Pricing freedom for India-based mining entities run by the provinces

KOLKATA (miningweekly.com) – As part of its aim to usher in commercial coal mining in India, the government has empowered provincial governments with pricing freedom for coal produced by provincial government-controlled mining entities.

The provinces would also have the freedom to enter into joint ventures (JVs) and appoint mine developer operators (MDOs) through their own mining companies, on condition that ownership of the coal block allocated by the Coal Ministry to the provinces remained with the provincial governments.

Moreover, coal produced by provincial government-controlled mining entities would not have any end-use restriction, which meant that provinces would have the freedom to sell the coal produced to any sector that it deemed fit and commercially viable.

The liberalisation of coal mining norms would be applied to the 16 coal blocks that the Coal Ministry planned to allocate to the provincial governments, thereby breaking Coal India Limited’s (CIL’s) near monopoly on coal mining and supply.

Reiterating that ownership of coal block assets would have to remain vested with the provincial government, Coal Secretary Vikas Swarup highlighted this as a step toward enabling private players to enter into commercial mining in collaboration with State governments. “The government will not only test the waters in the area, but will also have knowledge about how market forces work,” he said.

Officials in the Coal Ministry said that the liberalisation of  pricing and end-use norms for coal produced by the provincial governments would  throw open coal mining to domestic and foreign mining companies, albeit in collaboration with provincial governments’ mining entities.

However, some of the officials said there were still doubts about whether private miners would be keen to enter into JVs without getting a slice of ownership of the coal block asset; it was largely expected that the role of private domestic and foreign miners would remain limited to that of MDOs.

Significantly, the 16 coal blocks earmarked for the provinces would be the only allocations over the next few months, as the Coal Ministry has decided that no more blocks would be put up for auction for private investors, at least for the next three to four months, given the adverse business environment and a poor response from mining companies, officials added.