India to save Rs.30k cr on imports by allowing commercial coal mining: CRISIL

The Dollar Business Bureau

The Government’s move to allow commercial mining of coal by private sector will not only enhance production but also help in cutting the import bill by around Rs.30,000 crore, through substitution of imported non-coking coal with local production, according to the global rating agency CRISIL.

Last month, the Cabinet Committee on Economic Affairs (CCEA) has approved the methodology for auction of coal mines/blocks, under the Coal Mines Act, opening up the commercial coal mining for private sector.

“The move to allow the private sector to commercially mine coal will boost both production and mining efficiency. Moreover, the substitution of imported non-coking coal with domestic production could save roughly Rs.30,000 crore of coal imports,” CRISIL said in a statement.

At present, around 94% of the coal mining is being done by state-owned enterprises Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL).

In spite of increase in domestic production of the fossil fuel recently, India still has to meet one-fifth of its coal need through imports annually, costing around Rs.1 lakh crore.

“If the participation of private mining companies is allowed, it would result in competition and increase output by facilitating use of latest technology, equipment and services through more investments,” the rating agency said.

Considering that nearly 50% of the country’s coal reserves of 300 billion tonne, majorly non-coking coal, are still unallocated, the move to allow commercial mining can have far-reaching effect.

Sachin Gupta, Senior Director, CRISIL said, “Coal imports, especially of the non-coking variety, should reduce once the proposed regulatory changes to admit private sector companies in coal mining materialise. It will also help the country come closer to its vision of producing 1.5 billion tonne of coal annually by 2022.”

“Sectors such as power, steel and cement will benefit the most being the biggest consumers of non-coking coal,” Gupta added.

In the financial year 2016-17, India imported 150 million tonne of coal valuing around Rs.59,000 crore. About 90% of this was consumed by imported-coal-based power plants, captive power plants and independent private thermal power plants.