India moves to end state coal monopoly

State governments in India are allotting several new coal mines for commercial mining, which is seen as the first move towards ending the 40-year monopoly of government-owned Coal India.

The new coal mines will have an annual capacity of 40 million tonnes a year.

“There will be no restriction on pricing from our end,” Anil Swarup, India’s coal secretary, told the Hindu Business Line newspaper. “We hope this will lead to discovery of market determined pricing of coal for the first time in the country. Right now Coal India is determining the price. With another entity coming in, some sort of a market will be created and price discovery will happen.”

India does eventually intend to auction coal blocks to private companies for mining and sale of coal, but it has no immediate plans to do this.

“There will be no value if we do it now,” Mr Swarup said, according to Reuters. “There’s no demand for (private commercial coal mines) as of now.”

India has vast natural reserves of coal, although it still imports huge quantities of the fuel. The government has been pushing for an increase in the output of coal and Coal India has ramped up its production in the past couple of years, resulting in imports declining in the past financial year.

Millions of tonnes of coal for steelmaking, or coking coal, are imported each year. There is a shortage of the right quality of coal in India that is required for steelmaking.

But the government has been pushing for steelmakers to start converting the local coal to the required grade for steelmaking in an effort to reduce the amount of costly raw materials that it imports.

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