India to Allow Foreign Firms to Mine and Sell Coal

---

Researched by Industrial Info Resources India (Delhi, India)--India will allow locally registered foreign firms to mine and sell coal when commercial mining is permitted as a part of opening up of the nationalized industry after four decades, a decision that would open the door to global mining giants like Rio Tinto Plc (ASX: RIO) (London) and BHP Billiton Plc (ASX: BHP) (London) to access the world's fifth largest coal reserves.

India's coal ministry had last month promulgated an ordinance for auctioning the 204 coal blocks whose allocation was cancelled by the Supreme Court in September 2014. The ordinance had a provision for allowing commercial mining of coal by private companies.

The first lot of 74 mines will be auctioned to specific end-users and allocated to state-owned entities by March 2015. Allowing private companies into commercial mining will help raise coal output as state-monopoly Coal India Limited (CIL) (BSE: 533278) (Kolkata), which produces about 80% of the nation's coal, has missed all its output targets in the past four years.

As of now, only power, steel and cement companies can mine coal to meet their own fuel requirements. Commercial mining is dominated by CIL. Though CIL is the world's largest miner of the fuel, its unionized workforce resists mechanization fearing job losses. The resulting inefficiencies are partly responsible for the years of missed output targets. According to the ministry, opening up the industry will increase private coal production to about 400 million tons (MT) by 2019 from less than 50 MT last year.

The long-awaited reforms in the coal sector, which could end the existing practice of coal block allocation through a screening committee mechanism, was also welcomed by the President of India, Pranab Mukherjee.

Industry bodies have also hailed government's move, terming it as a major step towards to the growth of the Indian Economy. The Federation of Indian Chambers of Commerce and Industry (FICCI) President Sidharth Birla stated that, "This is an important decision and highlights the Government's seriousness to reform the coal sector. Through this move, the government has arrested concerns pertaining to diminishing coal supplies."

The trade unions in India have, however, opposed the move from the government. The All India Trade Union Congress (AITUC) have claimed that allowing private companies into commercial mining will jeopardize the national interest and CIL's position will be weakened. The All India Coal Workers Federation (AICWF) forewarned of a nationwide strike if the government allowed commercial mining by private companies.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.