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Coal India To Lose Monopoly As India Opens Coal Mining To Private Firms

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India will allow private and foreign companies to bid for coal mines without any end-use or price restrictions as the government cleared new auction guidelines to boost supply of the fossil fuel that powers over three-quarters of the nation’s electricity capacity.

The Cabinet Committee of Economic Affairs approved commercial coal mining for domestic and international companies “using new, safe and innovative technologies”, Minister of Railways and Coal Piyush Goyal said in a press conference in New Delhi today. “This will improve ease of doing business. All revenue generated from auctions will be given to states.”

Anil Agarwal, chairman of metals-to-mining giant Vedanta Ltd., told BloombergQuint that he now expects large global mining companies to participate in India’s coal sector. “BHP, Rio Tinto, Glencore, AngloAmerican will be keen to invest in India now. Vedanta will be very keen to participate in the coal sector.”

So far, private aluminium and power producers were allowed to bid for captive coal mines. The new norms have no such restrictions. The eased rules come as the world’s largest importer of coal looks to boost its power output. Yet, domestic coal production has not kept pace with demand. Inbound shipments are expected to rise as state-run Coal India Ltd., which produces more than 80 percent of India’s coal, has failed to meet targets, Bloomberg reported quoting Benjamin Sporton, chief executive at the World Coal Association.

The auction of mines will be conducted in a transparent manner, Goyal said without listing out the number of mines available for bidding. “We are in the process of identifying mines.” It will be a forward auction and people will be encouraged to come through the e-bidding platform, said Goyal. He didn’t spell out other details.

“Terms and conditions for commercial mining will determine if international bidders will participate in the bidding process,” Partha Bhattacharya, former chairman of Coal India, told BloombergQuint. “Size of coal blocks offered will have to be more than 40-50 million tonnes to make commercial mining feasible.”

The government recently allotted 11 mines to Coal India to reduce imports. And Goyal said Coal India unions have agreed to the government’s move to allow private miners as it will only improve efficiency.

Coal Secretary Sushil Kumar said revenue maximisation is “not the objective” of allowing the private miners in auctions. “We want most efficient miners to come in. Coal India can bid if it wants to, but the move primarily for the private sector.”

Shares of Coal India held on to gains after the announcement in line with the broader market.

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