New Delhi: Despite record coal production in 2015-16 and comfortable stock levels at thermal power plants, the government will further ramp up coal output as the expected turnaround of distressed power distribution companies will likely lead to higher coal demand for electricity generation, said coal secretary Anil Swarup said in an interview on Wednesday.

Accordingly, Coal India Ltd (CIL) will go ahead with its estimated capital investment of 57,000 crore to boost production to one billion tonne by 2019-20, Swarup said.

In 2015-16, the state-run company produced 536 million tonne of coal, an annual increase of 8.5%. The expected growth in coal consumption from power plants which now run way below their full capacity—some at half their potential—is driving CIL’s massive capacity expansion project despite the lukewarm interest bidders showed in the fourth round of coal mine auctions in December 2015, which later led to its cancellation.

Swarup said the 8.5% growth in domestic coal supply by state-owned CIL in 2015-16 has helped reduce imports by 34.26 million tonnes leading to a foreign exchange saving of 28,070 crore. The gross value of coal imports declined to 79,378 crore in 2015-16. The country imported 182 million tonnes in 2015-16, down from 216 million tonnes in the previous year, said the secretary.

CIL’s expansion plans are part of India’s overall efforts to ensure energy security by cutting crude oil imports by 10 percentage points over the next six years—the country now imports 80% of its crude oil requirement—and boosting domestic production of natural gas.

Towards this goal, the government recently announced a new contractual regime of revenue sharing for oil production and offered pricing and marketing freedom for natural gas produced from existing deep-sea discoveries.

To bring more competition in the coal sector, which is currently monopolized by CIL, the government is planning to allow commercial mining and trading of coal, Swarup said.

Private companies will be given mines through auctions once the demand for coal from the power sector picks up. The ministry has already identified some blocks for auction to private entities. As an initial step, state public sector companies will be roped in for commercial mining. This will help the country have a total of 1.5 billion tonne of coal output by the end of the decade, a third of which will come from sources other than CIL.

As part of reallocating 204 coal mines, the original allocation of which was cancelled by the Supreme Court in 2014 for alleged irregularities, the government has so far auctioned 31 coal mines in three tranches. Out of 34 operating coal mines auctioned and allotted, nine have started production and have registered about five million tonne output.

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