NEW DELHI: The government will soon invite bids from private players to kickstart coal mining in a public-private partnership (PPP) mode in the country, effectively ending the monopoly of public sector behemoth Coal India on this urgently-needed resource. The idea is to ensure that there are multiple producers of coal to meet the growing domestic demand.

According to official data, total domestic demand for coal in 2012-13 was 772.84 million tonne against supply of 568.7 million tonne. This has resulted in a deficit of 204.1 million tonne per annum, a huge part of which is being met by costly imports from Indonesia, South Africa and Australia.

Reducing coal import is part of the government’s plan to reduce the record current account deficit. A decision to this effect was taken at the prime minister’s office recently by a nine-member high-level committee, headed by coal secretary and having senior officials from the finance ministry, Planning Commission as well as the law ministry.

“The Planning Commission has submitted the initial draft of the model concession agreement and the coal ministry is expected to finalise it in a month’s time after which they will invite bids from private players in December,” a senior Planning Commission official told ET.

As per the proposal, the coal mine as well as the coal will remain in the ownership of the public sector while the private partner will receive a mining charge on the coal mined. The sale of such coal will be undertaken by the public entity, which grants the PPP concession.

“The only option before us is to increase domestic production and since Coal India is struggling to meet domestic requirement, it is best to involve private players, who will produce faster and cheaper coal,” the official added.

The high-level committee on financing infrastructure had earlier recommended setting up of a new public sector undertaking to award and manage PPP concessions, as this would lead to healthy competition and eliminate incumbent resistance from Coal India.

Despite being the world’s third-largest producer of coal and the fifth largest in terms of reserves, India’s domestic output has failed to keep pace with demand, forcing $16 billion worth of imports last fiscal. Finance minister P Chidambaram had said in his budget speech this year that the country must reduce its dependence on imported coal in the medium to long term. “One of the ways forward is to devise a PPP policy framework, with CIL as one of the partners, in order to increase the production of coal for supply to power producers and other consumers. These matters are under active consideration and the minister of coal will announce the government’s policies in this behalf in due course,” he had said.

However, any plan to bring private participation to coal mining will require the government to amend the Coal Mines (Nationalisation) Act, 1973. Under the Act, all coal produced, except that produced by captive mines, has to be sold only to designated end users while the surplus has to be sold to Coal India.

Courtesy: The Economic Times