Private players will be able to bid for mines with about 100 million tonnes of coal reserves in the initial phase of auctions for commercial mining rights, a top Coal Ministry official said.
The auction will follow a simple and transparent process for selecting eligible bidders, he said.
“Today is certainly the right time for allowing commercial mining. The leverage of interested parties to disrupt the supply of coal is minimal, so the timing is right,” said Vivek Bharadwaj, Joint Secretary in the Coal Ministry, brushing aside concerns about the timing of the auctions expected to be held this year
“The commercial miners will certainly find a way to service their own customers. I can tell you that the mines are not of just 70-75 million tonnes, they have an aggregate capacity of 100 million tonnes and if their mining plans are revised, it can go up further. Getting 10% share of the market will certainly make a huge impact on the total (coal) market,” Mr Bharadwaj said, addressing industry members at a coal conference hosted by Assocham.
Public sector major Coal India Limited is gearing up to compete with private competition for the first time since 1973 when coal blocks were nationalised and will shut down all unviable mines in the coming years, the official added.
‘Positive disruption’
Allowing competition in the commercial mining space will create a positive disruption in the market, the official said, citing the precedents of the BSE, State Bank of India and MTNL that once dominated the market but now compete with large new players in their respective sectors.
While an Indian consumer can buy anything from petroleum to aeroplanes, the regulated commodity of coal has no retail market.
“If commercial mining can create a market for coal, and I see no reason why there shouldn’t be one, then we can even have a coal price index,” Mr. Bharadwaj said, adding that till that happens, prices will have to be indexed on the basis of other countries’ data.
The eligibility criteria for bidders will be kept simple and the auction process would be absolutely transparent, the official said, promising there would be no complicated norms specifying net worth or experience of the bidders and assigning weightage to different factors.
Coal India is gearing up to meet competition from private miners and will shut down all unviable mining operations over the next couple of years, he said.
“Coal India is closing 37 unviable mines this year. Going forward, they will close several more and in the next two years, you will have no unviable coal mining in Coal India,” Mr. Bharadwaj said. He, however, said the private miners must not try to become more efficient just by exploiting cheap labour.
“Primarily, the cost structure of Coal India comes from its high labour costs.
If the efficiency of the private sector is coming from exploitation of labour, that is not something to be proud of. If the worker isn’t happy, somewhere down the line, it will reflect on the firm’s bottomline,” the Joint Secretary said.
