India could allow commercial coal mining by foreign companies if they set up units in the country, opening the door for global giants like Rio Tinto to access the world’s fifth-largest coal reserves, a source familiar with the matter said.
Prime Minister Narendra Modi’s decision to open commercial coal mining to private players is a key step towards bringing order to the country’s chaotic power industry and ending the chronic blackouts that impede its economic rise.
Nearly a quarter of a century after India embraced economic liberalisation, many businesses still rely on costly back-up generators for round-the-clock power and a third of its 1.2 billion people are still not connected to the grid.
As of now, only Indian power, steel and cement companies can mine coal for their own consumption. Commercial mining is dominated by state-owned Coal India Ltd.
But the government now plans to allow companies like Rio Tinto India to mine coal commercially after it completes the auction of 74 coalfields for the exclusive consumption of Indian companies’ power, cement and steel plants, said the source, who did not want to be identified as he is not authorised to speak to the media.
In a 27-page executive order posted on the Coal Ministry’s website on Wednesday, the government said any firm incorporated in India may be allowed to mine coal for their own consumption or sale, ending a 42-year-old ban. The document did not make any direct reference to allowing foreign firms.
Rio Tinto India Managing Director Nik Senapati declined to comment.
Other foreign players that may show interest in India are BHP Billiton and US firm Peabody.
A Coal India official said it would be natural for the government to allow deep-pocketed foreign companies to mine coal, given the need to invest heavily and quickly raise output.