Liberating black gold

The passing of the Mines and Minerals (Development and Regulation) Amendment Bill, 2015 and the Coal Mines (Special Provisions) Bill, 2015 marks a significant step forward in the Central government’s reforms push. It effectively ends government monopoly over the extraction of coal, which has existed after coal mining was nationalised in 1973. Parliamentary approval for the auction of coal blocks — effected through an ordinance that the Bill now replaces — also provides closure to one of the biggest scandals to have rocked the country in recent times: the allocation of 204 coal blocks to private parties, which the Supreme Court had cancelled on the grounds that the allocation process was arbitrary and illegal. The auctions have helped the coal-bearing States realise over Rs.2 lakh crore by way of royalties over a 30-year period from the 33 blocks auctioned in the first round. According to media reports, internal government estimates place revenues from all the 204 blocks to exceed Rs.15 lakh crore over 30 years. Quite apart from the windfall revenue to the States, the passage of the Bills is a game changer in other ways. It has opened up the path for foreign investments in the sector, since Indian arms of foreign companies are entitled to bid for blocks, as well as for commercial mining of coal, which can have a salutary effect on prices going forward. Despite having reserves of 301 billion tonnes of coal — the fifth largest in the world — India has been plagued by chronic coal shortages, leading to costly imports by power and metal producers. This has led to severe power shortages, with downstream impact on both industry and individual consumers. With 90 million tonnes of coal expected to be produced from just the 42 operational mines in the blocks auctioned so far, such shortages may well be a thing of the past. The move is also beneficial to the state-owned Coal India Limited, which may now get the elbow room to bring in some much needed technology and best practices, while opening up prospects of a better future for millions of mine workers.

The passage of the Bills also marks a significant political victory for Prime Minister Narendra Modi. With the exception of the contentious Land Acquisition Act, the government has now won parliamentary approval for three of the four major reform moves initiated via the ordinance route, sending a strong message to political parties on the economic advantages of reforms. With the exception of the Congress, the Left and the Dravida Munnetra Kazhagam, all other major Opposition parties had reversed their initial opposition to the coal bill, after seeing the enormous revenue potential unlocked by the auctions. This augurs well for future reform measures.

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