The Coal Conundrum

The auction of 19 of the 41 coal blocks offered for mining marks the beginning of yet another bid in the country’s long-drawn efforts to achieve self-sufficiency in coal. What made this auction different is that it allows for first-time commercial mining by any entrepreneur for free sale of coal in the open market. This is unlike earlier efforts in the last two decades when coal mines were mainly allocated to end users, especially large corporates, to mine coal for their own use. The auction is also the first major attempt by the government to buoy up the sector after the setback from the 2014 Supreme Court ruling that cancelled the allocation of 204 coal blocks auctioned by the government since 2003. This has shrunk the entry of new players into coal mining, with only five new coal mines being allocated to the private sector in the last three years.

The main reason for allowing the entry of private sector players into captive mining in 1993, just two decades after the nationalisation of coal mines in 1973, was the growing shortage of coal, which is vital for India’s energy security, as it powers around 70% of the electricity generation in the country. But despite this criticality, domestic coal production has substantially lagged behind demand, especially after the pickup in electricity generation in recent years, leading to a huge surge in imports. Coal imports, which now account for more than a fifth of the total domestic consumption, have touched 249 million tonnes in 2019–20, making India the second largest importer of coal in the world. And, the value of coal imports has shot up from `14,371 crore in 2004–05 to an astounding `1.59 lakh crore in 2019–20. This is a big setback not only because India has the fifth largest coal reserves of 106 billion million tonnes, which is around 9.9% of the total global reserves, but also because it causes a flight of the much-needed employment opportunities abroad and is a big needless drain on the foreign exchange resources.