Opening the coal sector to private and foreign participation, a landmark reform initiated by the Narendra Modi government, marked the end of coal nationalisation and dubious captive mining era.
In future, blocks will be awarded without any end-use restrictions. However, this may not trigger a rush for investments in the coal sector. This is partly because, India was too late in opening the sector and, thereby, missed the era of coal rush that ended last decade.
During that period, ground conditions for mining became more challenging in India, due to environmental and land acquisition-related concerns, impacting the potential return on investment.
To add to the problems, the government is in the mood to auction the same blocks that were once created for captive use. This might help speed up the process. But on the flip side, these blocks are too small to attract global miners which have access to modern technology.
A better option would be to delimit the blocks and introduce open acreage system, as in the oil and gas sector, allowing bidders to decide on the size and kind of mines. For long-term gains, the government should insist on introducing modern practices, which are clearly lacking in the coal sector.
India’s socialist legacy had a telling impact on the coal sector. Nearly 45 years since nationalisation in 1975, the coal industry is no match to China that denationalised the sector in 1978. In 1980, China (381 million tonnes) was producing three times more coal than India (127 mt).
According to Global energy statistical yearbook, China produced 4.5 times more coal than India in 2018. With China restricting production in recent years, this number has come down substantially in recent years as the country restricted production.
The performance of India’s coal sector will look paler, given the vast availability of opencast reserves closer (within 300 m) to the surface, which are easier to mine.