentivize private players to bid for mines, as they can sell this coal at competitive prices.
We have few concerns before we cheer up with the government move
Our first concern is that this may not offer any immediate respite. Thermal power plants in India are already stressed and are unlikely to survive long enough to reap the benefits.
Secondly, the full benefits can only be seen when the legal and administrative regime is adequately amended to ensure that land acquisition, environmental and forest clearances are fast-tracked with no bureaucracy hurdle. Can we expect that atleast ?
While this new regime is certainly a welcome move and having said that, on the road to becoming a self-reliant country with respect to energy dependence, this is a monumental step forward.