New Delhi, Feb 20: In the most significant move involving the Indian coal sector since its nationalisation in 1973, the Union Cabinet on Tuesday decided to end the monopoly status of state-miner Coal India Ltd (CIL) by opening commercial mining for the private sector.
Railway and Coal Minister Piyush Goyal told reporters here after a Cabinet meeting that it had approved the methodology for auctioning coal mines to private companies in order to bring efficiency into the sector.
“The government has taken several measures in the coal sector, which will enhance competition in the system, bring efficiency in coal production, reduce coal import, save foreign exchange and generate job opportunities for the people,” Goyal said.
As per the new methodology, the auction would be held as forward bidding on an online transparent platform, he said.
According to an official statement, the methodology gives highest priority to transparency, ease of doing business and ensuring the use of natural resources for national development.
“There will no end-use and price restriction. It would be up to the players to bring down the prices in open market,” the Minister said.
The government’s decision will now allow both domestic and foreign companies to sell coal in the open market at market-determined prices.
Queried on the implications for Coal India, which has enjoyed near-monopoly for over 40 years, Goyal said commercial mining would also help the state miner because competition would help improve efficiency of all stakeholders.
“The quality of coal would improve and imports would come down. We want India to be self-sufficient in coal. The move aims to improve ease of doing business in India,” he said.
Goyal further said the revenue generated from coal mining would go to the mine-bearing states, while the Centre would not have any share in this income.
The government had already enabled some commercial mining earlier through the Coal Ordinance (Special Provisions), 2014. The Centre had then auctioned 29 mines to private companies and states for captive use in power, steel and aluminium industries.
A Coal Ministry statement said on Tuesday: “The auction will be an ascending forward auction, whereby the bid parameter will be the price offer in Rs/tonne which will be paid to the state government on the actual production of coal.
“There shall be no restriction on the sale and/or utilisation of coal from the coal mine.”
Coal-fired power plants in the country are currently facing acute fuel shortage. According to Central Electricity Authority (CEA) data, as of February 6, six plants had less than seven days of coal stock, while 14 others had fuel for less than four days’ use.
In this situation, while domestic production growth has been flat, coal imports have gone up sharply. Coal India’s production during the April 2017-January 2018 period has grown by just 1.6 per cent.