The news started leaking out in December last. The Comptroller and Auditor General submitted its final report underlining gross irregularities in distributing and utilising India’s biggest and most import primary energy resource — coal.
The CAG report was incomplete. It only reviewed the distribution and utilisation of India’s coal mining assets — free of cost — to a handful of users in the private sector through a preferential, captive dispensation route. But the information piling up, and the ruckus the report raised in Parliament brought to light more disturbing facts.
One of these was that three or four business groups had lapped up nearly one-sixth of the blocks distributed and were pocketing the cost advantage by selling the final products at market price. Similarly, companies with political connections bagged assets, and sold them at a premium, to be recovered from the final consumer of the product. Worse, even the blocks allotted to state-owned entities across the country, through the government dispensation route, led to accumulation of profits by private businesses.
A large number of blocks that were intended to distribute coal to small or cottage industries landed up with private sector miners selling coal in the open market.
Even blocks offered to PSU power utilities helped private sector mine developers to reap windfall gains, depriving the country of both cheap electricity and huge revenues.
The bottomline: Nearly 45 billion tonnes of geological reserves — snatched from national miner Coal India Ltd and sold at one-third the global prices — largely fell into wrong hands.
Green barricade
Apparently, this was done to ensure meeting the country’s demand for adequate quantities of cheap coal. In the end, the country has neither adequate coal (captive segment failed to produce even half the desired quantities) in the Eleventh Plan (2007-12) nor did it bring the desired benefits to the end-consumer.
And, both issues — availability and price of coal — are troubling the nation. While the country boasts of one of the largest geological reserves of coal, nearly 25,000 MW of power generation capacity is starved of fuel. The fate of another 35,000 MW under construction hangs in the balance.
The reasons are largely the parallel failure of CIL to produce the targeted output in the last Plan period.
And the only common streak identified in this production shortfall (both at CIL as well as captive blocks) is the prolonged delay in securing green clearances. Over the last few years, the country has enforced a series of regulations to protect the environment and forests. But it has failed to create the right administrative framework for faster decision-making.
The result: miners wait for at least 7-10 years to get the clearances needed to start developing an asset. In 2012, an overwhelming fuel crisis definitely saw some movement from the Centre to speed up the process.
But it is doubtful if anything changed in the States that are primarily responsible for implementing such policies. CIL has been waiting for the last three months for a forest officer to conduct an on-field inspection (for stage-I clearance) of the projected 20-million-tonne Bharatpur open-cast mine in Orissa.
India’s policies for stepping up coal production have failed. But, like every proverbial failure, it has created an opportunity for the nation to set its policies right, be it in removing bottlenecks to ensure faster development of mines or ensuring that such coal is available at an affordable price.
Market economy
While tensions have eased slightly on the availability front, with over 8 per cent production growth at CIL in April-December 2012, it is still unclear if the Government has learnt its lessons from the captive block allocation failure.
If the experiences of China, Indonesia, South Africa and other such developing nations are any indication, privatisation of coal mining does not augur well for the domestic thermal power sector or industry at large.
All these countries are now forcing their power generation sector to absorb huge losses. Demand is getting stronger in Indonesia and South Africa to curb market forces in coal production.
As the Government has finally started de-allocating a large number of captive blocks, the future should tell if they are returned to their original owner, CIL, so as to protect the country’s long-term interests.