When the Supreme Court, in 2014, cancelled all existing licences of coal mines on grounds there were no objective criterion on the basis of which the mine leases had been given out, most expected this to result in large-scale commercial mining by the private sector, including many firms from overseas.
When the Supreme Court, in 2014, cancelled all existing licences of coal mines on grounds there were no objective criterion on the basis of which the mine leases had been given out, most expected this to result in large-scale commercial mining by the private sector, including many firms from overseas. Given the vastly superior productivity of top global majors as compared to the public sector Coal India especially, this was welcomed. Yet, that did not happen and when the government finally did come out with a policy that allowed the private sector to also participate in the auctions process, the only companies that were allowed were ‘actual users’. That is, a Tata Steel or a Jindal Power could bid for a coal mine, but a Rio Tinto could not. This made little sense since, while no one doubted the efficiency of a Tata Steel, its expertise lay in making/selling steel, not in coal mining. What made this especially odd is that, when the NDA was last in power, the government had brought in a Bill in the Rajya Sabha to permit commercial mining. The reason given by the government, at that time, was that since the SC verdict had created an artificial, and huge, scarcity of coal, allowing commercial mining could result in a situation where prices would rise significantly. Much better, the government reasoned, to let actual users bid and get the immediate shortage out of the way and, over a period of time, examine the possibility of commercial mining. The saving grace was that the policy allowed commercial mining even if there was no clarity on when this would happen.
Going by a report in The Indian Express, the government now plans to offer 10 mines for commercial mining of coal—four of these will be in Odisha, four in Chhattisgarh and one each in Madhya Pradesh and Jharkhand. This is a big step forward and, in retrospect, it does appear the government strategy of auctioning after the immediate shortage was taken care of was the correct one. While these mines have a large capacity, going by the history of global mining giants, these could go up significantly as the exploration will be more intensive. Australia’s mine reserves, for instance, have risen more than three times in the last 30 years as compared to just 20% in the case of India. Indeed, in just a few years of prospecting in Madhya Pradesh, the Australian Rio Tinto has found more diamond-bearing sites than PSU mining firms did for decades. And when Anil Agarwal bought the state-owned Hindustan Zinc, the company was producing 1.5 lakh tonnes of zinc with reserves of a few years being prognosticated—within a decade, the production had risen to 1.2 million tonnes and estimated reserves to over 30 years. While private mining has been allowed in non-coal for a long time, with coal also being opened up, India can look forward to having some truly global-scale players coming up. The implications of this for both jobs as well as royalties for state governments are truly large. As Vedanta’s Anil Agarwal never tires of saying, with 3.5 billion tonnes of bauxite reserves, India produces just 1.5 million tonnes of aluminium as compared to China’s 20 million tonnes with no bauxite reserves.