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India's Modi moves to reform problem-plagued coal industry

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India's government has pledged to open up the coal mining industry to private players in the energy-starved country as Prime Minister Narendra Modi unleashes promised reforms to revive the ailing economy - PHOTO: AFP

[NEW DELHI] India's government has pledged to open up the coal mining industry to private players in the energy-starved country as Prime Minister Narendra Modi unleashes promised reforms to revive the ailing economy.

Mr Modi's right-wing government approved an ordinance late on Monday allowing auctions of coal mines to private companies for their own use, as well as permitting some firms to sell the fuel in the future.

The ordinance - or executive order - takes the first steps towards ending a four-decade monopoly on mining and selling coal after the industry was nationalised in 1972 creating Coal India, one of the world's biggest miners.

The sector, plagued by inefficiencies, poor infrastructure and government red-tape, has long struggled to increase production to meet the electricity needs of the country's 1.25 billion population.

"It was decided to issue an ordinance in the cabinet," finance minister Arun Jaitley told reporters at a briefing on the issue.

"The entire coal sector was lying idle, it is an attempt to bring it to life once again," Mr Jaitley said after the cabinet meeting.

Mr Modi has stepped up much-needed economic reforms in recent days, five months after storming to victory in elections on a pledge to revive the faltering economy and create tens of millions of jobs.

His government announced at the weekend it was freeing diesel prices from government control and increasing natural gas prices, in a bid to attract foreign investment and cut an enormous subsidy bill.

The decree comes after the Supreme Court in September cancelled more than 200 permits for coal mines, after declaring the process of allocating them illegal, throwing the sector into turmoil.

India sits on some of the world's biggest coal reserves, yet its power stations are starved of the fuel with some idle and others running dangerously low on supplies.

Coal provides nearly 60 per cent of India's electricity generating needs, and blackouts are common across the country amid surging demand including from a fast-rising middle class.

Coal India accounts for some 80 per cent of the country's total production but has missed its output targets in recent years.

Some private cement, power and steel companies are currently allowed to mine coal for their own use, but the ordinance includes a provision to allow commercial mining at an unspecified time in the future.

The ordinance's new auction system replaces the controversial policy of allocating coal blocks based on recommendations from a panel of bureaucrats.

The ordinance takes immediate effect but must eventually be passed as a bill by parliament or it will lapse. AFP