Context

The government eased the regulations for coal mining in India.

What does the opening mean?

• Removal of restrictions: Until now there were restrictions on who could bid for coal mines.
• Only those in power, iron and steel and coal washery business could bid for mines.
• The bidders needed the prior experience of mining in India.
• Who can buy now?: The move will open up the coal mining sector completely, enabling anyone with finances and expertise to bid for blocks and sell the coal freely to any buyer of their choice.

Benefits of opening

• More value extraction: The restrictions limited the potential bidders to a select circle of players and thus limited the value that the government could extract from the bidding.
• Now the Government can extract more value from the auction of the blocks.
• Development of coal market: Second, end-use restrictions inhibited the development of a domestic market for coal.
• Job creation: Large investment will create jobs in the sector.
• Increase in Demand: It will also set off demand in critical sectors such as mining equipment and heavy commercial vehicles.
• Technology infusion: The country may also benefit from an infusion of sophisticated mining technology, especially for underground mines, if multinationals decide to invest.
• Ease on Current account: In value terms, coal imports touched $26.18 billion in 2018-19, up from $15.76 billion in 2016-17.
• This surge in coal imports, along with oil and electronics imports, has exerted pressure on the country’s current account in recent years.

Why the move matters

• 70 % of energy production in India is coal-based.
• Until now Coal India was the only commercial miner in the country for more than four decades accounting for 82 per cent of the coal production in the country.
• The productivity of coal is still an issue in the country. Coal is a very crucial raw material that is used in the power sector and also in cement and metal sectors.

Way forward

The relaxation in regulations, along with previous initiatives such as allowing 100 per cent foreign direct investment through the automatic route in commercial coal production, can aid in boosting coal production in the country and help reduce imports.

Coal India Limited (CIL) has to be nurtured even as private players are welcomed.

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