‘Self sufficiency in Coal Production- Government Policies & challenges’

Import Substitution techniques by Government. India's First Coal Trading Exchange!


lavanya tandon

2 years ago | 3 min read

1. Introduction

Coal is a blackish-brown sedimentary rock which is used primarily in thermal power plants for the purpose of electricity generation, steel making and cement manufacturing. Since there are many types of coal; quality benchmarks like carbon and moisture content are used to determine its quality and price.

In India coal reserves are found mainly in Jammu & Kashmir, Jharkhand, Orissa and West Bengal. India has 5th largest coal reserves in the world and is the 2nd largest coal producer.

2. Coal imports by India

According to the reports, India imported around 200 million tonnes of coal in 2019 from Indonesia and USA for fulfilment of its high energy- generation requirements.

But why India needs to import such large quantities of coal when it already has enough!?

There is a need to import coal because of several reasons. Firstly, the annual supply of coal from coal mines by ‘Coal India Ltd’ (Monopoly) is quite inadequate in relation to the demand by various coal- using industries. This hampers their performance.

Secondly, in order to extract more coal from new mines, people need to be relocated from that land and must be provided with occupations as compensation. This is a big challenge as India is a very populous nation.

Thirdly, for the transportation of coal, forests need to be cleared as mines are located in remote areas where there is a little or no infrastructural development.

Lastly, low cost of imported coal, stimulates its demand amongst coal using industries, leading to increased imports.

3. Government’s plan for Import Substitution

Importing such high quantities of coal is a very expensive deal for India. Government is planning to achieve self sufficiency in coal production by the end of 2024.

The 4th tranche of the ‘Economic stimulus package, 2020’ seeks to cater this issue. It provides for commercialisation of coal sector. Entry norms for private investors have now been liberalised. Now, any private party can bid for coal blocks in India. Auctions for the same will commence soon. This is done primarily to break the monopoly of Coal India and introduce healthy competition in the sector. INR 50,000 Crore have also been allocated for the infrastructural developments.

Privatisation in coal sector will not only help in Import Substitution but will also help government to save upto INR 1.73 Lakh Crore.

4. India’s First Coal trading Exchange.

India is reportedly planning to launch its ‘First Coal trading exchange’ as a measure for import substitution for coal and termination of monopoly of Coal India. It will be an electronically driven, online platform for various coal traders. It will bring orderliness to coal trading and open up greater prospects for the investors to invest in coal.

Industry experts feel that coal trading exchange will be much similar to commodity exchange and will give a boost to coal trading. It will turn coal sector into a free market wherein, market demand and supply decides the price of a commodity. It will be done to organise the sale of coal in India. This model will aim at increasing the number of buyers and sellers in the coal market.

A top executive in a coal trading firm is of the view that many countries across the globe already have this online platform and it has been proved to be quite successful.

5. Cause of Concern

Many officials feel that Coal Import Substitution is a fallacious policy. They are of the strong opinion that commercialisation of coal will lead to exploitation of workers and is a threat to environment.

This policy has been opposed by various Coal trade unions like BMS, AITUS, Hind Khadan Mazdoor Federation, etc. Workers of these unions observed ‘Thursday’ as ‘Black Day’ and antagonistically shouted slogans against wrong policies of central government.

Environmentalists are of the opinion that mining is a complex process involving evacuation of required land and resettlement of people; thus, private parties will tend to ignore such social factors. Privatisation in this sector is not a good decision.

It is even believed that privatisation in this sector will lead to hike in prices of coal. Coal India being a government company was charging much lower prices.

According to NC Jha, former chairman of a coal company, centre should give Coal India a second chance after removing such environment hurdles; if it fails then only they should go for privatisation.

Now it is becoming a big challenge for central government to attain self sufficiency in coal production by the end of 2024!

This article was originally published by Lavanya Tandon on Medium.


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lavanya tandon

Eloquently unpacking my vision on significant financial and economical events.







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