Darkness on coal policy front

When a leadership fails to address core issues hurting the country’s growth potential, it is left only with the option of beating about the bush.

Nothing proves this better than the Congress-led UPA government’s policies with regard to coal.

In the last one month run-up to the Budget, the Centre took two major policy decisions to improve the outlook on coal availability in the country: Granting an in-principle approval to pooling of domestic and imported fuel prices; and appointing a consultant to suggest means to restructure the State-owned Coal India Ltd (CIL).

COAL IMPORTS PLANNING

The first measure seems to assume that ever-rising coal imports are a fait accompli without thinking through the implications. In other words, the country — which has a slightly lower share (10 per cent) of global coal reserves compared with China (13 per cent), but lags way behind in extracting the same — now needs to survive on imported coal.

Leaving aside controversies with regard to pooling — which have all the potential to add to the problems of the Indian energy sector — the proposal bypasses serious concerns on availability of imported coal, in the face of rising neo-nationalist politics in major coal-exporting nations in Asia and Africa. It also overlooks the affordability of such imported coal to the nation.

It misses the concerns over the capability of India’s port and rail infrastructure — which has failed to carry 40 per cent of incremental domestic coal production to the consumers, since 2003-04 — to handle higher imports.

RESTRUCTURING CIL

The second initiative aims at spinning off seven mining subsidiaries of CIL into separate corporate entities.

Incidentally, the same government once toyed with the idea of integrating India’s oil companies into a mega entity. In a change of heart, the Centre now believes that disintegration of CIL will infuse competition in a State-owned commercial coal mining sector, making it more efficient.

Since CIL is already listed, implementation of any such proposal will not be easy. But, the bigger question is, would the country at all gain, in terms of growth in coal production, from this complex financial exercise?

The reality is: Each of these subsidiaries is subjected to gross political interference at every stage of decision making — right from the selection of executives to award of a transport contract — more often at the expense of business interests of the miner.

This is over and above the all-pervasive bureaucratic red-tapism in decision-making, in any PSU environment.

Creation of more companies may only improve the prospects for the Centre to raise more finances through disinvestment, without any change in the ground realities.

On the flipside, the move may offer politics a fresh opportunity to strengthen its grip on India’s state-owned coal sector.

Known problems

In fact, if competition was the only solution to ensure growth, the Centre should not have fallen flat on captive coal production targets.

Having come to power, the UPA government drew a strategy to boost captive production from approximately 20 mt in 2004 to 104 mt in 2011-12 (and 333 mt in 2016-17).

Nine years down the line, as in 2012-13, captive miners have added hardly 10 mt of production. And, a bulk of the 200 blocks dished out so far are lying idle.

Leaving aside issues with regard to the controversial allocation procedure and award of coal assets to companies of dubious background, there are fundamental reasons for this failure.

There was no preparedness on the part of the nation in handling critical issues with regard to land acquisition; dealing with environmental regulations in a time-bound manner; and creating a logistics infrastructure that should pave the way for evacuation of the energy resource to consumption centres.

The ‘planning’ ended with dishing out of coal assets, sending orders to Coal India to ramp up production and, hyping up investment prospects in power generation.

The result is now evident in a 40 mt supply gap of domestic coal.

It could have been wider, had it not been for state sector resilience in the face of planning inadequacies. Though they fell way behind the target, CIL and its peer Singareni Collieries (SCCL) together have added nearly 150 mt of production since 2004.

Concerns ahead?

A fuel crisis has hit India. The solution clearly lies in stepping up domestic production.

But the concern is, has the government learnt any lessons from its past failures?

Not a single procedure has been streamlined with regard to environment and forest clearances. No activity is in sight to step up transport logistics. And, no solution is in sight as regards land acquisition either.

Coal will henceforth be allocated through auction, generating revenue to the government. But that does not ensure development of such assets, as little progress is achieved either on the exploration front or availability of due regulatory clearances.

But that does not deter the government from making fresh promises on coal production. Captive mines, it says, will add another 70 million tonnes capacity in the next four years.

Coal India was asked to address demand growth. But — leave alone regulatory issues concerning projects — the government is yet to find time to fill up key vacancies in the company.

And, if that is not all, key projects will be held up due to dillying-dallying by regulatory authorities in granting due approval to vendors.

An Australian company is reportedly doing the rounds of the Directorate General of Mines Safety for the last 10 months, for testing of underground mining gears to be supplied to SCCL.

The list is a bit too long for any Finance Minister to address. And, and to spare him the discomfort, the coal sector has no demands from the Budget!