KOLKATA (miningweekly.com) – Signs are emerging that commercial coal mining in India, sans any end-use restrictions and permitting free merchant sale, will be put on the backburner, if not die a slow death altogether.

Although no official acknowledgement of the same is forthcoming from any of the departments involved in opening up of the coal mining sector to private miners, the fact is that government has not initiated any moves to even start the process of auctioning coal blocks to private miners, despite the rules having been changed six months ago.

Industry sources said that government internal memos have been in circulation that operational subsidiaries of Coal India Limited (CIL), which accounted for more than 80% of domestic coal supplies, were not happy at the imminent advent of private coal miners as competitors and have communicated that competition risked impacting on production levels of these CIL subsidiaries and, in fact, on the long-term financial health of these government mining companies.

At the same time, all trade unions representing the workforce engaged in the domestic coal mining industry have opposed entry of private coal mining, which they fear will result in the privatisation of the coal sector over the long term.

An indication of government's backtracking on opening up of the coal sector is that the Coal Ministry has rejected a proposal from a high-power government committee that suggested that all coal mines, except for those earmarked for specific sectors like steel, cement and power, be put up for auction with private miners eligible to bid.

A section in the government said that entry of private miners to the coal sector entailed political risk, as privatisation as part of overall economic reforms still did not enjoy unanimity across the political spectrum.

They said that with Indian national elections slated next year, no government could risk the political fallout from holding coal block auctions for private investors and the risk of any direct industrial action from trade unions in CIL, which would not only worsen the existing coal shortage in the country, but also alienate a significant number of voters in the coal industry.

Besides the political risk, a poor response from investors if auctions were to be held now would give the wrong signals about government’s economic management, in electioneering season, the sources added.

It was pointed out that response during the first, second and third tranche of coal block auctioning for captive mining by end-user industries had evoked a lukewarm response and following two rounds of auction were cancelled by the government owing to a lack of response from investors.

Hence, putting commercial coal mining on the backburner, and ultimately burying it quietly, were options before the government for both political and economic reasons, the sources said.