Government may allow only commercial mining of coal in future

The government may in near future scrap the present system of allocating coal mines for captive use and instead only auction mines for commercial use to private as well as foreign companies with a view to boost domestic product and cut imports, a top official said.

The move, which would not just help attract foreign investment but also bring in efficiency and promote competition, follows government's decision of opening up the coal sector to commercial mining by private entities.

"We can also take a decision that in future only commercial mining will be done.... things are evolving, we will see. One experience is there of end-use auctions. This will be another experience of commercial mining auctions. So we will see and compare whatever is better for the country in the longer term," Coal Secretary Susheel Kumar told PTI in an interview.

The Cabinet had last week approved auctioning of coal mines to any firm bidding the highest per tonne price. At present, private sector firms are only allowed to mine coal for use in cement, steel, power and aluminium plants. Coal India Ltd (CIL) is the sole commercial miner with 80 per cent market share.

Terming commercial mining a "full-fledged reform" in the coal sector, the secretary said the government is evaluating whether it is advisable to go for end-use restrictions.

"There is an idea floated by few people which we are examining whether it is advisable to go for end-use restrictions because that is a half-hearted reform. It is not a full-fledged reform. Commercial mining is a full-fledged reform so that is something which we are evaluating and whatever is in the best interest of the country will be done," Kumar explained.

Stating that the country was slowly moving towards free market in the coal sector, the secretary said CIL ought to improve its efficiency else it "will not be in the market." On deadline for commercial mining auctions, the secretary said : "Our expectation is that we will complete the process of auction by March 2019."

He however did not divulge the number of blocks to be put for bidding in the first tranche.

The government had in 2014 auctioned 29 mines to private players and states for capital use in power, steel, aluminium and cement plants. In the following year, it permitted the allotment of coal mines to states for mining and commercial sale to medium, small and cottage industries. Close to 16 mines were allotted to several states.