Coal news and updates

Over the past five years, Coal India's profit jumped 735% to Rs17,356 crore by just raising coal prices while employee expenses grew almost double. However, between the same period, its coal production increased by just 5%

 

Coal shortages have been caused mainly due to the inefficient and monopolistic Coal India Ltd (CIL), and road blocks created by Ministry of Environment and Forests (MoEF) in the development of new coal mines. Any bottlenecks in coal production has a cascading effect on all major industrial and household sectors in India, including power generation. CIL was formed upon nationalisation of coal mines with the noble purpose of increasing coal production, to provide better amenities and safety to coal miners and to provide coal to Indian industrial consumers at a reasonable price. It has largely failed in its objectives. Shockingly while CIL’s production has remained near stagnant for last five years it’s employee expenses have doubled to Rs27,320 crore.

 

CIL has increased coal prices by 60% in just last five years, an act of virtual extortion resulting in its profit jumping to Rs17,356 crore in 2012-13 against just Rs2,078 crore in 2008-09 (by 735%) while coal production marginally went up just 5% to 452 million tons (mt) from 431mt during the same period.     

 

Remedies:

 

CIL’s Subsidiaries should be made independent and decoupled from it

All seven coal producing subsidiary companies of CIL should be made absolutely independent in their ownership and operations, and should be freed from the clutches of CIL. The holding and subsidiary company relationship should end and all of them can be listed on stock exchanges.

 

After unbundling as above, let there be healthy competition between these seven self contained independent companies on the lines of Hindustan Petroleum Corp Ltd (HPCL), Bharat Petroleum Corp Ltd (BPCL) and Indian Oil Corp (IOC).

 

These seven coal producing companies can jointly promote a separate company, exclusively to carry out the bulk and economical procurement of mining and other equipments on their behalf. Similarly, these companies can form a joint committee to interact with railway authorities for placement of rail rakes for smooth movement of coal.

 

Consultancy firm Deloitte and the 12th plan document has also recommended decoupling of these subsidiary companies but Minister of Coal on 13 February 2014 refused to accept it.

 

Poor quality of coal and no redressal mechanism

 

CIL has no proper, fair and mutually acceptable arrangement for quality testing of coal, as a result the customers are forced to accept and pay for whatever CIL dispatches, even if it is stones or mud mixed with coal. The recent tussle on the quality issue between NTPC and CIL amply proved this point.

 

Mystery behind allocation of coal blocks/ reserves without any consideration

 

It is strange and mysterious as to how huge coal reserves, limited in quantity and not replenishable, unlike air waves/spectrum, were allocated to private parties selectively without charging any consideration through an open bidding process.

 

The best way out of this whole messy affair and controversy is to cancel all coal allotments made from 1999 to 2012 by executive order/ordinance barring those that have already seen investment and started mining. Thereafter, CIL should reallocate the same to actual and genuine user industries in small parcels, based on their captive requirement for next 15 to 20 years through an open auction by keeping a reasonable floor price.

 

Once coal blocks are reallocated against payment of suitable monetary consideration, there will be urgency on the part of new coal blocks allottees to invest and start mining. The present coal blocks allottees are not serious in mining and are waiting for further appreciation in the value of their coal blocks.

 

Fuel Supply Agreements (FSA) are drafted in a most biased and partisan way with all terms favouring only CIL. These must be scrapped and replaced with a new one based on equity and equality.

 

Authority for deciding coal prices

 

Coal prices should be decided from time to time with a holistic approach by an independent multi-member minerals commission and not by the proposed coal regulator, which is just an advisory post with powers of fixing coal prices staying with CIL and Ministry of Coal. This will curb the sort of impunity because of which CIL had overnight increased the price of higher grade coal from Rs2,140 per tonne to Rs4,920 per tonne in a single stroke effective from 27 February 2011.

 

Coal Mafia

 

Coal mafia and organised gangs are rampant and they not only pilfer coal but also forcibly extort money from consumers. This crime has been continuing since decades and is known to everybody. The government and administration can demolish this illegal racket if there is strong determination and will.

 

 

 

Source: http://www.moneylife.in/