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India opens door to coal industry privatisation

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World Coal,

The Indian government has begun the process of rebuilding the coal industry after the Supreme Court’s decision to cancel the allocation of 214 coal blocks to private companies – and opened the door to ending Coal India’s monopoly on commercial coal production.

A decree issued by the government will allow it to buy the land of the coal blocks, as well as any associated equipment, for auction to private companies for their own use. The previous holders of the coal blocks would be eligible to bid again, barring those convicted in coal-related offences.

More controversially, the decree also included a provision that would allow commercial mining in the coal sector, opening up the possibility that Coal India’s 40-year monopoly on mining coal for sale on the open market may be coming to an end – a “key game-changing reform”, Sonal Varma, an economist at Nomura Holdings, told Bloomberg.

Opening up the coal industry to private investors is seen by many as necessary to help solve the country’s chronic shortage of coal, which has left many power plants with critical levels of the fuel. Previous attempts at privatisation have been derailed by opposition from trade unions and this time looks unlikely to be any different. “We’ll resist every move to privatise the sector,” said Jibon Roy, general secretary of the All India Coal Workers Federation.

Narendra Modi’s government is in a far stronger position, however, than previous governments. And with recent wins in two key state elections – the first major electoral test since the general election earlier this year – that position is firmer still. With security of electricity supply and key promise of Modi’s election campaign, serious structural reform of the coal industry now seems only a matter of time.

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