Govt ends monopoly over coal; opens mining sector to private players

Joint auctions of bauxite and coal blocks expected to reduce dependence on imports

The Union government has opened up the mining sector in a big push for privatisation. Though non-coal minerals were available to the private sector, including foreign players, for bidding, private companies could take up coal blocks only if they had defined downstream projects where the mined coal could be used.

Besides, the government decision to introduce joint auction of bauxite and coal mineral blocks to enhance the aluminium industry’s competitiveness by lowering electricity costs would reduce dependence on imported coal.

Non-ferrous companies such as Hindalco Industries and Vedanta have had to buy coal at a premium in auctions to have uninterrupted supply for their smelters.

However, even now, when there is surplus availability of coal, these firms rely on imported coal because of non-availability of rail rakes, which are given on priority to the power sector, leaving these producers with no choice. Hence, the thrust on geographical closeness of bauxite with coal mine.

Anil Agarwal-led Vedanta feels joint auctioning, where a coal mine will be tagged with a mineral mine, will enhance competitiveness of the segment.

“Attaching a coal mine with a bauxite mine, if done in closer geography could give long-term fuel (coal) security along with cost visibility to an aluminium producer,” said Sunil Duggal, group chief executive officer at Vedanta. The company has a captive mine in Odisha, which is close to Jharsuguda aluminium smelter.
 

The domestic steel industry, however, remained parched amid the slew of measures announced for the coal and mineral industry. “There is no mention of any measures for coking coal mining, which is a key raw material for domestic steel industry.

Jharia in Jharkhand has coking coal reserves, which can feed the entire requirement of the steel industry. Some policy was needed for that too,” said Vinod Nowal, deputy MD at Sajjan Jindal-led JSW Steel. The Jharia coalfield has an estimated reserve of 19.4 billion tonnes of coking coal.

Over the past few years, domestic steel production has increased by 36 per cent, while coking coal imports have risen by nearly 65 per cent. The government plans to introduce a composite exploration-cum-mining-cum-production regime and offer 500 mining blocks through an open and transparent auction process.
 

About 54 mineral blocks across nine states have been successfully auctioned till 2018-19, according to FY19 annual report of the ministry of mines.
 

The government also plans to remove the distinction between captive and non-captive mines to allow transfer of leases and sale of surplus unused minerals, leading to better efficiency in mining and production, said Finance Minister Nirmala Sitharaman during her address on Saturday.  The ministry of mines is in the process of developing a Mineral Index. The Union government also plans to rationalise stamp duty payable at the time of award of mining leases.
 

Key Steps
 

• Exploration-cum-production regime for partially explored blocks
• Partially explored blocks to be auctioned instead of only fully explored earlier
• Diversified opportunities in coal sector investment of Rs 50,000 crore
• 500 mining blocks would be offered through an open auction process