India okays allocation of 5 coal mines; allows part output sale in open market

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The Indian government has approved the allocation of five mines with a combined of about 5.2 million mt/year, allowing successful bidders the flexibility to sell a portion of the production in the open , according to the ministry of Thursday.

“The significant feature of the allocations is that for the first time, the successful bidders shall have the flexibility to sell 25% coal produced in the open market,” the ministry said. “This will boost the coal production in the country and reduce the dependence of industries on imported coal.”

The ministry said these mines were allocated following electronic held in the first week of November. The government had initiated the process for 27 coal mines for non-regulated sectors last year.

The allocated mines are located in the Indian states of Madhya Pradesh, Chhattisgarh, West Bengal and Odisha.

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The ministry said that the allocation of these mines will generate a huge revenue for state governments where the mines are located in the form of upfront payment, royalties and other applicable taxes.

Currently, state-run Coal Ltd supplies almost 80% of domestic requirements and is also aiming to produce 1 billion mt at Coal by 2024-2025. Most of the sales from Coal are either through term contracts or via e-auction platforms.

Last year, India imported around 235.24 million mt of coal, up 12.9% year on year.

India’s total domestic coal production will reach 810 million mt in the fiscal year ending March 31, 2020, up 11% year on year, Coal Minister Pralhad Joshi said this week.

Coal India has set a production target of 655 million mt for the current fiscal year, which runs from April 1, 2019 to March 31, 2020. In the previous fiscal year 2018-2019, the company achieved an of 606.9 million mt, an increase of 7% on the year.

India has also paved the way for global companies to own coal mines in the country after the cabinet permitted 100% foreign direct in the sector, a move seen by many as creating a competitive market and hurting Coal India’s monopoly status.

— Deepak Kannan, deepak.kannan@spglobal.com

— Edited by Norazlina Jumaat, norazlina.jumaat@spglobal.com

Source: Platts

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