Coal production in India is not keeping up with consumption. One of the bottlenecks has been the private production of coal which was expected to grow much faster but has been hampered by scams and bureaucratic regulation. Now the Coal Mines Special Provision Bill was passed in March and is meant to encourage the private sector and allows foreign investment through an Indian subsidiary.
The government is very ambitious and targets a domestic annual production of 1.5 billion metric tons by 2020 which is 2.5 times larger than the current 600 million metric tons.
The US Energy Information Administration (EIA) reports:
Coal consumption in India, particularly in the electric power sector, is outpacing India’s domestic production. From 2005 to 2012, India’s coal production grew by only 4.7% per year to about 600 million metric tons while the country’s coal-fired electric power capacity grew by a much faster rate (about 9.4% per year), reaching 150 gigawatts. To help resolve the shortfall in coal supply and to support expanded coal-fired generation, India has set a coal production target of 1.5 billion metric tons by 2020. Recent shifts in government policies and practices may play a key role in India’s ability to meet this coal production goal.
Increasing coal production from its national coal producer. Coal India Limited (CIL), the national coal producer responsible for more than 80% of India’s current production, initially planned to produce 1 billion metric tons of coal by FY2020, almost double its FY2015 production. Although CIL revised its current expectations downward to about 900 million metric tons, its annual production must still rise faster than the current rate of increase to achieve its new goal. Since 2012, CIL has increased coal production by outsourcing production operations to private and foreign companies in an effort to improve mechanization and mining expertise and by working to adhere to detailed mine plans for achieving its 2020 production target.
Encouraging greater private and foreign participation. In August 2014, allegations of impropriety, hoarding of coal resources, lost government revenue, and a lack of transparency led India’s Supreme Court to cancel 214 coal licenses allocated to the private and public sector, representing 9% of FY2013’s production. The Ministry of Coal quickly reauctioned many of these properties to help minimize the disruption from the cancellation, but the impact of this redistribution of coal properties on production is uncertain.
Private mining may be expanded further as a result of the Coal Mines Special Provision Bill passed in March. This law opens the door to commercial coal mining by both private companies and foreign companies having an Indian subsidiary. The government is now evaluating the effect of a coal block auction to allocate properties for commercial development—a significant change for a coal industry that has been nationalized for 40 years.
The simple reality is that coal is essential – and irreplaceable – for Indian development and growth.