Fuel for reform {Energy}

Why in news?

The government’s decision to open up the coal mining sector to private companies is a long-overdue reform. It will end the 41-year-old near monopoly of Coal India Limited over commercial mining.

Why does India need to import coal?

The premier miner’s lacklustre performance is one reason for the country having to import coal despite being the world’s third-largest producer of the fossil fuel.

Companies, which produce electricity for their own use, “are being pushed towards costlier imports because they are getting barely half the supplies contracted from CIL.

Consequence of CIL monopoly

CIL’s monopoly has also reflected on the quality of coal produced in the country. Indian coal has an average ash content of about 45 per cent — far higher than the 25-30 per cent that ensures efficient power generation.

The efficiency of the country’s thermal power plants has also been compromised because they have to contend with stones and boulders in the coal they procure from CIL

Background

Coal mining in India

Coal mining in India began in 1774 when John Sumner and Suetonius Grant Heatly of the East India Company commenced commercial exploitation in the Raniganj Coalfield along the Western bank of Damodar river. As on 31 March 2015, India had estimated coal reserves of 306.6 billion metric tons (338.0 billion short tons), the fifth largest coal reserves in the world. India is the fourth largest producer of coal in the world, producing 536.5 million metric tons (591.4 million short tons) in 2014.

Due to high demand and poor average quality, India is forced to import high quality coal to meet the requirements of steel plants. India’s coal imports have risen from 43.08 million metric tons (0.04749 billion short tons) in 2006-07 to 199.88 million metric tons (0.22033 billion short tons) in 2015-16. India’s coal exports rose from 1.55 million metric tons (1.71 million short tons) in 2006-07 to 2.45 million metric tons (2.70 million short tons) in 2009-10, but subsequently declined to 1.25 million metric tons (1.38 million short tons) in 2015-16.

Nationalisation of coal mines

Right from its genesis, the commercial coal mining in modern times in India has been dictated by the needs of the domestic consumption. India has abundant domestic reserves of coal.

Most of these are in the states of Jharkhand, Odisha, West Bengal, Bihar, Chhattisgarh, Telangana and Madhya Pradesh. On account of the growing needs of the steel industry, a thrust had to be given on systematic exploitation of coking coal reserves in Jharia coalfield. Adequate capital investment to meet the burgeoning energy needs of the country was not forthcoming from the private coal mine owners.

Denationalisation of mining

Parliament enacted the Coal Mines (Special Provisions) Act, 2015 in March 2015 containing provisions enabling the government to allocate coal mines through auctions. The law also permitted private players to mine coal for use in their own cement, steel, power or aluminium plants.

On 20 February 2018, the Cabinet Committee on Economic Affairs (CCEA) permitted private firms to enter the commercial coal mining industry in India. Under the new policy, mines will be auctioned to the firm offering the highest per tonne price. The move broke the monopoly over commercial mining that state-owned Coal India has enjoyed since nationalisation in 1973

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