On Saturday, May 16, 2020, the Indian government announced landmark policy reforms in eight strategic sectors of the Indian economy. This was the fourth announcement in a series of five restructuring “phases” announced under India’s new US$266 billion stimulus package to provide economic relief to industries affected by the COVID-19 pandemic. The Finance Ministry provided bold new measures for the coal mining, mineral mining, power distribution, atomic energy, defense, civil aviation, space and social infrastructure sectors. Each new policy aims to spur business, employment and general growth in India’s ailing markets. This client alert summarizes the fundamental reforms made in each sector.
Natural resources and mining
The Indian government ended its long-standing monopoly on commercial coal mining. In India, mining rights are sold in “blocks” of a given geographic area. The purchaser of a mining block essentially buys the right to conduct mining operations within that block. Coal mining blocks range in size – some of the largest blocks can produce up to 50 million metric tons of coal per year. In 1973, all coal mining operations were nationalized in India. Prior to that time private sector mining was permitted. However beginning in 2015, captive, end-use consumers of coal were permitted to purchase mining blocks from the government by auction. These users were typically power and steel companies that mined coal only for their own consumption. Now, any business may purchase coal mining blocks and subsequently sell them on the open market. In conjunction, the Indian government will offer nearly 50 coal mining blocks for immediate auction. This relaxation introduces transparency and free-market competition into the coal sector. The Indian government separately announced its intention to spend nearly US$6.8 billion to build new coal evacuation infrastructure in the country. These reforms aim to reduce dependence on imported coal and to create a strong, self-reliant domestic energy sector.