Commercial Coal Mining to Start in India in FY18

The coal market in India has been a subject of frequent changes with the central government implementing new initiatives every now and then.

The next initiative in the offing for the coal industry in the country is commercial coal mining,something non existent in the country for the past 40 years. Commercial Coal Mining’ is mining of coal, especially by private players, and selling to end users of any sector. Stated in other words this type of coal mining involves extraction of coal from mines by private companies and selling the produce without any specific end use. The private miners are free to manage production, pricing and strategy without any restrictions.

Ever since nationalization of coal blocks in 1973, coal mining has been a monopoly of the state run behemoth Coal India Limited (CIL), the largest coal miner in the world. CIL hitherto regulates coal mining and fixes coal prices in the country.

The decision to open up coal mining to private players is influenced by the need to speed up domestic coal production in the country as the ambitious target of increasing coal production in India to 1.5 billion ton per annum by 2020 is in place. Commercial coal mining is estimated to contribute 500 mnt in the target and that will also help in lowering imports. The coal output through commercial coal mining will mainly be used to cater to the demand from the small, medium and micro industry segments. Besides,private coal mining will generate additional revenues for the coal bearing states. Although a concrete plan of action is yet to be charted out, preliminary developments in the Coal Ministry indicate that 25 coal mines, some will be Coking Coal and others will be Non Coking Coal, were earmarked for deploying in the commercial mining process. Out of the total mines kept aside for commercial coal mining, 2 will be allotted and the rest 23 will be auctioned. In the first phase 30 mnt of coal reserves will be put for bidding in commercial coal mining in the country.

As a matter of regulations, the Government of India can open up commercial coal mining for private players in accordance to the Coal Mines Special Provision Act of 2015. Several Indian conglomerates, such as Adani Group, Jindal Steel and Power Limited and GMR as well as global coal miners will be able to take part in the commercial coal mining process. As part of the broader plan, Coal Ministry also intends to attract global giants, like BHP Billiton, Rio Tinto and Glencore into the commercial coal mining sphere of the country.

Nevertheless, commercial coal mining is expected to entirely transform the facet of the coal industry in the country.With the actuation of the coal mining, involving private players, the four decade long sole monopoly of CIL in the Indian coal mining arena will slacken and competition will brew up among the involved players. Moreover, coal prices in the country will also be aligned to the price movements in the international markets as the private coal miners will maintain the import price parity so that buyers in the country are not attracted towards the international markets because of price differentials.
Coal production has been increasing in India due to the efforts of the government to scale up the domestic coal output.

Source : Steel 360 Magazine May-17 Issue