The Ministry of Coal (MoC) has introduced initiative to make the coal sector in India more investor-friendly. This initiative encompasses Commercial Coal Mining, eliminating restrictions on coal sale and utilization, and introducing flexible auction terms to encourage wider participation.
Since the launch of the first tranche of the Commercial Coal Mine auction in June 2020, the Ministry of Coal has successfully auctioned 91 coal mines across seven tranches. In an effort to promote broader participation in these auctions, the Ministry is instituting various reforms to enhance the sector’s attractiveness for investors.
One of the primary focuses of these reforms has been to facilitate the financing of coal mines, as many industries have encountered challenges in securing financial support from banks and financial institutions. With growing emphasis on Environmental, Social, and Governance (ESG) norms, many financial institutions have become cautious about funding coal-related projects.
To address these concerns and streamline the financing process, the Ministry conducted a ‘Stakeholder Consultation’ on “Funding of Commercial Coal Mines in India.” The event brought together coal mine allocatees and senior officials from financial institutions and banks to discuss the challenges and gather feedback.
During the consultation, banks expressed their willingness to finance coal mines when they are presented with detailed business plans demonstrating project viability and equity infusion visibility. Recognizing coal’s continued significance as a primary energy source, the Coal Ministry has requested the Department of Financial Services (DFS) to classify the coal sector under the ‘Infrastructure Sector.’ This reclassification would allow banks and financial institutions to create more effective policies to meet the increasing requirements of the coal sector.
The Ministry sought input from coal mine allocatees to determine the necessary financing and associated timelines for mine development and operationalization. This information has been shared with banks and financial institutions to help address industry demands more efficiently.
Furthermore, banks and financial institutions are designating nodal branches as single points of contact to meet the financial needs of coal mine operationalization. The State Bank of India (SBI) has already provided financial assistance for the development of one Commercial Coal Mine, and others are in the process of doing the same. Banks and financial institutions are also working on board-approved policies to extend financial support in line with development and operationalization timelines.
With the significant transformation in the Indian coal sector and abundant indigenous coal reserves, coal is expected to remain a primary source of energy in the foreseeable future. The Ministry’s reforms aim to ensure that the sector attracts the necessary investment to support its continued growth and development.
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