FDI in Coal Mining
The Government has clarified that any FDI in the commercial coal mining should also comply with the recent amendments made in the applicable laws.
• The government announced the nationalization of the coal blocks in two phases between 1971 and 1973.
• In 2014, the Supreme Court cancelled the coal block allocations made to the private sector by the government.
• In 2015 by the Coal Mines (Special provisions) Act of 2015, these coal blocks were returned to the private sector through auctions.
• There had been end-use restrictions and the private sector was not allowed to trade into the market making it unattractive for the private sector.
• Further in 2018, private sector firms were allowed to sell upto 25 per cent of the output in the market, but this also saw a lukewarm response from the private sector.
• In 2019, the government for sale of coal has allowed 100 per cent FDI under automatic route for coal mining, activities including associated processing infrastructure.
• The Government in early 2020 has approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act 2015 which aims to attract investment in coal mining.
The government recently modified its FDI policy according to which any entity of a country, which shares 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, could invest only under the Government route.
The new policy further states that a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors and activities other than defense, space and atomic energy.
Even for the sectors which are prohibited for foreign investment, Government route has been made mandatory for all such entities.
India imports nearly 250 million tonnes of coal from other countries despite having the world’s fourth largest coal reserve.
Restricting the entry of Chinese players into the Indian infrastructure space has taken precedence amid heightened tensions between the two countries, following the Galwan Valley stand-off.
After the stand-off, the government had restricted Chinese firms from participating in bids for government procurement without approval from relevant authorities, on grounds of defense and national security.
The government has also launched the auction process of coal blocks for commercial mining, under which private players are allowed to extract coal without any restrictions on end use of the fossil fuel.
The bidding terms were also liberalised to attract foreign players.
The Centre also amended the Coal Mines Special Provisions Act, 2015 to simplify the auction process and attract more investors.
The recent decision taken by the government to restrict Chinese firms from participating in the auction of coal mines for commercial extraction by the private sector is unlikely to affect India. As, the coal block auction has so far received good response with a lot of inquiries from both Indian and global mining, metal and energy companies. The mines on offer are attractive to investors as they are largely fully explored ones and can be brought to production in no time. According to the government, participation of more private players will bring efficiency to the coal sector and lead to competitive pricing of the fuel.