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100% FDI in coal mining | A good first step but more needed to attract global miners, says former CIL chairman

Despite having among the largest reserves in the world, India imported 235 MT of coal last fiscal. This gap can be met by investment from international miners, Bhattacharya said

August 29, 2019 / 11:44 AM IST
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The government's decision to open India's coal sector to 100 percent foreign direct investment will garner interest from global players. But much more has to be done to convert that interest into actual investment, feels Partha Bhattacharya, former Chairman and Managing Director of Coal India.

"We now need the right kind of policies to ensure that global players come to India," said Bhattacharya, under whom CIL listed on the bourses in 2010 and remains India's largest ever public offering.

The right policies would include a single-window clearance to ensure approvals on environment clearance, mining leases and land acquisition are processed in time bound manner, Bhattacharya said in an interview to Moneycontrol.

"International miners like BHP Billiton and Rio Tinto will be interested. But they will want to see transparency and a clear decision making process," said the industry veteran.

The government had on August 28 announced opening up of the sector, which till date had only one big player in the form of CIL.


The supply gapThe FDI timing is good as India is among the few remaining markets where coal mining and demand for the resource is growing. In most other countries, demand has peaked.

Not just that. India, despite having one of the largest reserves in the world at 350 billion tonne, still imported about 235 million tonne of coal last year. While demand for coal was 965 MT, only 730 MT could be sourced locally. "This despite CIL's production and capacity growing at a healthy rate. This gap can be made up only through participation of foreign players," said Bhattacharya.

CIL produced 607 MT in FY19, a growth of seven percent.

To meet that gap, immediate steps need to be take. "We are talking about 20 billion tonne of reserves that need to be auctioned immediately. Of this, six billion tonne should have been auctioned yesterday...that is the kind of urgency that is needed," he said.

The 20 billion tonne of reserves that need to be released, include capacity to replace imports and also to take care of any demand growth in future. "Nearly 40,000 MW of power capacity is right now stranded. Now there are efforts, including through insolvency courts, to restart these operations. That will increase the demand for coal," said Bhattacharya.


Auction processIndia may need to tweak its auction rules to ensure participation from international miners.

To speed up development of mines, auction can't be the only process to grant leases, said Bhattacharya. Instead, he suggests that the auction process be used for 'price discovery.'

"Once that is done, coal leases should be granted on first come, first serve basis. Of course, there should be proper due diligence. At the same time, we need to have a balanced evaluation," he stated.


Improving practicesInternationally, 20 to 45 percent of coal reserves are mined underground. But in India, it is just six percent, even though about a quarter of the reserves are under ground.

International players, says Bhattacharya, are excellent in mechanised underground mining. "This will bring a balance in under and open ground mining in India. The present difference has to be corrected," he said.

This, he added, will also help improve efficiency at CIL, which at present doesn't have competition to push it.

Prince Mathews Thomas
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Aug 29, 2019 11:44 am

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