India's coal sector was dominated by state allotments and captive mines, with private firms allowed to dig only for their own use. Eighteen months after a recession and heavy coal-sector debt, the government sought a cleaner way to allocate mines.
Prime Minister Narendra Modi launched the first commercial coal-mining auction on 18 June 2020. The reform removed the end-use criterion, so winners could sell coal on the open market, and the auction let bidders compete on the share of revenue they would give the state.
The result was competition from unexpected quarters: 42 companies bid, 40 of them private, and about 65% of bidders came from real estate, infrastructure, pharma and other non-end-user sectors. With the higher premium at 66.75% and the average at 29%, 19 of 38 mines were awarded.
Take the buyers you get, not the kind you planned for
Removing the end-use rule widened the buyer pool beyond power and steel
A revenue-share auction ties the state's return to the mine's success
Electronic bidding made the process transparent and comparable
The previous captive-source rules capped demand and kept success near a third
Widen an auction by removing use restrictions: letting anyone mine for sale creates far more competition than restricting bids to the industry you expected to win.
The first tranche closed in November 2020 with 19 mines awarded across five states, expected to give states about Rs 6,656 crore a year and to yield 51 million tonnes a year of peak capacity. The government treated it as proof that opening coal to everyone worked, and ran larger commercial rounds in later years.
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The sources
- States to garner Rs. 6,656 Crores of annual revenue from the historic success of nation's first commercial coal mining auction Press Information Bureau, Ministry of Coal · pib.gov.in ·
- Govt completes first tranche of coal block privatisation, makes Rs 7,000 crore The Week · theweek.in ·