Government has planned to allow commercialization of coal, and let private entities participate in all sectors, the Finance Minister announced as part of the stimulus package reforms last week. With this, Coal India’s monopoly seems to be ending in the country.
The monopoly
Founded in November 1975, Coal India is said to be the single largest coal producer in the world. The company produces around 83% of India’s overall coal production in India.
The Government of India held a 100% stake in Coal India till 2010 as the public sector company got listed in bourses that year. The government’s stake is reduced to 66.13% in the company as of March 2020, according to BSE’s shareholding data.
The financials of the company also conveyed a strong monopoly as the company’s consolidated net profit in FY2018–19 was up 148% on a yearly basis at ₹17,462 crore with other segments also showing impressive growth.
The need of the move
The company missed its production target for the thirteenth consecutive year in 2018–19. Even though India is estimated to have huge coal reserves, Coal India has not been able to meet the rising demand for fossil fuel in the country. This led to a surge in coal imports in recent years.
With private players being allowed in the field, it will help the country meet its production targets, thus reducing the import bill from the coal sector. The move is also done by the government in accordance with its plan of ‘Atmanirbhar Bharat Abhiyan’ and increasing self-reliance.
In 2019, the government allowed 100% foreign direct investment (FDI) under the automatic route for coal mining. This will help private players access more investment which may attract them to enter the industry. Hopefully, the rise in production from different players will help India provide more coal exports to other countries in need.
Though, private players will also have to face the similar kind of challenges that Coal India has been facing i.e., delay in environmental clearances and land acquisition as well as a shortage in coal rakes.
All in all, the government has made it clear that they are not going to privatize Coal India, but just bring private sector into the industry. With Coal India’s strong presence in the country and the world, let’s see how the private sectors will mold the monopolized industry as yet.
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