Even when it announced a new policy on allocating coal mines, in response to the Supreme Court cancelling existing licences due to non-transparent methods of allocation, it was never clear why the government didn’t want to allot mines to commercial mining companies—after transparent bidding—and chose to restrict the process to just ‘actual user’ firms. After all, some of the biggest, and the most efficient, global mining firms are commercial miners and not ‘actual users’. Rio Tinto, for instance, is a miner, it doesn’t produce electricity or steel, and its reserves have grown at many times that of India’s. And even in the mining sector, India has allowed commercial mining in the non-coal sector, and with pretty good results. To put this in perspective, had the Indian government policy not allowed private sector firms to explore for oil and gas, and had allowed only PSUs like ONGC and OIL to do this, its production would be around 30% less than it is today for oil and around 22% less in the case of natural gas.
For reasons best known to it, however, the government chose to play it safe and, though the policy allowed the possibility of commercial mining in coal, the exact date was left to be announced later. Possibly, the government didn’t want to signal that Coal India Limited’s (CIL’s) days of monopoly profits were over, in the same way that ONGC’s and OIL’s were, once private firms like Reliance and Cairn were allowed to enter the oil/gas sector. Around a year ago, news reports suggested the government had made up its mind to allow merchant mining and 10 mines were to be offered for this purpose—four of these were to be in Odisha, four in Chhattisgarh and one each in Madhya Pradesh and Jharkhand. Read more