NEW DELHI : The Union cabinet on Wednesday announced 100% foreign direct investment (FDI) under the automatic route in coal mining for open sale, besides creating associated infrastructure, such as washeries.

While the move will help create an efficient energy market, usher in competition and reduce coal imports, it may also put an end to state-run Coal India Ltd’s (CIL’s) monopoly. India’s coal sector was nationalized in 1973.

New Delhi’s move comes at a time when the window for fossil fuels is rapidly closing, and the global energy landscape has been rapidly evolving, with fundamental changes to the investment culture amid growing climate concerns.

“In the coal sector, for sale of coal, 100% FDI under automatic route for coal mining, activities including associated processing infrastructure will attract international players to create an efficient and competitive coal market," the government said in a statement.

Experts gave a thumbs up to the move. “While opening up coal mining for competition through commercial mining, with participation of foreign companies, may bring in innovative and sustainable technologies and practices. It is certainly a step in the right direction," said Dipesh Dipu, partner, Jenissi Management Consultants, Hyderabad.

The move will also help India gain access to high-end technology for underground mining used by global miners.

However, concerns remain. “Additionally, this may be right-timed when coal miners elsewhere have been closing mines, and yet, due to the structure of auction, the foreign companies may find it difficult to compete. There are other challenges, too, such as smaller resource-bases in coal mines and production capacities, and risks in land acquisitions and other permits, which may prevent their entry," Dipu added.

Last year, the NDA government had allowed commercial mining by private entities. “As per the present FDI policy, 100% FDI under automatic route is allowed for coal and lignite mining for captive consumption by power projects, iron and steel and cement units, and other eligible activities permitted under and subject to applicable laws and regulations," the statement said.

The Centre had set a mining target of 1.5 billion tonnes of coal by 2020. Of this, one billion tonnes is to be from Coal India Ltd and 500 million tonnes from non-Coal India sources in line with the government’s push to raise natural resources production to kickstart economic growth.