Author : Subhomoy Bhattacharjee 


ABSTRACT


There are two sets of consequential developments in the coal sector in India. The first is that after more than a decade of indifferent growth (FY11-22) of

3.6 percent, the run rate for coal production has vastly improved. In FY25, coal production grew by 4.99 percent1.


The opposing development is the significant delays in making new coal mines awarded through auctions reach production. These include some familiar problems but also lack of financial resources for the smaller companies since bank credit to the sector is de-growing. It was (-)2.4 percent year on year growth rate2. This possibly means only larger companies with access to alternative channels of finance can survive in coal mining.

This analysis also examines the significant administrative and bureaucratic challenges hindering the operationalization of India's recently auctioned captive and commercial coal blocks. Despite a transparent auction process that has brought in major corporate entities, allottees face persistent delays in securing statutory clearances, including Prospecting License-cum-Mining Leases (PL-cum-ML) and approvals for Geological Reports, as well as major hurdles in land acquisition. These impediments, reminiscent of a previous era, are stalling progress on a large number of mines—with 70 out of 131 still non-operational—and have severe consequences, including violence against personnel and the potential for fuelling illegal coal trade.

However, the current landscape is fundamentally different from the pre-2008 allotment system due to the involvement of established corporations and a premium-based auction model. This has led to a marked increase in efficiency and output where mines are operational. Production from captive and commercial mines saw a year-on-year increase of 29.79% in FY25, with

their contribution now constituting nearly 20% of the country's total coal output3.

The way out, I argue is for the coal ministry to keep to itself the role of allocation of mines, management of Coal India and its subsidiaries and Singareni Collieries Company Limited, while setting up an independent regulator (or as a unit of PNGRB) which will manage the landscape of competition for coal extraction, of maintaining fair value with imports and also over see the closure of mines.

In sum, in this paper, I explore, if there a possibility that the advent of large private sector run coal mines would create a virtuous cycle of positive externalities that be made even sharper if regulatory changes are brought in. The latter, I argue, is essential to build on the policy choices made by the corporate sector and the government together to ensure there is a commensurate rise in the benefits from mining for the Indian economy.


INTRODUCTION

Tales of bureaucratic inertia—an application pending with a state government for over eighteen months, a project stalled by the transfer of a District Collector, a plea for better coordination to secure land—sound like dispatches from a bygone era of Indian coal mining. Yet, these are not historical footnotes; they are contemporary accounts from meetings held this year between the Union Ministry of Coal and the new allottees of captive and commercial mines.

Mining, in general and coal in particular is most significant for India aiming to become the world's 3rd largest economy, targeting a $7 trillion GDP by 2030 and aspiring to a $30 trillion economy by 2047.

Towards this end, India has sought to to boost domestic coal production by opening the sector to private enterprise, but it confronts a familiar set of obstacles. The very issues that have long plagued development projects— delays in land acquisition, labyrinthine clearance processes, and multi-agency coordination gaps—are re-emerging as significant constraints. These delays are not merely procedural; they carry steep costs, threatening project viability, fostering an environment for illegal trade, and escalating to violent

confrontations, as evidenced by the recent killing of an NTPC officer in Jharkhand.

However, this is not a simple repeat of the past. The current push is defined by two crucial differences from the "Wild West" era of coal allotments: the entry of major corporate leaders like NTPC, JSW, Adani, and Hindalco among others plus a transparent, premium-based auction system. This sets the stage for a critical test of whether the presence of organized, high-stakes players can overcome the systemic friction that continues to impede progress of mining, on the ground.

Mining in India suffers because it sits in the tri-junction of historically weak corporate capacity, high taxation yet unresolved frisson between the centre and the states on allocation of these rights and finally the often justified fear of civil society about the impact of this sector on the local population4.

These are the reasons that despite being one of the first sector to get the benefits of liberalisation, the share of mining in the Indian economy has not expanded. As a result the market cap of mining based state run companies has hardly moved too. The same challenge has percolated to the private sector run entities too.

This is why India cannot immediately catch up with the rest of the world weaning itself away from fossil fuel to an environment where the e demand for other metals have flared up. Coal, particularly thermal coal or steam coal for the rest of the world will be India’s leading source of fuel, contributing 55 percent to the total energy mix even in 2047. The policy conundrum on coal in India will therefore coloured the outlook for mining in general in this period.

