India’s decision to allow private and foreign companies to bid for coal mines without any end-use or price restrictions is likely to lure foreign giants such as BHP, Rio Tinto, Anglo American and Glencore, currently swimming in cash.
According to online trading firm Angel Broking, the new guidelines — aimed at boosting investment, output and the introduction of better technology — could be the first step towards the full privatization of India’s mining, it said in a note Tuesday.
Anil Agarwal, the chairman of India’s largest miner and No. 1 iron ore exporter Vedanta (LON:VED), admitted his company is very keen to participate in the coal sector. However, he told BloombergQuint, his company will likely have to compete for assets with top miners, including BHP, Rio Tinto, Anglo American and Glencore, which have long been waiting to gain a toehold in the world’s third-largest producer of the fossil fuel.
In an interview with CNBC TV18, Coal Secretary Susheel Kumar said the government has already got “feelers” from international mining companies to invest in the local coal sector. It noted Delhi had also identified big coal blocks with 40 million tonnes to 50 million tonnes reserve for bidding.
While the move ends the monopoly of state-owned Coal India Ltd (CIL), which currently accounts for over 80% of domestic output, the miner said it expected to remain the dominant force in the market.
Coal India has a mandate to supply at least 75%of its output to the power sector and the rest can be offered to others like cement and steel. However, the private miners are most likely to be exempted from the clause.
“The reform states that private miners can sell or utilize coal in any manner they like,” CIL officials told Business Standard. “Thus, compared to us, the power sector is not a mandated priority for them.”
The state miner also believes private interests will prioritize short-term supply agreements, allowing CIL to retain long-term supply contracts and giving it greater flexibility to react as per global trends and earn higher margins.
India is believed to have 300 billion tonnes of coal in reserves, with West Bengal, Odisha, Jharkhand, Chhattisgarh, and Madhya Pradesh being the major coal bearing states.