The recent Cabinet decision to open up coal mining to commercial miners, who will now have the freedom to sell coal in the open market, is an interesting development.
For decades since its nationalisation, the public sector Coal India Limited (CIL) has dominated coal production in India, producing some 82 per cent of Indian domestic coal (figures from financial year 2014-15), and becoming the largest coal miner in the world by production.
CIL is also the single largest employer in the mining sector in India, and the only one allowed to sell coal in the market (besides Singareni Collieries Company Limited or SCCL, the second-largest producer but an order of magnitude smaller in size).
With this latest development, decision-makers expect private players to bring in competition along with private investment, technology adoption and international best practices.
There are three key questions to consider with this decision:
- Is this needed? What are the specific objectives for allowing new entrants? If they produce output, is that growth or displacement of other miners? If it is the latter, will the produce by “superior” in terms of cost, environmental impact, etc.?
- Will global players want to come in? This has two main components – the opportunity (linked to point 1) and the rules of the game (linked to point 2).
- What do we need to think through to make this a success? More than just the rules of the game for coal miners, which are critical, what else matters at an ecosystem level?