It is thus important to discover if the changes in the coal mining policies from 2016 have made any meaningful changes to draw in responsible corporate practices in the sector. Has it been aided by government policies and if so to what extent.

In 2024-25 the aggregate Indian Coal production has crossed One Billion Metric Tonnes. Estimates like those from Niti Aayog expect the peak will be at about 1500 billion by 20305.

In this paper, I explore, if there a possibility that the revival of private sector run coal mines would create a virtuous cycle of positive externalities that be made even sharper if regulatory changes are brought in. The latter I argues is essential to build on the policy choices made by the corporate sector and the government together to ensure there is a commensurate rise in the benefits from mining for the Indian economy.

Private sector companies (defined as any company not enumerated under the Coal Mines (Nationalisation) Act of 1975) was allowed entry in the field of coal mining under the Non-Regulated Sector (NRS) linkage auction policy dated 15.02.2016 of the Ministry of Coal.

Till July 2025, of the 131 mines handed over to private companies, 61 have come into production with 70 in queue. Counting the number of blocks those have reached 200. The capacity of these mines and blocks are substantial.

An analysis of 113 coal mines auctioned for commercial mining till the end of December 2024 shows they have Peak Rated Capacity of 257.60 MTPA.

So the total production from the private sector as a percentage of the total coal production from India is close to 20 percent.

The issue one dwells on is if the allocations\auctions have led to improvement of competition in the sector and what does that do to mining practices. The changes we are tracking are therefore independent of those within Coal India or that of SCCL. There too, a large of mines has been given over to Mine Development Operators, but we shall ignore those in the following recital.

One explores

the changes in laws and policies which have fostered competition

The need to institute regulatory institution to make the competitive environment, a long lasting one


Changes in Laws and Policies:

The most significant change to have happened in the coal mining business is the advent of listed companies or their subsidiaries for commercial mining of coal. The list includes names like NTPC, JSW, Vedanta, Adani, Hindalco, Jindal Steel and Power and a clutch of state government run companies besides smaller entities.

This is in contrast with the picture of the earlier spell of privatisation that ran from 1993 to 2008. In the former era, it was mostly myriad small companies which ran the operations. These companies got coal blocks on the basis of allotments whose terms were not transparent. The critical challenge was that

these companies were allowed to mine coal with the specific proviso that the production will only be used for their downstream units, ranging from power, steel, sponge iron, paper and cement among others. This rule was flouted in most cases. Also the category of commercial mining of coal was itself absent from the terminology of policy, in the period before 2020.

Instead the concomitant abandonment of judicious market principles in this period led to perpetuation of shortage of coal supply in the economy. The shortages provided these companies the economic space to arbitrate violating the rules, selling their production at a higher price in the market.

This is what led to the so called coal scam with its attendant implications.

A. Since 2016, the changes which have happened in the coal economy, are as follows. 

  1. A number of listed companies have participated in a transparent auction for price discovery of the mines. 
  2. These companies now account for the largest share of the coal assets allocated to the private sector—more than 60 percent (Peak rated capacity MTPA based)6

B. Two changes introduced by the Ministry of Coal in this context are also worth noting;

  1. the size of the prospecting license and of the mining lease for the companies which win bids in the auction have been clearly demarcated. These range between 25 square kilometres in West Bengal to 90 sq km in Chhattisgarh.
  2. Right to reclaim land from coal mining by the government has been written in as a policy. These land parcels, acquired under the Coal Bearing Areas (Acquisition and Development) Act, 1957 can now be given back even to the original owners, on a lease of 99 years7.

The implications of “A” are consequential. In the iterations of coal policy, post Independence, the state always took the position that mining was a rapacious activity ergo it has to be handled by the state. The Coal Mines (nationalisation) Act, 1973 and the subsequent ones were predicated on the same principle. These issues have been discussed elsewhere8.

The principle takeaway this time is the presence in large numbers of listed companies. This has been made possible by the process of auction, which has ensured the elimination of small and mid sized companies from the key

coal deposits. These companies have earned the coal blocks after paying sizeable premiums to the government in the auctions.

The entry of listed reputable companies are a significant development since mining companies abroad have either abandoned coal mining or have been reluctant to invest in India. The presence of domestic companies operating under corporate governance maxims and rules plus the attendant ESG covenants impose a set of market led restrictions on their method of operations.

