Coal Sector in India Gets Financing Boost, Aims to Attract More Investors

Commercial Coal Mining Undergoes Overhaul; Banks Offer Financial Assistance Amid ESG Concerns

In a game-changing move for India’s coal sector, the Ministry of Coal is working towards financial liberalization and operational ease. Banks express willingness to finance, as coal remains the primary energy source for the foreseeable future.

NEW DELHI – As the focus of the Ministry of Coal (MoC) shifts towards making the coal sector more attractive to investors, steps have been taken to simplify financial processes for the development and operationalization of coal mines.

The Ministry recently conducted a ‘Stakeholder Consultation’ on “Funding of Commercial Coal Mines in India,” attended by coal mine allocatees and senior officials from banks and financial institutions.

In light of the consultation, banks and financial institutions are formulating board-approved policies to extend financial support in sync with coal mine operational timelines.

Particularly, the State Bank of India has already extended financial assistance for the development of one commercial coal mine, and other institutions are following suit.

Recognizing the enduring importance of coal as an energy source, the Ministry requested the Department of Financial Services to consider reclassifying the coal sector under the ‘Infrastructure Sector.’

This reclassification aims to equip banks and financial institutions with the framework to address the coal sector’s needs more efficiently.

Feedback from coal mine allocatees has been gathered to ascertain the quantum of financing needed for coal mine development and operationalization.

This information has been shared with banks and financial institutions to facilitate a streamlined financing process.

Notably, this consultation comes against the backdrop of 91 coal mines being successfully auctioned across seven tranches since the launch of the first tranche by Prime Minister Narendra Modi in June 2020.

Despite rising Environmental, Social, and Governance (ESG) concerns, which have made many financial institutions wary of coal projects, banks have expressed their willingness to finance coal mines, provided project viability and equity infusion are clearly outlined.

The Ministry is actively working to reform the coal sector, including introducing flexible auction terms and financial provisions to encourage broader participation.