Welcome reforms in coal sector

Welcome reforms in coal sector

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The Narendra Modi government’s decision to open coal mining to commercial exploitation sans any end-use restrictions is significant for several reasons. This brings curtains down on Coal Mines (Nationalisation) Act of 1973 that was piloted by the Indira Gandhi government and made operative from May 1, 1973. Union Cabinet’s call last week also ends the monopoly of the cash-rich state-owned behemoth, Coal India. While an enabling provision was made three years ago, the sector will now witness competition from private and foreign players. Though coal blocks were hitherto allotted to private players for mining, they were restricted from open market sale and mandated to use the coal in their power and steel projects for captive purposes. There’s no denying that opening up coal sector is a big reform that was in pipeline for quite some time. Given the scams and the coal mafia that had deep pockets and huge traction with powers that be, reforms in coal sector remained a far cry thus far. The economic slowdown and spurt in coal imports seem to have pushed the  Centre to embark on a reform agenda ahead of presenting the Union Budget on February 1.

The Centre has cited over 235 million tonnes imports made to fuel power plants, 70% of which were run on coal. In addition, steel and ceramics industrial units’ demand for quality coal was on the rise. Coal import bill has touched a whopping Rs 170,000 crore given the shortages prevalent in several states. Investments by both domestic and foreign companies in coal blocks through transparent e-bidding would save precious foreign exchange, bring in new mining technologies and lead to expansion of the sector with huge potential. Opening up telecom to private players was easily a big success story given India’s evolution as a major player in technology-driven services. Staunch swadeshi acolytes may not welcome commercial coal mining by foreign players. They have argued that instead of importing coal worth billions of dollars, developing coal infrastructure and modernising Coal India should have been the priority in order to achieve 1.5 billion tonnes output and improving the quality of coal.

Having invested billions of dollars on clean coal technologies as part of a global alliance, India should reap the benefits of this know-how. Domestic private players and state-run Coal India and its subsidiaries should get the preference to this proprietary technology. As a responsible global player, India must put in place stringent norms to limit pollution and carbon emissions, even if fresh coal is being mined. Getting access to new and environment-friendly technologies could be a precondition to allow foreign players in mining coal. In any case, phasing out coal-fired power and steel plants that were big polluters may have to be considered seriously.

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