Editorial Notes

[Editorial Notes] Opening up Mining Sector

Coal is the backbone of energy sector in India, and the government’s move to liberalize the sector by doing away with the “end use restrictions” and easing mining rules, will open up a new chapter in the history of coal production and allied sectors in the nation.
By IASToppers
January 17, 2020

Contents

  • Introduction
  • Why was it needed?
  • Mineral Laws (Amendment) Ordinance 2020
  • The amendments in the Acts would enable
  • The fate of Coal India Limited
  • Way forward
  • Conclusion

Opening up Mining Sector

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Introduction:

The Union Cabinet has approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend the Coal Mines (Special Provisions) Act, 2015 as well as the Mines and Minerals (Development and Regulation) Act, 1957.

Mineral-Laws-(Amendment)-Ordinance-2020

Why was it needed?

  • Despite having the world’s fourth largest coal reserves, India imported 235 million tonnes (MT) of coal last year, of which 135 MT coal valued at ₹171,000 crores could have been met from domestic reserves, if India could raise its production.
  • The end-use restrictions limited the potential bidders to a selected circle of players and thus limited the value that the government could extract from the bidding.
  • Further, the restrictions inhibited the development of a domestic market for coal.
  • The amendments are intended to open up new areas of growth in the coal & mining sector.

Mineral Laws (Amendment) Ordinance 2020:

  • The ordinance was issued in an attempt to attract investments in coal mining.
  • The ordinance pulls off “end-use restrictions” and allows coal mining by any company present in any sector, of which earlier power, iron and steel and coal washery business could only bid for mines.
  • The ordinance essentially democratizes the coal industry and makes it attractive for merchant mining companies, including multinationals such as BHP and Rio Tinto, to look at India.

The amendments in the Acts would enable:

  • The ‘historic’ decision would boost the ease of doing business and increase the growth avenues in the mining sector.
  • Offering of unexplored and partially explored coal blocks for mining through prospecting license-cum-mining Lease (PL- cum-ML). The ordinance would strengthen the auction process of those mines whose leases were expiring on March 31, 2020 and will facilitate seamless transfer of clearances.
  • Democratization of coal mining sector by opening it up to anyone willing to invest.
  • Promoting Foreign Direct Investment in the coal mining sector by removing the restrictions and eligibility criteria for participation.
  • This will help India in gaining access to sophisticated technology for underground mining used by global miners.
  • The move is expected to strengthen Coal India and to achieve the set aim of production of one billion tonnes coal by 2023-2024.
  • Allowing of successful bidder/allottee to utilize mined coal in any of the plant of its subsidiary or holding company. The move will also help the steel industry to get cheaper inputs (coal) leading to an increase in ‘competitiveness’ in the market.
  • Large investment in mining will create jobs and set off demand in critical sectors such as mining equipment and heavy commercial vehicles.

The fate of Coal India Limited:

Coal India Limitedd

  • While the move will help create an efficient energy market, usher in competition and reduce coal imports, it may also bring an end to state-run Coal India Ltd.’s (CIL) monopoly.
  • The Coal Ministry emphasized that CIL has been and will be allotted adequate blocks and the interests of laborers will be taken care of.

Way forward

  • The decision of easing mining rules and opening up the sector is expected to fetch results in the coal production and allied sectors in the nation.
  • However, it should be the government’s responsibility to ensure that the rights of CIL are not compromised the way BSNL has been by the opening up to private players. The company employs about three lakh people, and is listed as a national asset, hence the responsibility increases.

Conclusion

The move will be instrumental in a country like India which today and in the near future too will be depending on the coal sector for its major energy needs.

Topics
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