Good Ol Coal the New Auction Hero

Context: With the introduction of commercial mine auction in the coal sector, India is shifting its focus from revenue maximisation to maximum coal availability to address coal production needs, provide large-scale employment, attract investment and ensure energy security while saving precious foreign exchange. 

Fundamental Shift in Coal and Mining Sector

• Transparent mechanism in allocation of coal blocks for captive use through Coal Mines (Special Provisions) Act, 2015 (via auction process).
• Rising coal stocks at the power plants (sufficient for 30 days) unlike earlier when there was insufficient coal stocks (less than seven days) with India as the second-largest producer of coal.
• Unlike Nationalisation era, which restricted the role of the private sector in the coal sector, nowadays coal sector is attracting investment from the private sector also.
• Coal India Ltd (CIL), the world’s largest coal miner, has registered an unprecedented increase in production.
• Unfriendly provisions like law excluding companies not having mining operations in India from participating in auctions have been removed or amended.
• Economic efficiency based coal mines auction (unlike earlier auction process that relied on need of the single captive-user) and consequent gain sharing between the coal mining company and coal buyer. 
• Equitable system of sharing of revenues, moving away from fixed rates to an ad valorem system.
• Simplified and less time-consuming mining plan approval process (30 days instead of earlier 90 days).
• Issues

• Rising demand and import of coal from India even after decreasing CAGR of coal import from 23% to 2% and having fifth-largest reserves in the world. 
• The policy of allowing private coal mining to captive users had failed to enthuse the private sector. 

Way Forward

• Inviting global coal-mining firms to invest in Indian coal sector to introduce their best practices. 
• Invest in a commodity business where domestic supply falls short of demand.