This was most necessary. These board room restrictions were quite apparent even in the case of Coal India once it was listed. The market led discipline is more powerful than the series of instructions which used to be issued by the government and were routinely flouted by companies, on which there was no process to stick accountability. It is even more salutary, that subsidiaries of Coal India, Bharat Coking Coal Limited (BCCL) and Central Mine Planning and Design Institute (CMPDI) are also set to be listed. More could follow soon.

The listing of the latter is particularly significant. CMPDI provides the Geological Report based on which a mining company can finally begin to excavate coal. The mine closure plan has to be also approved by this company.

To ensure that the mining companies stick to the narrow, CMPDI will play a very critical role. The performance of this company after it is listed (it has filed its DRHP with Sebi) will thus be made transparent.

The next set of changes we shall analyse are the policy changes brought in by the ministry of coal that we enumerated as “B”.

One of the challenges discovered in the period 1993—2008 was the tendency among coal block operators to mine beyond their allotted mining lease property. It was made possible because a number of leases were awarded in close proximity often with slim partition of an existing coal bloc. Numerous cases came up because of this problem. The Coal Controller faced with this tightly drawn leases found it impossible to adjudicate in most cases, leading to another set of bottlenecks.

The change brought in by the coal ministry should therefore be read in this context. The size of the area demarcated for Prospecting License is significantly larger now. As the following table shows the size of this license and that of the next stage, Mining Lease has made this possibility remote.

 



It is now impossible, given the liberal boundaries for the operators to claim they have been stifled in their explorations by the tightly drawn boundaries. Instead it has created a challenge for the relatively smaller companies. The number of borewells per kilometres they need to dig to justify the presence of a sizeable reserve has shot up. This is therefore a salutary step towards ensuring better quality of exploration and mining of the same. In the two most mineral rich states, Chhattisgarh and Jharkhand, the size of the leases are comparable to those of small towns.

 

There is merit in the second policy change too. It was estimated that under the Coal Bearing Areas (Acquisition and Development) Act, 1957 the coal companies had become the biggest land holders in India. Since the Act does not have provision for return of the land to the original land holders or others, these parcels had become a deadweight loss for the economy, once they were denuded of their coal deposits.

The Union Cabinet has approved the reversion of these land as and when they occur to a wide range of parties including rehabilitation and resettlement of project affected families. The operative mechanism is that it would be a lease hold property for those getting back the land, but the lease would run for 99 years. Again, despite the beneficial ownership of the land remaining with the coal company, those rehabilitated can mortgage the land9.

The implication is that there shall be a competition to reclaim the land which does not have any more coal. It offers companies an end of life capital asset recovery which was not possible before. This changes the equation for land in coal belts.


Regulatory Principles:

A perusal of the government records, however, throws up some awkward problems, which cannot be solved by the present arrangement of a pan national ministry dealing with all sorts of companies and problems.

A visible demonstration of thsi challenge becomes evident in bringing many coal mines to the production stage. In Appendix-1 are the redacted comments from the minutes of meetings of the coal ministry with mine allottees. One could be forgiven for imagining these were scraps of notes from government meetings on coal from a previous era. But these are not. They are from meetings held by the union ministry of coal with allottees of captive and commercial mines held this year. The coal ministry, to its credit is hosting these meetings to ensure coal production begins quickly from the 131 mines won by companies through auctions for them.

These delays could prove to be costly. Earlier this year, an NTPC officer Kumar Gaurav was killed in Jharkhand. Soon after, a Jharkhand police team shot dead a suspected criminal in an encounter, who was alleged to be the leader of the gang that killed the officer. NTPC has forayed into coal mining through its subsidiary, NTPC Mining.

There is more and some of these are very familiar problems. These are related to land acquisition, delays in sanction of mining lease and even those fro prospecting license. As a result, as per coal ministry data of the 131 mines (200 blocks) handed over to companies so far (uptil July 2025), 61 have come into production with 70 in queue.

These need to be handled by a regulatory agency. The choice of whether to set up a coal regulator or expand the ambit of Petroleum and Natural Gas Regulatory Board is not significant at this stage.

What is important is to recognise that the coal ministry at the centre and the mines department at the states having handed out the licenses for the coal blocks, should not be allowed to monitor their performance. Since there are three types of mines,

Captive, 2. Govt run but allotted 3. Commercial mines the reasons for a neutral regulator to bring in best practices in the sector is indubitable. At this juncture we have not brought in the overarching role of Coal India and its subsidiaries. These too are getting listed.

As of now, the coal ministry is attempting to keep order despite the rapid expansion of companies in the sector through the office of the nominated authority. The minutes are a clear sample of the impracticability of this effort.

