Considered to be one of the most significant reforms in coal sector of the country since 1973, Indian government has cleared permission for private sector companies to perform mining of fossil fuels for commercial use – henceforth ending the monopoly of state-owned Coal India Ltd (CIL).

On 20th February, today, Coal Minister Piyush Goyal announced that the Centre has opened up coal mining sector for private firms which can be used for commercial usage. The government believes that this move will increase efficiency in the sector by moving it from an era of monopoly to competition and also lower power tariffs which will indirectly help common people. The announcement comes as a major reform in the coal mining sector since its nationalisation in 1973, and the move will end the fossil fuel mining monopoly of CIL. So as per new rules, the private firms which were allowed to mine coal for captive use only, will be able to mine it for commercial usage.

The move is welcomed by the private sector, quite obviously, as it will allow them to deal with transparency, ease of doing business and ensuring that natural resources are used for national development. During the announcement, Goyal said, “It will increase competitiveness and allow the best possible technology into the sector. The higher investment will create direct and indirect employment in coal-bearing areas, especially in the mining sector and will have an impact on economic development.” This reform is stated to be the most ‘ambitious’ and most significant change in the coal mining sector, since 1973.

The auctions will be an ascending forward auction whereby the bid parameter will be the price offer in Rs/tonne which will be paid to the State Government on the actual production of coal. And firms from big, medium as well as small mines would be offered to private companies for mining. Also, there will be no restriction on sale and utilisation of coal mines from now own. This will not only lower the prices of power energy, but it will also lead to energy security since 70% of India’s energy is still generated using thermal power stations, fuelled by fossil fuels.