The move to allow the private sector to mine coal for commercial use will boost both production and mining efficiency. Substitution of imported non-coking coal with domestic production can save about ₹30,000 crore of coal imports, according to a Crisil estimate.
The Cabinet Committee on Economic Affairs recently approved the methodology for auction of coal mines for sale without restrictions on end-use. Currently, about 94 per cent of the mining is done by government-owned Coal India and Singareni Collieries Company.
Despite the recent increase in domestic coal production, India still meets a fifth of its annual requirement through imports, which costs about ₹1 lakh crore.
Participation of private miners would increase competition, enhance productivity by facilitating the use of latest equipment, technology and services through higher investments, said Crisil.
Considering that almost half of the domestic coal reserves of 300 billion tonne, mostly non-coking coal, are yet unallocated, commercial mining can have far-reaching impact.
Production to improve
Sachin Gupta, Senior Director, Crisil Ratings, said coal imports, especially of the non-coking variety, should reduce once the proposed regulatory changes to admit private sector companies in coal mining materialise. It will also help the country come closer to its vision of producing 1.5 billion tonnes of coal annually by 2022, he added.
Being the largest consumers of non-coking coal power, cement and steel sectors will benefit the most. Last fiscal, India imported 150 million tonne of coal worth ₹59,000 crore.
As for coking coal, the benefits are moderate because India has limited reserves of this fuel and imported about 40 mt worth ₹41,000 crore last fiscal.
Nitesh Jain, Director, Crisil Ratings, said commercial mining can ensure sustained coal stocks for industries, especially power. This can support the credit profiles of thermal power generators, which are currently facing the risk of inadequate fuel.
The benefits from increased private participation in coal mining, though, will depend on faster environmental clearances, availability of adequate evacuation infrastructure.