India takes first step to end state coal monopoly

India takes first step to end to state coal monopoly

Coal mine in Jharkhand by Nitin Kirloskar | Flickr.

India’s Parliament has paved the way for private sector companies to mine coal commercially in the country, by endorsing Prime Minister Narendra Modi’s proposal to end a state monopoly on extracting and selling the fossil fuel in Asia’s third-largest economy.

The bill passed by the Lok Sabha, reports Bloomberg, gives the government authority to allow private producers, including local units of overseas companies, to mine and sell coal in India, whether there is a shortage of the fuel or not.

The decision comes about two months after the coal ministry published a 27-page ordinance, stating that a company or joint venture “may carry on coal mining operations in India, in any form either for own consumption, sale or for any other purpose”.

The move, analysts say, could finally help solving an acute fuel shortage that threatens to choke industrial activity in India. But they also warn that any attempts to liberalize the sector may have huge impacts for Coal India, the state-owned group that currently controls about 80% of the country's production.

New Delhi’s time frame for ending a four-decade-old state monopoly on mining and selling coal will be clearer by March, coal secretary Anil Swarup told reporters on Nov. 19.

India is the world's third-largest producer of coal, behind China and the U.S. Yet it relies heavily on imports because of mismanagement and an onerous bureaucracy in coal exploration, production and power generation. As a result, nearly a quarter of India's 1.2 billion people have no electricity, according to the World Bank.