One of the most vital pillars of Prime Minister Narendra Modi’s Aatmanirbhar Bharat strategy is the opening up of commercial coal mining. But local state capacity has to be significantly improved to deal with existing mining issues. While the central government auctions coal blocks, state governments need to handle local issues efficiently and with sensitivity. State governments must collaborate with the central government to handle the resettlement process and provide new job opportunities and economic benefits to affected populations while maintaining law and order.
Unfortunately, in Jharkhand, chief minister Hemant Soren has chosen to oppose commercial coal mining, which damages our national interests because it makes it difficult to deal with local issues thereby slowing down commercial mining.
Aatmanirbhar Bharat will comprehensively unlock agriculture, space, and defence production sectors as well to build a resilient, self-reliant India.
Opening up these sectors will expand world-class production capacity, provide top products and services, and integrate India more closely with global supply chains. Ultimately, Aatmanirbhar Bharat is about making India truly globally competitive, so that we build up our economic strength and can control our own destiny.
Why coal is key for India
Today, coal is our third-largest import. In 2019, we imported about 235 million tonnes of coal, spending Rs 1.71 lakh crore or about $23 billion. We import both thermal and coking coal from Indonesia, South Africa, Australia, and Russia. India has the world’s fifth-largest reserves of coal, yet we are the world’s second-largest importer. Only China, at about 300 million tonnes per year, imports more coal than us.
While it is difficult for us to reduce our oil and natural gas imports, which accounted for $120 billion or so in imports in 2019, we can definitely ramp up domestic coal production. Top five states with highest coal reserves include my home state Jharkhand (26 per cent), Odisha (24 per cent), Chhattisgarh (17 per cent), West Bengal (11 per cent), and Madhya Pradesh (8 per cent). Currently, India produces about 729 million tonnes of coal per year with the bulk of the production (602 million tonnes or 83 per cent) coming from Coal India Ltd. In the next few years, the Coal Ministry has indicated that Coal India Ltd should produce 1,000 million tonnes per year. However, to meet its growth requirements and become self-sufficient, India should expand its production to 1,500 million tonnes per year.
To that end, PM Modi’s government has fully opened up the coal sector for commercial mining. Forty-one coal mines are to be auctioned through transparent bidding. There are no end-use restrictions on the coal production from these mines. Coal gasification and liquefaction will be encouraged. Bidders will not require any previous experience in coal mining — they simply have to put up sufficient deposit money. Mining plan approval will be provided in 30 days, rather than 90 days.
Revenue share is the bidding parameter and 100 per cent Foreign Direct Investment (FDI) is allowed through the automatic route. Coal pricing will be determined through a transparent National Coal Index that will be determined for different grades of coal.
As per Coal Ministry estimates, these 41 coal mines are likely to produce about 225 million tonnes annually. It will require Rs 33,000 crore in capital expenditure to get these mines going and, at potential coal prices of Rs 1,500 to 2,000 per tonne, they are likely to generate about Rs 34,000 to Rs 45,000 crore in annual coal revenues. Additionally, state governments will probably generate more than Rs 20,000 crore per year in royalties from these mines: Odisha (9 mines) – Rs 10,648 crore; Chhattisgarh (9 mines) – Rs. 4,399 crore; Jharkhand (9 mines) – Rs 3,242 crore; Madhya Pradesh (11 mines) – Rs 1,897 crore; and Maharashtra (3 mines) – Rs 432 crore. Jharkhand’s mining royalties have ranged from Rs 4,000 crore to Rs 5,000 crore per year, so these mines are likely to increase royalties by 60-75 per cent for my state.
Commercial coal mining is projected to provide more than 3 lakh direct and indirect jobs. This will create much-needed employment opportunities in remote rural areas, where labourers have returned after the lockdown. In addition, it is expected that these 41 mines will provide Rs 112 crore annually for the District Mineral Foundation Fund (DMFF).
Some of India’s richest coal reserves lie in the Karanpura coalfield that runs right across my Hazaribagh constituency. In the last few years, the epicentre of coal production in India has started to shift from Dhanbad to Hazaribagh as the Jharia coalfield gets depleted, and the Karanpura coalfield is brought into production. As a result, we have had to handle all the challenges associated with a rapid ramp-up of coal production in agricultural areas.
Identifying rightful landowners and paying them fair compensation is probably the greatest challenge that we face on the ground. Land records are still not fully digitised and remain subject to endless disputes and litigation. Additionally, there is significant fraud and criminal activity associated with land records. It is also necessary that jobs generated in these mines be given to local people. Only very specialised jobs requiring unusual skills should go to outsiders. Moreover, mining companies must, through their CSR activities, make all possible efforts to train local people for the full range of jobs available—from operating mining equipment to handling accounts.
Once mining starts, a host of difficult issues require continuous administrative and political handling. Villages have to be resettled in other areas to enable coal mining. Handling coal-related road and rail traffic soon becomes difficult. New roads have to be built; conveyor equipment, railway sidings, railway over and under bridges, and other infrastructure become necessary to prevent coal traffic from making normal life difficult. Coal dust spreads everywhere, leading to loss of agricultural production and many health problems. Criminal syndicates and extortion rackets get involved in mining and transporting activities. Deforestation and environmental damage have to be strictly controlled.
Commercial coal mining is vital to building an Aatmanirbhar Bharat. The auction process will lead to energy security for the country and enable us to take advantage of our rich coal reserves. Further, unleashing private sector participation will result in rapid investment, job creation, and increase in government revenues.
Jayant Sinha is the Chairman of the Standing Committee on Finance in Parliament and a Lok Sabha MP from Hazaribagh, Jharkhand. Views are personal.