In order to address the challenges and streamline the financing process, the Ministry of Coal conducted a ‘Stakeholder Consultation’ on “Funding of Commercial Coal Mines in India.”

The event was attended by coal mine allocatees and senior officials from financial institutions and banks. The consultation aimed to address concerns related to financing Commercial Coal Mining and gather feedback and suggestions from all stakeholders.

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At the event, banks expressed their willingness to finance Coal Mines, provided project viability and equity infusion visibility were demonstrated through detailed business plans.

Ministry of Coal in an initiative towards liberalization of the coal sector has undertaken an initiative to introduce Commercial Coal Mining, removing restrictions on the sale and utilization of coal.

This initiative also introduced provisions for financing coal mines and flexible auction terms to encourage wider participation.

Since the launch of the first tranche of Commercial Coal Mine auction by Prime Minister Narendra Modi in June 2020, the Ministry of Coal has successfully auctioned 91 coal mines across seven tranches.

To enhance broader participation in these auctions, the Ministry is implementing a series of reforms in the coal sector making it more investor-friendly sector. One key area of focus has been securing financial assistance to operationalize coal mines.

Classifying coal under ‘Infrastructure Sector’

The Coal Ministry recognised that coal is expected to remain a primary energy source in the foreseeable future, and requested the Department of Financial Services (DFS) to consider classifying the coal sector under the ‘Infrastructure Sector.’

This reclassification would enable banks and financial institutions to formulate policies more effectively to meet the increasing requirements of the coal sector in a time-bound manner.

The Ministry invited response from Coal Mine allocatees to determine the quantum of financing imperative towards coal mine development and operationalization, along with the associated timelines meeting the requirement.

This collated information has been shared with Banks and Financial Institutions to help address industry demands efficiently, the Coal Ministry said.

Steps taken by banks

The banks and financial institutions have also undertaken steps to identify nodal branches that will act as a single window to meet the financing needs imperative for coal mine operationalization.

According to the information shared by the ministry, as of now, the State Bank of India (SBI) has extended financial assistance for the development of one Commercial Coal Mine, and others are under the process of doing the same.

It was also highlighted at the meeting that with the rising impetus of ESG norms, most of the banks and financial institutions are reluctant in engaging in  projects related to coal.