The world’s largest coal miner is likely to hold on its crown as competition in India is going to increase as the union cabinet on 28th August 2019 has approved 100% FDI under the automatic rule in mining, processing and, sale of coal in India. This opened up opportunities for foreign and Indian companies. This will help to reduce coal imports to India and create an efficient and competitive coal market in India.
Under the automatic rule, 100% FDI is approved for coal mining and setting up of associated infrastructures, such as washeries. Washeries are the place where coal is washed. FDI permitted setting up of processing plants such as washeries on the condition that the coal company shall not do coal mining or sell washed coal in the open market. They are allowed to supply the processed coal only to those who are supplying them with raw coal. With the new additions of thermal power plants and steel mills, India’s coal demand is expected to rise over the years. It makes India a bright spot for coal miners in the world. It will help to create an efficient energy market and help to reduce coal imports. It will also help India gain access to high-end technologies that are used for underground mining, used by global miners.
India’s coal sector was nationalized in 1973. Coal India Limited (CIL) is the state-owned coal mining corporate established in 1975. CIL is the single largest coal producer in the world. But this move will reduce the dominance of CIL in the coal industry. CIL has an advantage over other private companies as it gets mines for free.
The privatization of coal mining will bring innovative and sustainable technologies and practices that will help to boost output. The private companies face initial problems such as allocation of coal mines, which could be possible only through auctions, and also after winning auctions, acquisition of land for mining operations can be time-consuming. Getting approval from local, state and central government can also be time-consuming. Shortages of railway rakes for transporting the commodity can also hinder the companies.
100% FDI in the mining sector will gather interest from global players, but more has to be done to convert that interest into actual investment. Right policies such as single-window clearance to ensure approvals on environment clearance, mining leases, and land acquisition are to be processed in a time-bound manner. The Coal Mines Special Provision Act 2015 provides for opening up commercial coal mining to public and private entities. The government had laid out guidelines for commercial coal mining. With the privatization of coal mining in India, global companies such as BHP Billiton, Peabody Energy, Rio Tinto, Glencore, and other similar companies can now be able to own coal mines and carry out related operations in India, which will boost economic growth by attracting high investments into the country.
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