FDI Inflows to Coal Production

FDI Inflows are permitted in the coal production unit in India depending on the outputs. Coal production is the backbone of the Energy sector in India. 78 percent of the coal production is consumed by the electricity generated.

Coal Industry in India at a Glance-

Coal production is the backbone of the Energy sector in India. 78 percent of the coal production is consumed by the electricity generated. The coal production unit is also a major resource for about 58 percent of the electricity generated in India. The size of the coal production industry in India is estimated to be around 248 billion tonnes among which 93 billion tonnes are tested coal reserves. India ranks fourth in having tested coal reserves across the globe.

India is also known to be the third largest coal producer among the total world coal production of 360 million metric tonnes per annum. The Ministry of Coal in India has set up 143 coal blocks and has occupied about 11 percent of the total coal reserves for captive consumption which exclusively includes power generation and steel plants. 80 blocks have already been allotted or in the process of the same. Coal India Ltd. (CIL) accounts for about 85 percent of the entire coal production. The coal production unit in India is entirely a pub sector affair. Private sector participation is only allowed in steel plants and power generation.

FDI Inflows to Coal Production-

• The captive coal mining unit is allowed private sector participation


• All the sales of coal mining are made through Coal India Ltd. (CIL)


• FDI Inflows are permitted in the coal production unit in India depending on the outputs


• Foreign investors holding less than 50 percent share in the coal production units in India can invest in coal mining or other related activities and this does not require the approvals from Foreign Investment promotion Board (FIPB). This has been systematized by the Government of India in order to put certain restrictions on the power of the foreign investors while investing in the Indian market


• FDI of higher value are sometimes permitted in coal production depending on the end-product of the same. If the output of coal production unit links to any significant sector or activities, then FDI of higher value is not permitted which is just the opposite if the end-product is not so serious


• FDI Inflows up to 100 percent is permitted in the coal and lignite mining for captive consumption in the power generation sector and for captive consumption of the same in steel and cement sector, FDI is allowed up to 74 percent


• The coal processing unit which includes coal washing and sizing is allowed Foreign Direct Investment up to 10 percent

Last Updated on 4/23/2011