Commercial coal mining in India: A disruptor or a magic-bullet?

Arindam Bandyopadhyay

When the world was busy downing shutters, the Indian coal sector was opened up! Commercial coal mining, announced by the government in June, was not just about opening the doors, but infusing fresh blood into the anemic body of an economy which has, like fellow countrymen, remained under seize ever since coronavirus invaded the Indian air space in March.

An avenue to restart investment flows, generate employment, upgrade technology and, of course, augment coal production – it was a naturopath’s remedy for holistic cure complete with a message for self-reliance!

But will it work on an unknown malady that has seized not only the body but also the mind of an economy?

While the market remains tightlipped, notes, cautions and apprehensions are being exchanged, privately, on three basic concerns: Will there be sufficient participation of bidders? Will production from the blocks start in time? And lastly, will there be adequate demand for the coal produced? What is not being talked about, however, is: what will happen to the coal sector if any of the above three concerns turns out to be true.

Behind the doors, nobody is questioning the good intent behind the move, but the same cannot be said about the timing of the shift. Something that could be a game-changer for the economy some 15-20 years back, it is apprehended, may not be as effective in the era of fast-changing energy dynamics in global and local markets. Blame it on the unions’ pressure tactics or the lack of government will, the fact remains that had commercial mining been launched earlier, the country could have saved an outgo of at least `700,000 crore only on thermal coal imports over the past decade which is equivalent to one year’s crude import bill (as of FY2019-20).

But nothing comes before time, if at all. If it took the government(s) 20 years to make way for commercial mining, it may take a few years more to actually get started at any significant scale. The launch of auctions would mean little if bidders do not turn up in good numbers.

Given the lukewarm response to the recent tranches of captive block allocation – some of these were annulled due to lack of participation – one cannot rule out a scenario where a good number of blocks remain unsold this time as well.

According to official sources, the initial response from the market has been rather encouraging. The government has been getting a lot of enquiries from nontraditional sectors, i.e. people who are not current stakeholders of the industry. While that comes as good news, the problem is that nobody seems to want more coal on his platter while everybody wants to do business with it!

Old faults in a new seam

Ideas, like fresh flowers, are always beautiful. What use they would be put to is a different matter. When the then government thought out captive blocks concept, way back in 1993, and amended the Coal Mines (Nationalisation) Act, 1973, the move might have had been as justified and novel as commercial mining may seem to be today. Twenty years later, captive blocks became the eyesore to the community and prompted mass de-allocation of blocks which allegedly shook up the investors’ confidence. Although the government tried to restore peace, by working overtime to prepare for auction of the de-allocated blocks, and tasted initial success too, captive production never really picked up big time.

The primary reason behind the mass deallocation of captive blocks in 2014 was “nontransparent and discretionary” mechanism of block allocation, but the trigger behind the move was stunted production. Barring a few ‘special’ cases, the ‘fault’ of the majority of captive block allottees was that they couldn’t deliver production as promised. And in the majority of the cases, the reasons for failure were institutional bottlenecks – land, water, statutory clearances, connectivity etc. – things on which they had little control.