Private coal mining to take a while yet in India, despite FDI clearanceThe cabinet approved 100% FDI under automatic route in coal mining and associated infrastructure
Hence forth all allocation of coal mines will only be done through auctions. The miner has to acquire the land after being awarded the mandate to mine. This is a momentous step for India but then its not going to be honky dory. With the economy in a downslide and the overall sentiment not being conducive.This may take a long time to translate into action.
Industry analysts find this to be a contradiction. One of the front line business man in the Mineral Mining sector said “This bipolarity in Govt functioning is puzzling. While at one end they canalize the mineral mining through IREL and virtually kill the industry they are trying to free up the coal mines by opening it to the private sector”
Its relevant to not that before this FDI was allowed so its not new. But this was confined to captive coal and ignite mining by the power, steel and cement companies.
Anil Agarwal, chairman of Vedanta, said: “100% FDI in mining is another progressive step announced by the government. This will send a positive signal to global investors and will give a significant push to the economy to reach the $5 trillion mark.”He expressed hope that the current decision will allow global miners like Rio Tinto, Glencore and BHP Billiton to enter the Indian coal mining space.
Is it going to be smooth sailing ? Certainly not.
Analysts point out that there will be some challenges ahead for private investment to happen.
Here is the process.
- Allocation of coal mines through auction done
- Miner has to acquire necessary land for operations
- The miner has to obtain environment and forest clearences and many other such clearances.
- Then the miner has to make sure the logistics are taken care of hence he must see if the rakes are available. (There is a short supply of rakes)
- Then once the coal is mined the new miner must compete with Coal India prices.
So it’s not going to be picnic.