The Lok Sabha has passed the Coal Mines Bill, which was tabled in the Lower House of the Parliament on Wednesday. The Bill will replace Coal Block Allocation Ordinance, promulgated by the Centre after the Supreme Court decided to cancel 204 coal blocks in September. Power Minister Piyush Goyal said that the legislation will boost coal production, increase transparency and will also lead to a drop in electricity prices.
In an interview to CNBC-TV18, Piyush Jain, Equity Research Analyst, Morningstar, discusses the impact of the move.
Below is the transcript of Piyush Jain’s interview with Kritika Saxena on CNBC-TV18.
Q: We have been seeing international prices fall; the China data doesn’t look good. How much of an impact would a domestic development as this create on the metal and power space as a whole?
A: First would be that definitely we will see increase in the coal production because after all the Bill intent is to increase the coal production. Outside if you are seeing in the softening in coal prices is because of slow down in demand and second is logistic expansion in china which is pushing down the cost of mining itself.
The same when you see in India it is actually you are going to have the private players and both the state owned players. If they are actually allowed to mine at optimal rate it will increase the rate of supply and over the next five years demand is going to increase considerably and if they are able to increase the production with the help of this bill our imports will decrease as there is a potential chance of India’s imports going to actually become the largest in the world after 4 years.
Q: Are there numbers that you have figured out in terms of the kind of a production uptake you are expecting?A: There are two things here, one is providing the railway connectivity which is the biggest bottleneck and second thing is if you are allowing the private players to do commercial mining which is under the trough and I am not sure whether that will become an eventuality but if we think about that then basically it will lead to increase in the production because till now in the past what you see the privates players were sitting on the coal block but it didn’t make any sense for them to actually sell at notify prices or they were not allowed itself and they wont like to sell at the notify prices which Coal India sells which is far below the market price. So, they did not have any incentive to do any commercial mining. If they are allowed it will increase the rate of production because they will like to mine more than. So, on the private side it is progressive if they are allowed but on the state owned side I think what will be the game changer would be the railway connectivity because the coal mines was never an issue the issue is basically the evacuation the number of rake and also the rail connectivity.
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