Transforming India's Coal Sector: A New Era of Liberalization, Financial Support, and Industry Collaboration
The Ministry of Coal (MoC) in India is spearheading a transformation of the country's coal sector. A ground-breaking initiative to liberalize the sector has been underway, ushering in Commercial Coal Mining, removing long-standing restrictions on coal sales and utilization, and introducing more flexible auction terms. In this effort, the ministry aims to foster broader participation and make the coal sector more investor-friendly.
Since the launch of the first tranche of Commercial Coal Mine auctions by Prime Minister Narendra Modi in June 2020, the Ministry of Coal has successfully auctioned 91 coal mines in seven tranches. Recognizing the challenges faced by industries in securing financial support from banks and financial institutions (FIs), the ministry is now taking measures to address these concerns and streamline the financing process.
To this end, the Ministry of Coal conducted a 'Stakeholder Consultation' on "Funding of Commercial Coal Mines in India." The event, attended by coal mine allocatees and senior officials from financial institutions and banks, aimed to gather feedback and suggestions from all stakeholders. During the consultation, banks expressed their willingness to finance coal mines, provided that detailed business plans demonstrate project viability and equity infusion visibility.
Recognizing the continued importance of coal as a primary energy source in the foreseeable future, the Coal Ministry has requested the Department of Financial Services (DFS) to consider classifying the coal sector under the 'Infrastructure Sector.' Such a reclassification would enable banks and financial institutions to formulate policies more effectively to meet the growing requirements of the coal sector in a timely manner. Responses from coal mine allocatees regarding the financing imperative for coal mine development and operationalization, along with associated timelines, have been shared with Banks and FIs to efficiently address industry demands.
Banks and financial institutions are also taking steps to simplify the financing process by designating nodal branches that will act as a single window to meet the financing needs imperative for coal mine operationalization. The State Bank of India (SBI) has already extended financial assistance for the development of one Commercial Coal Mine, and other banks and FIs are in the process of doing the same. Board-approved policies are also being formulated to provide financial support in line with development and operationalization timelines.
The Ministry of Coal believes that these initiatives will not only boost the coal sector but also support India's energy needs as it continues to rely on indigenous coal reserves. With these reforms, coal remains a vital source of energy for the foreseeable future.
The Ministry of Coal is driving substantial changes in the Indian coal sector, aiming to liberalize and revitalize the industry while addressing financial challenges. The cooperation between stakeholders, banks, and financial institutions marks a significant step towards achieving these goals.
