Opening up coal mining welcome, but will it help?

This week’s Cabinet decision was prompted by the fact that India’s coal imports were rising sharply though we have the fifth largest global coal reserves estimated at 319 billion metric tons.

In a welcome move, the Cabinet has opened up coal mining to all players without any of the old command economy restrictions in a bid to attract more investors, especially large foreign investors who could help make the vital sector efficient. Earlier only state-run miners such as the mammoth Coal India, or steel mills and power plants that use coal were allowed to lease and mine the mineral. Open trade in coal was also a strictly taboo subject. Though technically 100% FDI was allowed in coal, none of the big global players such as BHP Billiton, Peabody Energy and Arch Coal were interested in coming to India due to the restrictions.

This week’s Cabinet decision was prompted by the fact that India’s coal imports were rising sharply though we have the fifth largest global coal reserves estimated at 319 billion metric tons. Between April-Nov 2019, India imported 161 MT of coal. The number has been rising every year and is on course to rise by 33% this year compared to imports three years ago.

However, there is no guarantee that this move would enthuse large multinational miners to flock here. For one there is no clarity on pricing. Will firms be free to set prices or will it be done by a state authority? Without a remunerative price, few would be willing to invest billions of dollars in the latest mining techniques. Further, miners have to currently pay huge amounts upfront to get a mine after winning an auction. This is such a big damper that auctions in the last few years either drew a blank or had a tepid response.

Despite promises for a single-window clearance, multiple layers of permissions from many agencies including the state government are needed, making starting mining operations an arduous task. The other problem is that coal has a ‘dirty fuel’ tag and few global lenders are willing to put their money into the sector. Under these circumstances we may see Coal India being replaced by local business houses without the much-needed flow of foreign investment and technology into the sector that could perk up production and improve the quality of coal sold in India.

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The New Indian Express
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