The Union Government?s recent move to allow the private sector to commercially mine coal will boost both production and mining efficiency, according to CRISIL. Substitution of imported non-coking coal with domestic production could save roughly Rs 30,000 crore of coal imports, CRISIL estimates.

The Cabinet Committee on Economic Affairs (CCEA) recently approved the methodology for auction of coal mines/blocks for sale of coal. Under this, the highest bidder will be given mining rights and there are no restrictions on end-use.

Currently, about 94 per cent of the mining is being done by government-owned entities Coal India Ltd and Singareni Collieries Company Ltd. Despite the recent increase in domestic coal production, India still meets a fifth of its annual requirement through imports, which costs about Rs one lakh crore.

Participation of private miners, if allowed, would increase much-needed competition, enhance productivity by facilitating the use of latest equipment, technology and services through higher investments.

Says Sachin Gupta, Senior Director, CRISIL Ratings, ?Coal imports, especially of the non-coking variety, should reduce once the proposed regulatory changes to admit private sector companies in coal mining materialise. It will also help the country come closer to its vision of producing 1.5 billion tonne of coal annually by 2022.?

The benefits from increased private participation in coal mining, though, will depend on faster environmental clearances, availability of adequate evacuation infrastructure. Prudence will also be required from bidders to ensure successful commercialisation of India?s largest natural resource.