Reforms in India’s coal sector- Part 2

ECONOMY/ DEVELOPMENT/ GOVERNANCE

Topic: General Studies 2:

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
• Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment

Reforms in India’s coal sector- Part 2

Context: The kick-starting of commercial coal mine auctioning is a fundamental shift in Coal sector which will help in realizing the vision of Atmanirbhar Bharat. 

Click here for part-I – that has elaborated on the recently announced reforms and also on brief history of Coal Sector in India

Benefits of the recently announced reforms

• Competitive Sector: It will lead to the induction of new technology and competition in the sector. 

• Revenue maximisation: The mines are expected to attract a capital investment of around ₹33,000 crore over the next 5-7 years, adding ₹20,000 crore annually to state government revenues.

• Increased Production: According to the coal ministry, these 41 mines are expected to hit a peak production of 225 mt, generating around 15% of India’s coal output in 2025-26

• Attracts Foreign Firms: Global coal mining firms, which were so far forbidden from mining coal in India, can now invest and introduce their best practices. 

• Reduced Imports: Indian industry can invest in a commodity business that provides an opportunity to substitute 135 MT coal imports

• Knock-off Impact: With the unlocking of the sector now, companies using coal will be free to focus on their core business while procuring coal from professional miners.

• Better Utilization of resource: Mines will no longer be allotted on the basis of a ‘match’ with the needs of the single captive user. Rather, it will be auctioned based on economic efficiency.

• Increased job opportunities: It is expected to create employment generation for more than 2.8 lakhs people.

• Provides a boost to Make in India programme, since coal mining operations require large machines and manpower

• Benefits State governments: the economies of coal-bearing states like Jharkhand, Chhattisgarh, Madhya Pradesh, Maharashtra and Odisha will also grow since all the revenue from these auctions will accrue exclusively to them.

Challenges Ahead

• Federal Challenges: In a writ petition to the SC, Jharkhand has said the Centre’s decision to commence commercial mining process flouts Schedule-V of the Indian Constitution, which refers to the ‘scheduled areas’ falling under the state government. 

• Social Impact Assessment: Jharkhan state has further contested that there is need for fair assessment of the social and environmental impact on the huge tribal population and vast tracks of forest land in the state.

• Weak Investment Appetite: The negative global investment climate prevailing due to Covid-19 is unlikely to fetch reasonable returns proportionate to the value of the scarce natural resource

• Vulnerable to Foreign Control of resource: Covid pandemic and liquidity crunch with the domestic industries might make them uncompetitive in auction process where Global players with huge resources will also be participating

• Environmental Challenges: One of the proposed auction of a mine site is near Maharashtra’s Tadoba- Andhari Tiger Reserve. The State government has raised concerns that mining at the site can lead to destruction of wildlife corridors.

Connecting the dots:

• Merits & challenges of privatisation
• Sustainable development goals and necessity of coal (cheap source of energy but polluting in nature) by emerging countries for development