India’s plan to auction abandoned coal mines to private firms to meet rising energy demand has brought little cheer to the industry as running the mines poses financial, technological and safety risks companies are reluctant to take on, analysts said.
Grappling with unprecedented energy and power demand caused by scorching heatwaves in April and May, the government announced the reopening of 20 coal mines here and called on private operators to run them, with a bidding process now underway.
State coal officials say extracting the planet-heating fossil fuel from underground mines does little damage to the surrounding environment, compared with open pit mining.
But energy experts have called the plan short-sighted and out of touch with the green and fair transition the country should be aiming for, saying renewable sources would be a cheaper and quicker fix for India’s needs.
Boosting production from underground coal mines will take several years, while potential bidders are worried about the financial viability of the plan, critics say.
Officials argue that tapping high-grade coal reserves in underground mines is a relatively green option, as it would not lead to the land degradation caused by opencast mining.
“These mines can produce 5 million tonnes of coal every year for the next five years, provided all 20 mines are operated and there are sufficient bidders,” said B. Veera Reddy, technical director with state-run Coal India Limited (CIL), India’s largest coal firm.
Bids for the 20 underground mines will open in early August and Coal India said it was hopeful of finding operators, with about five to 10 showing interest so far.
But private mining firms said Coal India’s revenue-sharing model was a deterrent. The current tender leaves 100% of the financial risk with the bidders. Operators are required to put up all the investment for the project, but revenue generation will start only when coal production begins, which will take two to three years. CIL accounts for more than 80% of India’s coal production and it owns 345 mines, 150 of them underground and 170 open-cast, with 22 mixed mines, government data shows.