The government will soon invite bids from private players to initiate coal mining in a public-private partnership (PPP) mode in the country.

The Government’s initiation to kick start coal mining in public-private partnership (PPPs) mode to effectively end the monopoly of public sector behemoth, Coal India, on this urgently-needed resource. Public-private partnership is the only option to increase production because Coal India is struggling to meet domestic requirement. It is better to involve private players, who can produce faster and cheaper coal. The idea is to ensure that there are multiple producers of coal to meet the growing domestic demand.

Despite being the world’s third-largest producer of coal and the fifth largest in terms of reserves, India’s domestic output has failed to keep pace with demand, forcing USD 16 billion worth of imports last fiscal.

 Total Coal Import of FY 14 (Qty in MnT) 

According to official data, total domestic demand for coal in 2012-13 was 772.84 MnT against supply of 568.7 MnT. This has resulted in a deficit of 204.1MnT pa, a huge part of which is being met by costly imports from Indonesia, South Africa and Australia.

Demand, Supply and Production of Coal during last three years is as follows: (MnT)

As per the proposal, the coal mine as well as the coal will remain in the ownership of the public sector while the private partner will receive a mining charge on the coal mine. The sale of such coal will be undertaken by the public entity, which grants the PPP concession.

Reducing coal import is part of the government’s plan to reduce the record current account deficit. A decision to this effect was taken at the prime minister’s office recently by a nine-member high-level committee, headed by coal secretary and having senior officials from the finance ministry, Planning Commission as well as the law ministry.

However, any plan to bring private participation to coal mining will require the government to amend the Coal Mines (Nationalisation) Act, 1973.