Foreign companies may eventually be allowed commercial coal mining in India and dig deep into reservoirs estimated to contain the world’s fifth largest deposits of the fossil fuel.
The Coal Mines (Special Provisions) Ordinance 2014 -- which the President signed on Tuesday -- states that foreign companies with units or joint ventures “may carry on coal mining operations in India in any form either for own consumption, sale or any other purpose…selected through auction by competitive bidding…”, virtually lifting controls in the controversy-marred sector.
Currently only steel, power and cement companies are allowed to own mines for their own use.
The Ordinance, which the Union Cabinet ratified on Monday, could also allow commercial use of mines, a move that would enable private companies to get into trading coal.
It will also likely open up the doors for entry of companies like BHP Billiton, US firm Peabody and Rio Tinto.
India’s estimated coal reserves now stand at 301 billion tonnes, the fifth highest in the world, but companies still have to import as large number of mines remain unused.
More than half of India’s power is produced from coal.
State-owned Coal India Limited (CIL) accounts for nearly 80% of the country’s coal output, but falls short of meeting India’s rising energy demands.
India’s coal imports jumped more than three times in the last eight years—from 41.2 million tonnes in 2005-06 to 140.6 million tonnes in 2012-13.
The new auction-based system will replace the earlier controversial policy of allotting coal blocks based on the bureaucrats’ panel, which the Supreme Court had struck down last month as arbitrary, cancelling 214 blocks allotted since 1993.
Analysts feel the government should not miss out on this opportunity to bring out a comprehensive policy to save coal mines in environmentally rich and thick forest areas.
“The government has set an ambitious target of framing rules for mapping the coal reserves and putting them on block for e-auction. Instead they should work at creating a national mining policy,” said Sudip Srivastava, a senior Supreme Court advocate specialising on the mineral sector and one of the petitioners for repealing the coal blocks allocated since 1993.