India's cabinet recently decided to allow commercial miners the chance to get into coal mining and sell their products in the open market. This would allow them to compete with domestic heavyweight Coal India Limited, which accounts for some 80% of the country's domestic production and is the world's largest coal miner by output.
"With this latest development, decision-makers expect private players to bring in competition along with private investment, technology adoption and international best practices," Brookings said.
The institution said key questions regarding the decision were:
- Whether commercial coal mining was needed?;
- Whether global players would be interested in partaking?; and,
- What would be required to make it a success?
It said these issues were complex, as long-term future coal demand was evolving as demand grew for cleaner fuels.
Brookings said to answer the above questions, clarity would be required on a number of other points.
These included the types of projects planned and their locations, as greenfield projects took time and faced bureaucratic challenges such as environmental clearances and land. It assumed the best mines were already in production, leaving any greenfield opportunities to be remote or more difficult to mine.
Another factor is the size of the mines, as global players would be interested in economies of scale, which would entail mines much larger than the majority in India.
Brookings said to attract commercial miners, India would need to create a level-playing field, with it suggesting regulated rates of return, or markets, both of which are justifiable and used around the world.
The country needs also to improve power sector dynamics, issues of contracts, power purchase agreements, and fuel supply agreements to level the playing field.
Other things to take into account are the preparation level of mine documents, the allocation process - which typically been by auction - policy consistency and removing subjectivity, and streamlining process bottlenecks, with approvals and licences more of a challenge for private companies.
"Changing norms after the fact is contentious in India, and when this happens with commercial bids ... projects often end up in the courts. We suggest spending more time in planning, with open-ended multi-stakeholder consultation, displacing the model of execute first and details later. Like many things, the devil is in the details," the institution said.