India opens up coal mining sector to investments, discards end-use criteria

The Union Cabinet has approved the opening up of the coal mining sector, from the previous monopoly held by Coal India Limited (CIL) while discarding end-use criteria.

January 8, 2020

The promulgation of the Mineral Laws (Amendment) Ordinance 2020 has been approved to attract investments in coal mining

Mining lease clearances due to end in 2020 have been given a two-year extension in their validity period

With this move, companies present in other sectors can also participate in coal mining, while captive end-use criteria are discarded

The government expects to attract investments from Indian and global corporations, besides mining majors such as Peabody, BHP Billiton, and Rio Tinto

According to media reports on January 8 citing an official announcement, the Union cabinet has approved the opening up of the coal mining sector, from the previous monopoly held by Coal India Ltd (CIL). Additionally, mining lease clearances due to end in 2020 have been given an extended validity period of two years. The promulgation of the Mineral Laws (Amendment) Ordinance 2020 has been approved by the Cabinet to attract investments in coal mining. The advantages will be twofold: companies present in sectors apart from steel and power can also participate in coal mining, while captive end-use criteria are discarded.  

India has the world’s fourth-largest coal reserves, and 85 per cent of India’s coal is produced by CIL, the largest coal miner in the world. However, the country still imported 235 million tonnes of coal in 2019, Coal and Mines Minister Pralhad Joshi said at a media briefing. He added that Coal India has been tasked with producing one billion tonnes by 2023-24, but as production was still likely to fall short of demand, there was a need to introduce private players in the sector. According to the Ministry of Coal’s Annual Report 2018-19 released in December 2019, CIL has projected a growth rate of 8.2 per cent till 2024-25 to meet the rising demand for coal-driven fuel within the nation. The government expects to attract investments from Indian and global corporations, besides mining majors such as Peabody, BHP Billiton, and Rio Tinto.

This reform is expected to bring efficiency into the coal sector by moving from monopoly to competition. It will increase participation and allow the use of cutting-edge global technology into the sector. The higher investment will create direct and indirect employment in coal-bearing areas. This measure will ensure assured coal supply, accountable allocation of coal, and affordable coal – leading to affordable power prices for consumers. As the entire revenue from the auction of coal mines for sale of coal would accrue to the coal-bearing States, this methodology shall incentivise them with increased revenues which can be utilised for the growth and development of backward areas, especially those in the eastern parts of the country.