While the government tries to deal with Coal India Limited’s (CIL) unions’ opposition to divesting a mere 5% of its shareholding in the PSU, it has far larger battles to fight. As a result of CIL’s inefficiencies, India already imports 19% of its coal requirements and this is projected to rise to 27% in a business-as-usual scenario by as early as FY17, according to a consulting paper done by Metis Energy for Ficci. In other words, that’s a critical import dependence and, apart from the significantly higher global prices, this also chokes up India’s ports. Another issue that needs considering is that, in 2007 this was pointed out by the TL Sankar committee, CIL does not have the expertise to mine at more than 200 metres for open-cast projects and 350-400 metres for underground mining while the norm in the US and Europe is 1,800 metres.
In such a situation, the government has no option but to open up mining to the private sector—captive mining offers a partial solution in that the mining may be more efficient than CIL, but it is unlikely to be of the same quality as that by global leaders like BHP Billiton. It is worth keeping in mind that, around a decade ago, India’s oil and gas sector looked quite unpromising as well, but with the entry of private firms, India’s prospects look a lot better than in the past.