The fact that India still depends on energy imports and suffers regular power blackouts reflects its low productivity, which could indicate hypocrisy when the government claims to lift transparency and eradicate corruption. Yet its Finance Minister has stressed that the interests of [state-owned producer] Coal India must be protected.

FDI said such statements mean that “the state’s effective monopoly on the sector is not about to be reduced immediately”, when protectionism has been a factor in the sector’s poor productivity in the past.

Inefficiency dogs the sector. The Geological Survey of India estimates the country to have a total of 301.56 billion tonnes of coal reserves as of April 1, of which the “prime” coking coal constitutes 5.313Bt, medium and semi-coking coal 28.76Bt, non-coking coals 266Bt and tertiary coal 1.49Bt.

FDI said coal-fired plants comprised 58% of India’s installed power generation capacity.

FDI noted that whereas an open-cast mine in Australia can produce 75Mt per 8 hours and an underground mine 40Mt, Coal India averages 7t and 0.8t, respectively.

“Officials are hoping that the move towards denationalisation will be the catalyst for an efficiency initiative in Indian coal production. What this means for the global coal industry remains to be seen,” FDI said.

And in a move with far-reaching implications for the industry, the government is reforming the sector by allowing commercial mining by private companies – which local unions have vowed to fight tooth and nail.

FDI believes an ordinance expected to be announced soon by the president will contain an enabling provision for commercial mining.

Finance Minister Arun Jaitley announced the decision after a recent Cabinet meeting, confirming the government’s intention to take the sector partially down the road of denationalisation – “partial” as the two state-owned coal giants will be allocated mines and their market shares protected, and only companies incorporated in India will be allowed to bid.

The ordinance has not yet been passed in parliament, but must do so within six weeks of parliament resuming sitting.

Unions, meanwhile, are expected to aggressively lobby against the decision. All India Coal Worker’s Federation general secretary Jibon Roy told local media: “We’ll resist every move to privatise the sector.”

The Indian Supreme Court’s September 24 ruling that 218 coal blocks allocated to private companies since 1993 were operating illegally was a public show of the state confronting corruption, with the government taking control of 42 operational mines.

A transparent re-allotment procedure for the blocks has been outlined by the government, which intends to use e-auctions, with proceeds to go to the state in which the coal mines are located and the entire process is to be completed within three to four months.

There will also be no first right of refusal for the original owners of the blocks.

The Supreme Court called the initial allotment of the blocks “fatally flawed” in its ruling, saying the blocks were allotted though an “ad-hoc and casual” approach, adding that “common good and public interest suffered heavily in the unfair distribution of the national wealth: coal”

FDI believes coal mines were under-priced by the previous government, with as much as $US33 billion in windfall gains was effectively given away to mine operators.

It has also been alleged that these companies worked to illegally influence the allotment decision, with Indian media dubbing the matter “coalgate”

The Supreme Court has refused to allow former ministers involved in the original allocation process – among them former Prime Minister Manmohan Singh – to be brought under scrutiny by the relevant authorities prior to levelling possible criminal charges against them. Companies under investigation for illegally influencing the allotment procedure, however, have not been barred from bidding for allocations again on the grounds that investigations against them are still underway.