Commercial Coal Mining In India: Will The Eagles Dare?

Introduction of commercial mining couldn’t have been timed better and has generated enough curiosity and also serious interest from investors and analysts’ community across the globe.

- Sumit Maitra

“There is interest also from nontraditional business companies who weren’t there in the mining sector previously. They are also showing interest,” said M Nagaraju, Joint Secretary and the nominated authority of Ministry of Coal.

“After the launch, we had few interactions with the business community, received number of queries so far and whatever interests we have received are also very unprecedented,” Nagaraju, the key ministry official working on the auction process, said.

The reasons behind such interest are not hard to find.

The current situation of over-supply and falling demand of coal is but a small blip. And when the economy recovers from the current pandemic-induced slowdown, and stranded power plants get new lease of life and begin generation, country would need coal much more than Coal India can manage to produce, believes PS Bhattacharyya, former chairman of Coal India Ltd.

Commercial mining would also bring a sea-change to the way coal is handled and transacted in the country. In a duopoly situation, it’s a sellers’ market and the onesidedness of the transactions is seen in the Fuel Supply Agreements that Coal India and Singareni Collieries sign with its customers.

The FSAs would become a thing of the past, or at least get renegotiated while the coal market as a whole would largely depend upon short term transactions rather than long term transactions, believes Yogesh Daruka, Partner-Power & Utilities, Mining, PwC.

“We are already seeing many companies pressurising Coal India to rework the terms of their FSAs and make them more evenly balanced,” he said. There would be more short-termed market-linked transactions on coal after commercial coal is available.