• Coal India Limited (CIL) has achieved an unprecedented increase in domestic coal production in 2015-16 aided by lower regulatory and logistical barriers within the constraints of state ownership. However, the turnaround in CIL's production efficiency has come at a time when demand and price of globally traded commodities in general, and coal in particular, have fallen to their lowest levels in a decade, raising questions over policies that exclusively focus on the quantity of coal production.
• CIL, which accounts for more than 80 percent of the total coal production of the country, has 34 billion tonnes (BT) of reserves of coking coal, or a 90- percent share in the country's coking coal reserves. As the focus of CIL is on power grade coal, coking coal production in India has stagnated for the last several years. Policy measures need to be strengthened to develop a domestic coking coal base in the country.
• Captive coal mining by consumers is not practised anywhere else in the world and is not optimal from economic, geological and ecological perspectives as it requires coal reserves to be artificially sub-divided. A review of this policy may be considered.
• India has depended on import of coking coal since the early 1980s as domestic production was unable to meet demand in terms of quantity and quality. Coking coal imports increased from 13 million tonnes (MT) in 2003-04 to about 44 MT in 2014-15, implying a compounded annual growth rate (CAGR) of 11.7 percent, but in the same period import of non-coking coal grew three times faster from 8.7 MT in 2003-04 to over 212 MT in 2014-15 (CAGR of over 33 percent). The share of non-coking coal in total coal imports increased from 60 percent in 2003-04 to about 80 percent in 2014-15. Imports of coking coal have also increased over the years. To ensure raw material security and minimise the impact of volatility in coal prices, it is desirable to increase domestic coking and non-coking coal production by putting new mineable blocks for auctions.
• The coal sector is burdened with taxes. Apart from regular taxes, mining now involves the payment for District Mineral Foundation (DMF), payment of National Mineral Exploration Trust (NMET), both as a percentage of royalty, and clean energy cess that has been increased to INR 400 per tonne for 2016- 17, in addition to auction commitments. There is a need for meticulous intervention by policymakers to sustain the competitiveness of the domestic coal mining industry.
• Reform, liberalisation and privatisation of the coal industry must take into account the fact that certain rigidities that are locked up or institutionalised in the sector cannot be undone quickly. It may not be credible to expect that CIL, a holding company with several subsidiaries each of which is a monopoly in their particular geographies, would become more efficient through closer government intervention. Goal-setting and development of policy frameworks cannot be replaced by investing all resources in micromanaging CIL. The inevitable consequence is that insufficient attention is paid to dealing with institutional and framework issues. In the absence of broad-based institutional reforms, it makes sense to de-merge CIL into several constituent companies – Bharat Coking Coal Limited (BCCL) Eastern Coalfields Limited (ECL), Central Coalfields Limited (CCL), Western Coalfields Limited (WCL), Northern Coalfields Limited (NCL), Mahanadi Coalfields Limited (MCL), South Eastern Coalfields Limited (SECL) and North Eastern Coalfields Limited (NECL) – and leave them to thrive in an environment of friendly competition.
• While 'commercial mining' is indicated in the Coal Mines (Special Provisions) Act 2015 (CMA 2015), issues such as pricing and marketing freedom need to be elaborated for putting the coal sector on the path of complete deregulation.
• A part of coking coal produced by CIL subsidiaries and currently being diverted to power plants may be allocated as long-term linkage to washeries established by steel plants for their exclusive use. Policymakers may seek requirement from steel companies and commence allocation accordingly. Going by present capacities, 5 million tonnes per annum (MTPA) of coking coal may be allocated in the first tranche. Suitable augmentation plans may be drawn up for all the existing washeries to enable them to handle all qualities of coal at least up to their installed capacities to ensure that most of the coking coal mined does get washed instead of being diverted to power plants.

• Energy
• Coal
• India

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