Published: June 1, 2020 |

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India is taking the next steps towards opening up the coal sector for commercial mining, which is key to the country’s broader goal to raise domestic production and cut imports.

The federal coal ministry plans to launch a tender for the auction of coal blocks for commercial mining on June 11 and embark on a series of domestic roadshows to attract companies to the first round of bidding, despite the Covid-19 pandemic denting investor confidence, economic growth and coal consumption prospects.

Travel restrictions during the virus outbreak had dented earlier ambitions of conducting international roadshows. But the government is still hopeful of receiving interest from domestic and international mining companies, as well as foreign investors, given that India has one of the world’s biggest resources of thermal coal and is taking steps to make doing business easier.

The ministry is also looking to rope in an Indian industry association to facilitate the meetings and roadshows. It hopes that recent steps such as a decision to expand coal transportation infrastructure and fast-track clearances for coal projects will attract investor interest in the sector.

It has also decided to offer only fully explored or partially explored blocks in the first round, as part of efforts to help companies make well-informed investment decisions.

The final list of mines to be put up for auction has yet to be confirmed, but the coal ministry has identified about 36 coal blocks with an estimated combined peak capacity of 212.5mn t/yr, a senior government official said. The ministry had earlier said about 50 coal blocks might be auctioned in the first round.

The auction underscores the government’s interest in bringing in more competition to the coal sector, which is dominated by state-controlled Coal India (CIL) and has struggled to rapidly raise output. CIL’s coal output contracted for the first time in about two decades in the 2019-20 financial year that ended on 31 March. It is also the 15th consecutive financial year that CIL has missed its government-set production target.

CIL is facing a steep task ahead as the government has asked it to raise production to 1bn t/yr by March 2024, up from 710mn t/yr planned for 2020-21.

Delhi hopes that increased output from CIL and the mines slated to be auctioned will help cut down imports drastically in the coming years. It is already discouraging utilities and other coal-consuming industries from importing coal as domestic stocks have reached record highs.

Imports have weakened in the last two months, as a nationwide lockdown dents coal consumption.

Source: Argus

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