India has moved to end its four-decade-long curbs on private mine firms and end the dominance of the state-owned Coal India, in a move to cut down its reliance on imported coal amid power shortages.

The decision to open up commercial coal mining for the private sector, announced by India's Coal Minister Piyush Goyal, is the most ambitious coal sector reform since the nationalisation of the industry in 1973.

According to Minister Piyush Goyal, allocation of mines will be through auctions in which local and foreign private companies will be able to bid without end-use or price restrictions. Revenue from the auction of coal blocks will be allocated to the states.

The methodology gives highest priority to transparency, ease of doing business and ensures that natural resources are used for national development. The auction will be an ascending forward auction whereby the bid parameter will be the price offer in Rs per tonne, which will be paid to the State Government on the actual production of coal. There shall be no restriction on the sale and/or utilisation of coal from the coal mine.

"This reform is expected to bring efficiency into the coal sector by moving from an era of monopoly to competition. It will increase competitiveness and allow the use of best possible technology into the sector", said Mr Piyush Goyal. "The higher investment will create direct and indirect employment in coal bearing areas, especially in mining sector, and will have an impact on economic development of these regions."

The move is also believed to lead to energy security, as 70% of India's electricity is generated from thermal power plants, with a guaranteed coal supply, accountable allocation of coal and affordable coal leading to affordable power prices for consumers.

Source: Government of India, Ministry of Coal