India Eases Coal Mining Laws In Bid To Attract Investment, Participation In Auctions
Day labourers fill baskets with coal at an open pit coal mine in the Bestacolla Colliery in Jharia, Jharkhand, India. (Photographer: Sanjit Das/Bloomberg)

India Eases Coal Mining Laws In Bid To Attract Investment, Participation In Auctions

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The Union Cabinet has approved an ordinance to India’s mining laws, a move that will encourage participation of global players in the country’s coal mine auctions.

Oil and Steel Minister Dharmendra Pradhan, along with Coal Minister Pralhad Joshi, said Wednesday the promulgation of Mineral Laws (Amendment) Ordinance, 2020, will pave the way for growth of the coal sector and allow foreign direct investment.

The ordinance will also do away with end-use restrictions and allow sectors other than power and steel to participate in coal mine auctions.

"We have taken a historic decision by promulgating amendment to the MMDR Act, 1957. These amendments will open up new areas to the growth in coal and mining," Joshi said after a cabinet meeting where the decision was taken.

Pradhan said that "this a mother reform in the coal industry".

This will lead to growth of the segment, promote ease of doing business, besides "democratisation of the sector by opening the sector for anyone", Joshi said. The decision will result in "promoting FDI in the sector by removing the restriction and eligibility criteria for the participation. It will boost foreign direct investment" he said.

According to Joshi, of the 334 non-captive mining leases expiring March 31, 46 are working mines. The ordinance will allow auction of 46 iron ore and other mines before March 31, 2020. Though the auction process of these mines have started but this amendment will strengthen the auction process.

The ordinance will also facilitate the seamless transfer of all statutory clearances.

The move holds significance as India has the fourth largest coal reserves in the world and has set a target of producing 1 billion tonnes of the dry fuel by 2023-24. Despite this, it had to import coal worth around Rs 1.7 lakh crore last year.

"Last year, we imported 235 million tonnes of coal out of which 100 million tonnes is non-substitutable. But still about 135 million tonnes, which was substitutable, has been imported. The total cost of that is Rs 1,71,000 crore," the minister said.

In the Coal Mines (Special Provisions) Act, 2015, the 204 blocks which were cancelled by the Supreme Court had end-use restrictions. Out of the 204 coal blocks which were cancelled so far, around 99 have been allocated. Out of these, 29 have been auctioned.

Joshi also said that allocation of coal/lignite blocks for composite prospecting licence-cum-mining lease has been provided and requirement of previous approval in cases where allocation of blocks was made by the Centre has been dispensed with.

The amendment approved on Wednesday will facilitate coal mining to co-exist with the increasing production by Coal India. The large investment will be attracted because of restriction of end-use has been dropped.

Coal India is the largest coal producer in the country accounting for over 80 percent of the domestic production. Its shares, however, fell after the announcement.

India Eases Coal Mining Laws In Bid To Attract Investment, Participation In Auctions

The move "will promote ease of doing business for the successful bidder. It will ensure the continuity of mineral supply post March 2020 especially the production and supply of iron ore in the country and it will give boost to the exploration and auction of the deep-seated minerals like gold and diamond in the country," Joshi said.

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