At the end of 2019, India will invite foreign companies to participate in coal mining tenders for the first time

02/03/2022
India plans to invite global companies to tender for coal mining blocks for the first time by the end of 2019, according to people familiar with the matter, a move that would break Coal India's long-standing domestic monopoly and reduce coal imports.
Coal is one of the top five commodities imported by India, which is one of the largest consumers of the fuel in the world. Coal imports surged after the government failed to open up the industry to competition despite a liberalisation policy passed 19 months ago.

The tender for the coal mining block is aimed at attracting global miners including Glencore, BHP Billiton, Anglo American and Peabody.

The government is aiming to allow the winning bidders to start developing coal blocks, which hold proven reserves, in early 2020, three sources said.

It was unclear when the government asked the target mines to reach output, and India's Coal Ministry did not respond to a request for comment.

India's total thermal coal imports, mainly used for power generation, rose by about a third to 56.23 million tonnes as of June 30, according to government data reviewed by Reuters.

Coal India and a small state-owned company are currently the only companies allowed to mine and sell coal in India. India does allow some power, steel, cement and aluminium companies to mine coal for their own use.

India's annual coal demand rose to nearly 1 billion tonnes in the fiscal year to the end of March 2019, with rising fuel consumption by local utilities and a growing cement industry presenting opportunities for miners.

But the megatrend for global investors trying to wean themselves off coal could be a challenge when India's overall economic growth slows. London-listed Rio Tinto, for example, has sold out all of its exposure to thermal coal mines, and miners such as Glencore and BHP Billiton have said they also plan to cut exposure due to shareholder concerns about global warming.

However, the privatisation of India's coal sector will also provide opportunities for local mining groups such as Adani Conglomerate and Vedanta, which could help stem import growth.

“Any interest from Indian or Asian players will depend heavily on the nature of the blocks being offered, as well as any government efforts to reduce bureaucratic hurdles and improve infrastructure,” said Satyadeep Jain, an independent global metals and mining equity consultant.

Indian steelmakers import most of their coal demand due to scarcity of local coking coal production, while coastal power producers are expected to continue to rely on imports.

The government wants to cut all coal imports and ban shipments from coastal utilities and steelmakers, two of the sources said, adding that New Delhi wants to cut imports by at least 100 million tonnes over five years.

India's coal imports rose 13 percent to 235.2 million tonnes as of March 31, 2019, despite measures by Prime Minister Narendra Modi's government to cut imports to reduce the country's trade deficit, according to government data.

The Modi government has been pushing hard on plans to liberalize the coal industry, and the cabinet recently passed a proposal to allow 100 percent foreign investment in coal mining. Proposals to liberalise the industry have been stymied, however, by resistance from the Coal India union, which has issued a strike notice next week to protest the move.

The government wants to negotiate with unions to ensure the privatisation of the coal industry, the sources said.