India is going to allow international companies to mine and sell its coal, marking a historic landmark after four decades of restricted commercial mining for foreign businesses. Those foreign firms that would like to use this opportunity must be, however, registered locally. This step is part of broader efforts by the Indian government to put an end to a chronic lack of coal in the country, which cripples power plants and limits imports of fuel. The government of Narendra Modi will have also spent about $1 billion by 2019 to purchase railway wagons and transport coal from the mines in remote areas.
Last month, the government already made provisions for foreign private firms to commercially mine coal, although it did not set any schedule for the time when the digging should commence. The decision is believed to open the door to the world’s major players, such as Rio Tinto and BHP Billiton, but under the new law, “any company registered in India can bid when a commercial coalfield auction takes place” Mr Anil Swarup, India’s Coal Secretary, commented.
Opening up the sector is hoped to boost private coal production to about 400 million tonnes by 2019 from less than 50 million tonnes last year. Currently, only cement, steel, and power companies have the opportunity to mine coal for their own consumption. The leader of the Indian commercial mining is the state-run Coal India Ltd, which is also the world’s largest fuel mining company. However, the firm is largely inefficient as its unionised workers do not want to adopt mechanization out of fear of job losses. This causes inefficiencies that are partly responsible for lower output. However, Coal India is still expected to beat its production target of 507 million tonnes in the fiscal through March despite the fact that the production has lagged behind set targets over the last six years.