Coal news and updates

New Delhi has paved the way for private sector companies to mine coal commercially in India, as fuel shortages threaten to choke industrial activity in Asia’s third-largest economy.

The 27-page ordinance published on the coal ministry’s website may call an end to the public sector’s monopoly on coal production, stating that a company or joint venture “may carry on coal mining operations in India, in any form either for own consumption, sale or for any other purpose”.

 

 

The new ordinance comes just weeks after the Supreme Court cancelled more than 200 coal licences held by private sector industrial groups, following allegations of corruption and mismanagement in their allocation.

Though industry analysts say the details of the order remain unclear, it could open India’s coal mining sector radically – an early sign that the country’s new pro-business government, led by Prime Minister Narendra Modi, is ready to deliver hard-hitting reforms.

Private sector companies in sectors such as power and steelmaking have so far been handed use of so-called “captive” coal mines, with output used to fuel their plants rather than sold on the open market.

Any moves to liberalise the sector could have big repercussions for Coal India, the state-owned group that controls some 80 per cent of production in the country and is often criticised for being the unproductive monopoly behind the country’s acute fuel shortage.

Neelkanth Mishra at Credit Suisse in Mumbai said the clause in the new ordinance suggesting future openness to commercial mining was “a welcome first step” in what is likely to be a longer battle to open up India’s state-dominated mining sector.

“This would end Coal India’s monopoly in India on marketing of coal, and is likely to invite the wrath of Coal India unions as well as officers,” Mr Mishra wrote in a note following the release of the ordinance. “That the government is willing and prepared to indulge in brinkmanship shows its confidence.”

 

Industry analysts are waiting for comments from legal experts on the details of the ordinance – in particular, on the possibility that global mining companies will be allowed to operate in India via subsidiaries.

“It’s actually somewhat cagey,” said Sasha Riser-Kositsky, an analyst at Eurasia Group, a risk consultancy. “There are a lot of details that need to be filled out.”

The type of mining liberalisation suggested in the ordinance is unlikely to be introduced without further changes to legislation.

These would need to be passed in India’s upper house of parliament, where Mr Modi and his allies control only about a quarter of votes, allowing opposition parties to block any controversial measures.

“It looks like this is more of a sign of future intention rather than a decision,” said Kameswara Rao, an energy specialist at consultants PwC in India. “It is also not at all clear why any private miner would want to come into India without much clarity on how the system operates, especially the role of Coal India.”

 

Source: ft.com