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India: Government Monopoly on Coal Finally Ends



By Samrat Sharma

May 18, 2020 - India's Finance Minister Nirmala Sitharaman today ended the government’s monopoly on coal by allowing commercial mining to introduce competition, transparency, and private sector participation through a revenue-sharing mechanism in the coal sector. In the fourth tranche of the announcement under the Atma-Nirbhar Bharat mission, FM Sitharaman removed the regime of fixed rupee/tonne pricing of coal. The Finance Minister added that the economy will benefit from the opening up of the coal sector. The Union Cabinet had already approved auction for coal mines in the country for commercial mining in February 2018.

Earlier only captive consumers with end-use ownership could bid for coal blocks. Now, any party can bid for it and sell in the open market, with liberalization of entry norms. Nirmala Sitharaman has also offered to immediately auction nearly 50 blocks. The move will help India’s economy with a cut in the country’s import bill, CARE Ratings said. Further, today’s liberalization will also help coal prices become more market-oriented, which would lead to an increase in supplies, it added.

Investment Should Increase

Among the other major announcements, incentives will be given to convert coal into gas, and auction for coal bed methane extraction. The government has pledged an amount of Rs 50,000 crore to be spent for evacuation infrastructure, after mining. Nirmala Sitharaman said that India has the third-largest valued coal mines, but still, the country imports it. Therefore, there is a need to reduce the import of substitutable coal and increase self-reliance in coal production, which is in-line with the Prime Minister’s Narendra Modi call for self-reliant India, she added.

Liberalizing Minerals Sector

The Finance minister today also said that the government is suffocating the minerals sector by regulating it and preventing it from producing what is required by industry as the regulation is required when there is shortage. Hence, to improve the condition, FM Sitharaman announced to remove the distinction between captive and non-captive mines to allow the transfer of mining leases and sale of surplus unused minerals, leading to better efficiency in mining and production. She added that the structural reforms are being carried out to boost growth, employment, and bring state-of-the-art technology in mineral exploration.

Meanwhile, the Finance Ministry also announced structural reforms in the defence production; airports, airspace management, maintenance, repair and overhaul of aircrafts. Privatization of power distribution companies in UTs and space, and allowing private players to use ISRO’s facilities were also among the major announcements.