The Union government has initiated fresh efforts towards coal sector reforms which have been long overdue. The government is expected to launch ‘coal reforms 3.0’, aimed at reducing overall coal imports and increasing the availability of this energy source for industrial sectors. The crucial coal energy sector is the lifeline for many industries, but limited availability and high prices remain significant hurdles. It is expected that the much-awaited reforms will address these challenges.
With coal reforms 3.0, the ministry of coal is expected to unlock domestic production of coking coal through several steps. This third wave of reforms will also encompass non-power sectors, especially the steel industry. Another ambitious target is to eliminate imports of this vital energy source within the next two financial years.
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Coal reforms 3.0
Prior to the government’s announcement regarding the reforms, industry insiders had identified various segments in need of overhaul. Broadly, there are four areas that require urgent government intervention.
Although the coal sector was nationalised in 1971, with the government taking ownership and control of most coal mines in the country, the government is looking to catalyse private sector investment. The sector was opened to private players in 2020, allowing commercial coal mining, but further liberalisation could better attract private sector investment. This can be achieved through a liberalised reform agenda, making the sector more appealing for private investment. Additionally, the government should promote underground coal mining, which is more environment friendly.
Alternative uses of coal
Another crucial yet overlooked area for reform is promoting alternative uses of coal, especially considering that the availability of this resource has significantly improved. It is expected that India may have a coal surplus by 2026. Coal gasification must become a priority to utilise this surplus; otherwise, production will suffer. The government recently approved an Rs 8,500 crore incentive scheme to boost coal gasification projects across the country, which is expected to mitigate some environmental impacts of extensive coal use.
Other issues in the coal sector include challenges in land acquisition for mining and enhancing logistics infrastructure for coal transportation. Recently, the Union minister of coal, mines, and parliamentary affairs, Prahlad Joshi emphasised that promoting sustainable mining must be a priority.
The ministry has already undertaken next-generation reforms, including the sale of coal through a market-determined pricing mechanism and coal gasification. A production-linked incentive (PLI) scheme is being developed to support coal gasification by both public and private entities.
Need for transparency in policies
Transparency in coal sector policies is crucial for ensuring accountability, attracting private investment, and fostering sustainable development. Clear and transparent policies help mitigate corruption, reduce inefficiencies, and build trust among stakeholders, including local communities, investors, and international partners.
The coal sector, being a significant contributor to India’s energy mix, requires policies that are not only clear and consistent but also accessible to all relevant parties. Enhanced transparency can lead to better decision-making, improved resource management, and increased competitiveness, ultimately contributing to the sector’s long-term viability and environmental sustainability.
Carbon fuels and sustainability
India has set ambitious targets to reduce its carbon footprint, with the government actively pushing for net zero emissions by 2070. Achieving this goal will largely depend on reducing fossil fuel usage, particularly coal. However, a previous article by Policy Circle noted that substantially reducing fossil fuel usage, especially coal, could be detrimental to the country’s growth.
India continues to rely heavily on coal, with 45% of its total primary energy supply coming from this fuel. The country is rich in coal deposits, particularly in the east, and hence is naturally dependent on coal. India’s economic growth has been powered, in large part, by abundant coal reserves. Considering this, it is unfair for the Western world to press developing countries to drastically cut their emissions.
Globally, nations are scrambling to create cleaner ways to utilise this abundant yet controversial resource. Countries like China, Germany, and Japan have established themselves as pioneers by deploying coal gasification for various purposes beyond just power generation.
While burning carbon fuels, especially coal, fuels global warming by trapping heat, nations clash over phasing them out. Developed nations, with established renewables, push for stricter regulations. Developing countries, reliant on coal for growth, resist. This conflict between environmental concerns and economic needs makes a global coal ban a tough hurdle in climate change talks.
India, too, must strive to benefit from its resources while also being mindful of its sustainability targets. The dependence on this fossil fuel, with its hefty carbon footprint, is increasingly at odds with our nation’s environmental commitments.