India moves towards ending coal monopoly

The Indian government has taken a cautious step towards ending the coal monopoly as its plans to allow private players to mine and sell coal, a move that is expected to benefit cement companies amongst others.

The cabinet has approved auction of 74 of the recently-cancelled 204 coal blocks in the next 3-4 months. While state-owned companies will be allocated coal blocks on a priority basis and will not have to bid in the auction, private companies will be able for the first time to buy blocks via e-auction. Private players will also be able to mine and sell coal.

The move is expected to allay concerns about a significant rise in coal imports, needed to meet the country’s requirement. This is particularly the case for the cement, power and metal industries. "Opening of coal fields to private companies would directly benefit cement, metals and power sectors. Currently these sectors are fulfilling their most of the coal requirements through imports, which is expensive and impacting their operating margins," said Tushar Pendharkar, equity strategist at Right Horizons Financial Services.  He expects cement producers such as UltraTech Cement and Ambuja Cement to benefit most from coal reforms.