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Govt opens up coal mining for private sector, but fresh investments likely to be delayed

Finance Minister Nirmala Sitharaman on Saturday said nearly 50 coal blocks will be offered immediately for auctions and “any party could bid for the blocks and sell in the open market.”

Published: 17th May 2020 07:44 AM  |   Last Updated: 17th May 2020 07:44 AM   |  A+A-

Coal India

For representational purposes

Express News Service

NEW DELHI: The renewed focus on commercial coal mining with revenue sharing model is unlikely to attract new investment in the short term as private miners remain cautious about placing aggressive bids that would put the company in a difficult financial situation at the production stage.

As part of the fourth tranche of the Atma Nirbhar Bharat Abhiyan relief measures, Finance Minister Nirmala Sitharaman on Saturday said nearly 50 coal blocks will be offered immediately for auctions and “any party could bid for the blocks and sell in the open market.” There would be no eligibility of condition and only be upfront payment with a ceiling, she further added.

The decision to permit commercial coal mining would allow domestic mining firms like  Essel Mining, Sesa Goa, JSW Energy, Vedanta, Adani and global giants like Rio Tinto, BHP Billiton and Glencore to mine, sell and help ramp up production from India’s huge reserves — the world’s third-largest. 

Officials, however, say that investments will be accrued only over time. "The first tranche of coal mines auction that was scheduled for April has been has been delayed to July in the wake of COVID-19 pandemic," said a coal ministry official privy to the development. 

Commercial coal mining, in fact, was already enabled by amendments in the Mines and Minerals Development Regulation (MMDR) Act. Earlier in January 2020, the Union Cabinet approved the amended rules paving way for overseas miners and non-coal firms to participate in the bidding process. 

Firms will also be given incentives for quick production. The official added: "The plan is to keep the revenue share low to have active participation from companies but it’s a tough time to get fresh investments. Potential investors including multinationals aren’t willing to stretch their balance sheets."  

According to Madan Sabnavis, chief economist of Care Ratings, imports will come down in future which is good for the economy. “Prices will become more market-oriented and supplies increase. Investment should increase.” However, the government spending of Rs. 50,000 crore for the evacuation of coal will be over 3-5 years and will not be immediate, he added. 

On non-coals, the finance minister said 500 mineral blocks to be auctioned and there will be no distinction between captive and non-captive mines. Besides, the government will also introduce a joint auction of bauxite and coal blocks to enhance the competitiveness of the aluminium industry. Industry captains say, the move will help improve availability and access affordable minerals. "Iron Ore & Bauxite reserves are available in abundance and can now be exploited better as its use won’t be restricted to captive. The optimum utilisation of these resources will make Indian Steel and Aluminium producers extremely competitive globally,” said Sajjan Jindal, Chairman of JSW Group in a tweet.

The key, however, would expedite development works to realise the real economic benefits of the reforms, say officials. For instance, inordinate delays in land acquisition and statutory approvals need to be addressed. So far, it may be noted, that just a handful of the blocks which have been auctioned are operational. 



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