The ministry has often toyed with a plan to make the Office of the Coal Controller, play the role of a quasi regulator. This Office is an arm of the ministry of coal. Even a brief foray into the regulatory principles will thus demonstrate this is an unworkable solution. At the heart of the regulatory architecture is the need to keep the regulator at an arms length from the political executive. The reasons why the Coal Controller has not been able to come up to expectations is the conflict with this principle.

But the risks are mounting. Officials of the centre and the states were unwilling to come on quote but they acknowledged that delays in the process of clearances have the potential to bring in unwelcome practices. Some of these licenses have to be obtained from the state governments while the Geological Report has to be cleared by the Coal India subsidiary, CMPDI.

Once CMPDI is listed, it could provide a valuable technical support the regulator. As of now, being over dependent on CIL which provides 95 percent of its revenue from operations, is something the consultancy company will have to be weaned out of.

The stakes are rising when viewed from another angle too. Coal production from captive and commercial mines has increased 29.79 percent year on year in FY25. It has risen to 190.5 million tonnes from 147.12 , which means private producers account for nearly 20 percent of the coal mined in the country.

Of the 61 operational captive and commercial coal mines, 38 have been allocated to the power sector, 11 to the non-regulated sector, and 12 are designated for the sale of coal, a coal ministry data set, shows. No wonder the senior companies were specifically called for a meeting with the ministry in April on some of these concerns. “The Ministry sought constructive suggestions on how production levels could be further increased, with a focus on identifying best practices, addressing bottlenecks, and leveraging available resources efficiently” read a press note issued after the meeting10.

It is not the government’s job to offer the carrot of fast clearances of statutory regulations. The companies can game the government policies in that case, often by promising anodyne steps like the promise of integrate proactive planning, promises to adopt advanced technologies, and timely completion of statutory clearances. A regulator with no skin in the game, is perfectly poised to understand the difficulties, companies are subjected to and which has a cascading impact on the cost of production.

Pricing decisions between grades of domestic coal and between them and the imported coal are best left to the companies to figure out.

Finally, environment. The business of coal has a strong negative impact on the environment. A government, running a quasi monopoly company in the sector is in no position to enforce clean up rules. The risks rise as private sector companies join the sector. The presence of the neutral regulator is therefore essential to bring in best practices and develop best practices in the coal mining sector. How those could be ensured are questions that only a regulator would be able to answer.


CONCLUSION

In this paper, I have explored, if there a possibility that the revival of private sector run coal mines could create a combination of regulatory challenges which expand the negative externalities, and also offer no commensurate rise in the benefits from mining.

There is no doubt that the liberalization of India's coal sector represents a significant yet challenging transition for the economy. The current landscape is a paradox: while the entry of major corporate entities through a transparent auction system has successfully driven a remarkable increase in production, with output from new mines growing nearly 30% year-on-year, the reform is simultaneously being undermined by persistent, legacy issues of administrative and bureaucratic delay. A large number of mines remain stalled, entangled in the same clearance and land acquisition hurdles that have historically plagued Indian infrastructure projects.

The series of steps taken, which have brought the sector closer to a market led operation have been useful. The auctions have led to revival of interest among listed companies to foray into the sector, the government has also helped by framing mostly transparent and practical rules and policies. .

Two of the critical difference in this new era is the high-stakes involvement of established corporations, which has brought both significant investment and a demand for governance, fundamentally altering the dynamics from the previous allotment regime.

The second is the bold policy to offer land back to those who had faced government led acquisition. The handing over of land where the coal seam has been exhausted with smart drainage facilities, offering the resettlers the right to mortgage leased land are salutary steps. Since these are recent steps, they will take time to demonstrate their efficacy. The future success of this ambitious national endeavor now clearly hinges on bridging the significant gap between policy intent and on-ground execution.

The ongoing, proactive dialogue between the government and the corporate allottees is a promising step, but its ultimate value will be determined by its ability to translate assurances into tangible, timely action at the state and district levels, thereby unlocking the full potential of a modernized Indian coal sector.

The steps tie in with the recent steps taken by the Government to launch the National Critical Mineral Mission, wherein there has been intensified discussions to fast-track domestic exploration of critical minerals. The success of this Mission will be guided by the lessons from the coal sector.

(These are personal views of the writer. They do not necessarily reflect the opinion of OP Jindal Global University or its affiliated institutions)