MAC: Mines and Communities

India to ease mining rules to spur investment

Published by MAC on 2020-01-17
Source: Reuters

Foreign companies in focus

India to ease mining rules from March to spur investment — minister


8 January 2020

For years the coal market defied a global pushback against the commodity by lawmakers and some of the world’s biggest money managers.

India will lift restrictions on the use of coal mined domestically and ease bidding rules from March, a minister said on Wednesday, as the country aims to attract foreign mining companies and reduce imports of the fossil fuel.

India plans to introduce global tenders for coal mining blocks in March, coal minister Pralhad Joshi said after cabinet approved the plans, a move that could end state-run Coal India Ltd’s near-monopoly of the fuel.

Previously, the government restricted the end use of the fuel, with winners of coal block auctions only allowed to use output for specific purposes and not to sell it in the open market. That attracted criticism from the industry which said the rules discouraged bidding.

The auctions are aimed at attracting global miners such as Glencore Plc, BHP Group , Anglo American PLC and Peabody Energy Corp.

India, one of the world’s biggest coal producers, expects it to remain its main energy source as the fuel helps produce inexpensive electricity, even as many countries are looking to reduce coal use and cut greenhouse gas emissions.

“Previously there was a restriction that anybody participating in the auction should have coal mining operations in India. That restriction we are removing,” Joshi said.

Joshi said recent auctions of coal blocks had drawn a tepid response from mining companies because of restrictions on the way the coal could be used.

Out of 99 coal blocks auctioned since Prime Minister Narendra Modi came to power in 2014, only 29 attracted firm bids.

“We feel that because of the end use restriction, the participation in the auction was restricted and comparatively less. Now we are withdrawing all these restrictions,” he said.

The move could hurt prospects for state-run Coal India Ltd. Shares of the company fell as much as 3.6% after Joshi’s comments, but pared some gains to settle down 2.7% at 200.20 rupees ($2.80).

Joshi also said the government has amended mining laws to fast-track mining at sites where leases have lapsed, to avert an iron ore shortage.

“The auction process has already begun,” Joshi said.

The amended laws will also boost exploration and auction of “deep-seated minerals like gold and diamond,” he said.

The plans still need presidential approval, and a government spokeswoman said more details will be provided after that. Presidential approval is generally a mere formality.

($1 = 71.5320 Indian rupees)

(By Nidhi Verma and Sudarshan Varadhan; Editing by Subhranshu Sahu and Susan Fenton)

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