The Centre has done well in moving quickly to clean up the mess in the coal sector following the >Supreme Court’s cancellation of the allotment of 214 blocks . The cancelled blocks will be reallotted through an e-auction and an ordinance will be promulgated shortly to facilitate the transfer of the mining land from existing owners to the new ones who emerge successful from the auction. The most interesting part of the ordinance relates to the enabling provision in it that will allow the government to allot coal mines to private companies for commercial exploitation. Finance Minister Arun Jaitley would not term it as denationalisation of the coal industry and held out the assurance that the interests of Coal India would be protected. Yet, the fact is that the enabling provision confers powers that can be exercised when the need arises. India, which has 301 billion tonnes of coal reserves — among the highest in the world — imported 174 million tonnes last year, spending $20 billion of precious foreign exchange largely because of the limitations that monopoly producer Coal India has in increasing its output. Allowing private players into commercial mining of coal will not only fetch much-needed investment, including FDI, but also help increase production to meet the country’s needs. Of course, the caveats to this are that it should be done after due regulatory safeguards are built in and the impact on the environment is taken into account.
Meanwhile, the government has protected the >interests of State and Central utilities by assuring them of allotments outside of the bidding process. While an e-auction will lead to transparency, it is most likely that it will also push up acquisition costs for successful bidders. This is especially because some of them are already operating downstream projects such as cement, steel and power plants and will be keen to reacquire the mines that they have forfeited by the apex court order. While these companies will be allowed to bid in the >e-auction , they will not get the right of first refusal over the mines that they are already operating, which is the right thing to do. The higher mine acquisition costs could push up prices for consumers unless the availability of coal increases simultaneously. The tricky part of the e-auction exercise will be in the valuation of the land and assets of the forfeited owners which will be done by a committee. This could turn out to be contentious and needs to be handled with utmost transparency. The Centre also needs to be commended for passing on the proceeds from the auction to the States where the mines are located. Thus, States such as Jharkhand, West Bengal, Chhattisgarh and Odisha will get a much-needed revenue boost.