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Coal ordinance opens doors to foreign firms

Foreign companies may be allowed to mine coal without any strings attached sooner than expected.

The Coal Mines (Special Provisions) Ordinance 2014, which the President signed on Tuesday incorporates an amendment to the Coal Mines (Nationalisation) Act, 1973 that effectively opens up the coal mining sector to all companies in India including subsidiaries of foreign entities.

This is what a section of the amendment says: "After section 3 of the principal Act, the following section shall be inserted.... a company or a joint venture company formed by two or more companies, may carry on coal mining operations in India, in any form either for own consumption, sale or for any other purpose in accordance with the prospecting licence or mining lease, as the case may be."

This wording of the amendment has triggered speculations in corporate circle about the possible entry of foreign companies, rather a re-entry after 42 years.

"The changes in the ground about entry of foreign entities now becomes a possibility. There is a disconnect between what the amendment says and what the government indicated earlier," a coal sector veteran associated with formulation of government policy on energy told dna.

On allowing foreign players in the coal auction process, Finance Minister Arun Jaitley had said on Tuesday that only companies incorporated in India would be allowed to participate in the bidding.

But the words " companies incorporated in India" also includes subsidiaries majority or fully owned by foreign companies, company law experts said. The ordinance has not dealt with the ownership of the such Indian companies.

Ashok Khurana, director general of Association of Power Producers however said that the foreign companies would be allowed only for specific purposes and not merchant mining according to his interpretation of the Ordinance. Merchant mining is coal mined for export and not for end-use.

The development comes at a time when coal is increasingly gaining importance with power hungry India fast emerging as a key player. "Coal is projected to overtake oil as the largest energy source in coming years," Peabody, US largest coal miner said recently.

The dilution of the Coal Mines (Nationalisation) Act has been a politically sensitive issue. The last time it was changed was in 1993.

The All India Coal Workers Federation has threatened a nation-wide dharna beginning November against this order.

Source: DNA