India okays allocation of 5 coal mines; allows part output sale in open market

The Indian government has approved the allocation of five coal mines with a combined capacity of about 5.2 million tonnes per year, allowing successful bidders the flexibility to sell a portion of the production in the open market, according to the ministry of coal.

“The significant feature of the allocations is that for the first time, the successful bidders shall have the flexibility to sell 25 per cent coal produced in the open market,” the ministry said. “This will boost the coal production in the country and reduce the dependence of industries on imported coal.”

The ministry said these mines were allocated following electronic auctions held in the first week of November 2019. The government had initiated the auction process for 27 coal mines for non-regulated sectors last year.

The allocated mines are located in the Indian states of Madhya Pradesh, Chhattisgarh, West Bengal and Odisha.

The ministry said that the allocation of these mines will generate a huge revenue for state governments where the mines are located in the form of upfront payment, royalties and other applicable taxes.

Currently, state-run Coal India Ltd supplies almost 80 per cent of domestic requirements and India is also aiming to produce 1 billion tonnes at Coal India by 2024-2025. Most of the sales from Coal India are either through term contracts or via e-auction platforms.

Last year, India imported around 235.24 million tonnes of coal, up 12.9 per cent year on year. India’s total domestic coal production will reach 810 million tonnes in the fiscal year ending March 31, 2020, up 11 per cent year on year, Coal Minister Pralhad Joshi said this week.

Coal India has set a production target of 655 million tonnes for the current fiscal year, which runs from April 1, 2019 to March 31, 2020. In the previous fiscal year 2018-2019, the company achieved an output of 606.9 million mt, an increase of 7 per cent on the year. India has also paved the way for global companies to own coal mines in the country after the cabinet permitted 100 per cent foreign direct investment in the sector, a move seen by many as creating a competitive market and hurting Coal India’s monopoly status.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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