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Government set to deregulate coal - Views on News from Equitymaster
 
 
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  • Jan 4, 2000

    Government set to deregulate coal

    The government has decided to deregulate the prices, production and distribution of coal. This move is likely to make captive coal mining attractive.

    The deregulation of coal pricing, production and distribution would attract private investment into this sector, in effect leading to an improvement in existing mining technology and a rise in competition. Th increased efficiency and competition would lead to competitive pricing and an improvement in the quality of their product. The consumer will stand to gain from this as costs reduce and yields take an upturn. This move would also facilitate the entry of international mining majors such as BHP (Australia) in to the country.

    The main industries that would benefit by the deregulation of coal would be steel, cement and power sectors. These in turn could have a trickle down effect across the economy. There are many companies, which import coal primarily because the coal that the public sector monopoly Coal India supplies has an enormously high ash content.

    India has one of the largest coal reserves and coal based power has been losing to gas based power in recent times mainly due to the uncertain availability and low quality of coal. Power plants based at coal pit-heads can generate power at the rates of Rs.1.10 per Kwh as against Rs.3.50-3.75 per Kwh for gas based power. In the steel industry, Tata Steel owes its low cost structure party due to the fact that it owns its coal mines.

     

     

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