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Foreign Investment in Coal Mining

Permitting 100% FDI in commercial coal mining is fraught with production and ecological risks.


The policy reform by the government now allows 100% foreign direct investment (FDI) under the automatic route for the sale of coal and for coal mining activities, including associated processing infrastructure subject to provisions of the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957, amended over time. Under the earlier policy, this was allowed only for captive consumption. Specifically, 100% FDI via the automatic route was allowed in coal and lignite mining for captive consumption by power, steel and cement units. Further, 100% FDI was allowed via the automatic route for the setting up of coal washeries. However, firms could sell washed coal only to those units that supply raw coal for processing and not in the open market. The changed policy regime, thus, allows foreign companies to extract coal for commercial purposes for sale in the open market and in “associated infrastructure” that include washeries, crushing, coal handling and separation.

The new policy regime governing the coal mining industry is of considerable significance due to several reasons. First, India has one of the largest reserves of coal, amounting to 286 billion tonnes. Coal mining in India, the third largest in the world, is an important industry that supplies the largest commercial source of primary energy. Coal, being a vital raw material, is mainly used by the power plants, and metallurgical and cement industries. Therefore, the industry plays a key role in the growth of the economy in general.

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Updated On : 11th Sep, 2019


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