FDI in commercial mining
The Centre on 3 August 2020 clarified that any foreign direct investment (FDI) in commercial coal mining from an entity of a country that shares land border with India will be allowed only after government approval. This is with reference to the ongoing auction process of coal mines for commercial coal mining...It is further clarified that any FDI (foreign direct investment) in the commercial coal mining is subject to applicable laws issued by the Central Government, the coal ministry said.
- According to the Press Note, 'an entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.
- Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest only under the government route in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment. A corrigendum to the tender document has also been issued in this regard.
- Foreign Direct Investment Policy, 2017 was amended vide the Press Note, issued by the central government, to permit 100 per cent FDI under automatic route in coal mining activities, including associated processing infrastructure, for sale of coal, subject to the provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 and other relevant Acts on the subject.
- Accordingly, it was stated in the tender document that The Press Note, issued by the Central Government, amended FDI Policy 2017, to permit 100 per cent FDI under automatic route in coal mining activities, including associated processing infrastructure subject to the act and other applicable Laws, for sale of coal.
- It is further clarified that any FDI in commercial coal mining is subject to applicable laws, including the Press Note 2020.
- Prime Minister Narendra Modi launched the auction process of coal blocks for commercial mining in June.
- In June 2020, the Prime Minister threw open the auction of 41 coal blocks for commercial mining.
- The decision, which was part of the announcements made by the Centre under the Atmanirbhar Bharat Abhiyan, was already proposed in January through the Mineral Laws (Amendment) Ordinance, 2020.
- These auctions invite participants to mine coal blocks by bids on the percentage value of coal sold that they will be willing to share with the government.
- Successful bidders will obtain leasing rights from State governments to mine a coal block for a certain period.
- What’s new about the recent auction of 41 coal blocks is that this is the first time private players have been allowed to mine coal for commercial mining purposes, without any end-use restrictions.
- India has a long history of commercial mining, for about 200 years starting from 1774. In the second half of the 20th century, the government took note of the inadequate capital investments from private players to meet the burgeoning energy needs of the country.
- Some private coal miners were found to be using unscientific coal mining practices and providing poor working conditions for labour. This led to the Central Government taking a decision to nationalise private coal mines.
- The nationalisation was done in two phases, from 1971-1973. That’s how the Coal Mines (Nationalisation) Act, 1973 was enacted, which restricted coal mining operations mainly to government entities.
- The recent decision to allow private firms to participate in the bidding process with a reduced upfront amount, the facility of adjustment of upfront amount against royalty, liberal operational efficiency parameters, and 100 per cent FDI through automatic route is a watershed moment for India’s energy industry.
- India being the world’s fourth-largest country in terms of availability of coal reserves, we still import around 240 million tonnes (mt) of coal a year valued at about ₹1.7 lakh crore.
- The High Powered Expert Committee formed in 2017 to examine the efficacy and challenges in coal mining auctions recommended a gradual shift from the allocation of coal blocks for own consumption to allocation of blocks for commercial mining.