Why has coal mining been opened up?

Why has coal mining been opened up?

Context:

• The Centre opened up commercial coal mining for the private sector recently.

Key facts:

• About 70% of power generated in India uses coal.
• Domestic coal has been able to meet only 75% of our annual coal demand.

What is the significance of the move?

• With this decision, the sector will move from an area of monopoly to that of competition.
• The government has termed it the most ambitious coal sector reform since 1973 when the sector was nationalized.
•  The State-owned Coal India Limited (CIL) was set up in 1975. Ever since, it has monoplised the sector, and is now the world’s largest coal-producer.

What led to this move?

• The coal ministry had, from 1993 to 2011, allocated 218 coal blocks to eligible Public Sector Undertakings and private firms for specified end-use projects, as well as for commercial mining by PSUs.
• These allocations were challenged before the Supreme Court , which in August 2014 cancelled the allocation of 204 blocks after finding that the allocations were arbitrary and illegal.
• To manage and reallocate the cancelled blocks, the Coal Mines (Special Provisions) Act, 2015 was enacted.
• In March 2017, the coal ministry brought out a discussion paper on auction of coal mines for commercial mining.

How will the recent decision be implemented?

• The approved methodology for auction of coal mines / blocks for sale will prioritise on transparency and ease of doing business.
• There will be an ‘ascending forward auction’ — a two-stage online auction comprising (i) technical bid and (ii) financial bid with initial and final price offers.
• There will be no curbs on the sale or use of coal from the mine.

What are the benefits?

• It is expected to bring in greater efficiency, technology, higher investment and more employment.
•  It would also lead to more revenue that can be used for development of the area and inhabitants around the mine by the State. Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana and Maharashtra would benefit the most.
• This is the first step towards the full privatisation of the mining sector.
• However, coal blocks would be commercially viable only if they are offered in minimum blocks of 40-50 million tonnes.