Ease of mining coal needs to be accompanied by regulatory overhaul

| Updated on January 09, 2020 Published on January 09, 2020

To invite investor interest in coal, a regulator for the sector is essential, overseeing issues such as pricing, conduct of auctions and allocations to government entities

In an effort to boost domestic coal output and curb imports, the Cabinet has resolved to throw open coal mining auctions to all entities, as against permitting only entities already invested in coal. To facilitate wider participation, it has done away with so-called end-use restrictions, or the condition that coal be mined for specific uses, such as making power or steel. Therefore, commercial mining is expected to receive a boost, with foreign majors which are not invested in coal in the country being able to mine coal for the purpose of sale to other parties. The backdrop to this push for investment in coal comes from the fact, as mentioned at Wednesday’s Cabinet meet, that coal imports in 2018-19 were 235 million tonnes (₹1.71 lakh crore), of which 130 million tonnes were substitutable in nature — in other words, of a calorific content readily available in India. At the same time, of the 204 coal block licences that were cancelled by the Supreme Court in 2014, only 29 have been auctioned, with the Minister for Coal attributing this disinterest to end-user restrictions. Meanwhile, public sector Coal India, which employs about three lakh people, has been given an output target of one billion tonnes by 2023-24, against its current level of about 650 million tonnes. However, to invite investor interest in coal, a regulator for the sector is essential, overseeing issues such as pricing, conduct of auctions and allocations to government entities. Mining practices need an overhaul, and hazardous mines should be shut down. While the Minister has promised, both in the case of coal and other minerals, that mining and prospecting leases will be issued without delays, this should not translate into rampant misuse of forest land.

Analysts have pointed out that the post-2015 auction-based mechanism, while being a vast improvement on the discretionary allotment of mining blocs by the earlier ‘Screening Committee’, can be made more transparent. A close reading of the Coal Mines (Special Provisions) Act, 2015, suggests that non-transparent award of mining blocs is still possible. Both the design of auctions and the allotment process leave scope for improvement. What began in 2015 as a hurried response to the Supreme Court should be followed through with deeper institutional reforms.

However, the larger backdrop of the world moving away from coal and towards renewables (in India, renewables are slated to account for 40 per cent of power capacity by 2030, against about 20 per cent now) should not be forgotten. Climate change is an inexorable reality, and while coal will remain central to India’s energy needs its share in the overall mix will have to fall. Investor interest would depend on this fact as well, and this is already perhaps playing a role in India’s case.

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Published on January 09, 2020
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