Liberalization of Mining Sector

Easing of Mining Regulations is a Welcome Step, but Interests of Coal India must also be Protected

Liberalization of Mining Sector
Liberalization of Mining Sector

In January 2020, the Union Cabinet approved an ordinance in a view that it would attract huge investments and assist in modernizing the under-exploited & inefficient coal sector of India. The Mineral Laws (Amendment) Ordinance, 2020, amends the prevailing provision and puts an end to the restrictive end-use criterion for coal mine block allocations. Previously, coal washeries and companies which needed coal as raw materials such as iron & steel makers and power generators could only bid for coal mines. The Cabinet’s decision to liberalise the norms for entry into coal mining sector and relaxing the regulations on mining & selling coal in the country will now enable any companies having financial strength and expertise to bid for blocks & freely sell the coal to buyers to their choice. Subsequently, the end-use restrictions used inhibit the development of a domestic market for coal. The decision to remove the restrictions promises to expedite the projects & paves way for commercial mining of coal in India. It aims towards reducing the coal imports and may also put an end to Coal India Ltd’s monopoly.

India has the fourth largest coal reserves and is one of the largest producers of coal in the world. Output of 2018-19 was 729 million tonnes. However, the country still had to import 235 million tonnes in the same year – a hike from 190 million tonnes imported in 2016-17. In terms of value, imports of $26.18 billion were done in 2018-19, a rise from $15.76 billion in 2016-17. Coal & mines minister Pralhad Joshi said that out of 235 million tonnes imported, 135 million tonnes could have met from domestic reserves. This leap in coal imports, on top of oil & electronics imports, has exerted a tremendous pressure on the current account of the country. The liberalization of norms together with past initiatives of enabling 100% FDI in commercial coal production will help in increasing the production and also subsequently reduce coal imports.

How will this be Beneficial?

The move is expected to bring in large investments, give access to sophisticated technology, increase the efficiency level and most importantly create employment opportunities in the mining sector. Sophisticated modern technology will also make mining cleaner and safer which will also be beneficial for the environment. Additionally, there will be an increase in the revenue which can be utilized for developing of the surrounding mine areas and for the betterment of the inhabitants. Jharkhand, West Bengal, Chhattisgarh, Odisha, Telangana, Maharashtra and Madhya Pradesh are expected to get most benefit.

However, to reap the benefits, more needs to be done by the government – such as whittling the required time for approvals of mining leases & easing the clearance procedures apart from the availability of infrastructure and kind of blocks offered.

Drawing Inferences

The Centre’s decision will encourage participation of private players in the auctions that will be held to reallocate the captive bocks which the Supreme Court had cancelled in 2014. In 2014, the Supreme Court of India had cancelled allocation of 204 blocks on learning that the allocations were arbitrary & illegal. Since then, only 29 blocks have been auctioned and the rests are yet to be reallocated. Production from captive blocks in 2015 was 43.2 million tonnes which came down to 25.1 million tonnes in FY19. Centre’s decision of relaxing the regulations will facilitate entry of major multinational mining players like BHP Billiton, Rio Tinto, Glencore and Anglo American to invest in India and bring in latest sophisticated technologies for enhancing the productivity.

The opening up of coal mining will end the monopoly status enjoyed by the Coal India Ltd (CIL). Coal Minister Pralhad Joshi told that CIL will be allotted adequate blocks and labour interest will also be taken care of. The centre has set a target to produce one billion tonnes by 2023-24. Coal India Ltd. is a Maharatna PSU where huge amount of public resources have been invested over the years. It is the responsibility of the government to ensure that by allowing entry of private players, CIL does not get compromised in the way BSNL has been. The integrity of the process is a key factor, so that the auctions do not translate into winners’ curse as it previously had happened in case of telecom sectors. It must be kept in mind that CIL is a listed company and is a national asset and also employs approximately three lakh people. It needs to be nurtured even if private players are allowed.

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