Coal India set to lose its monopoly finally?

By: | Published: June 22, 2016 6:24 AM

As a precursor to commercial coal mining for private entities, the coal ministry has decided to allot 16 mines to coal-bearing states for sale of the fuel to any entity irrespective of end-use.

adani groupThe states will have complete independence on pricing of coal besides being able to rope in any entity as a mine developer and operator (MDO).

As a precursor to commercial coal mining for private entities, the coal ministry has decided to allot 16 mines to coal-bearing states for sale of the fuel to any entity irrespective of end-use. This will put these states in direct competition with state-run miner Coal India, which enjoys a near monopoly on mining coal for commercial purpose.

The states will have complete independence on pricing of coal besides being able to rope in any entity as a mine developer and operator (MDO).

However, the ownership of the mine will remain entirely with the state, coal secretary Anil Swarup told reporters. “This is a step towards allowing private players to enter commercial mining. The government will not only test the waters in the area, but will also have knowledge about how market forces work in commercial sale of coal,” Swarup added.

In theory, the state governments could rope in international mine developers to operate these mines. The state governments have been suggested to ensure that small industries’ demand for coal be met through these mines, but there is no bar on selling the dry fuel to any entity. “We expect that the incremental coal production from these mines would cater to the unmet demand of coal in the country, especially of medium, small and micro industries, and bridge the gap between demand and supply considerably,” Swarup said.

In 2014, the government amended the coal mining policy and enabled the entry of private entities into commercial sale of coal. However, the government has since cited tepid demand for coal blocks as a reason for not inviting private miners to set shop in the country. The last round of coal block auction late last year was cancelled due to poor response from unregulated sectors.

Out of the 16 mines identified by the government, eight will be allotted to host states while the other eight will be given to states that do not possess these mines within its geographical boundary.

The government has invited applications from the states and the results will be declared in August for both the categories. The decision to allot mines would depend upon the information furnished by the states regarding expected demand and other usage among other parameters. The nominated authority, which is in charge of coal block auctions, will make a final decision on allocation.

Of the identified mines, five belong to Madhya Pradesh while Telangana has contributed three blocks. The remaining belong to Chhattisgarh (2), Jharkhand (2), Maharashtra (2), and Odisha (1). These mines are part of the schedule III category as identified by the ministry, which means they will require 18-24 months to become operational. These mines have an annual peak production capacity of 40 million tonne.

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