Coal news and updates

Cleaning up coal

The decision to allot coal mines to States marks the first step in ending the Centre’s four-decade old monopoly over the mining and sale of coal. Public sector undertakings — both Central and State — will now be allocated coal blocks and the Centre’s stated objective in doing this is to provide small and medium industries in various States with easier access to coal supplies. This is certainly a laudable goal, although it will be a secondary outcome of the move. So far, States have been allocated coal blocks, but such allocations are tied to specific end uses such as power, steel or cement production. By now allowing merchant mining of coal, even if in a circumscribed fashion, the Centre has taken a step forward in reforming the market for India’s largest energy resource; at the same time, it has opened up additional revenue earning opportunities for coal-rich States.

While the Centre’s de jure monopoly over coal may have ended, its de facto monopoly is assured for years to come as it controls 90 per cent of the country’s total coal output through the centrally-owned Coal India Limited and Singareni Collieries, a Central government joint venture with the Telangana government. CIL is, for all purposes, a monopoly, leading to many market distortions. Since customers do not have an effective grievance redressal mechanism in the absence of a coal regulator empowered to regulate prices, this has also led to undue pricing power in the hands of the State-owned miner. Another undesirable outcome has been a steady rise in coal imports, despite India having over a tenth of the world’s total reserves of the fuel.

We need to ramp up our coal production considerably if we are to meet the target of 1.5 billion tonnes by 2020. Coal India’s output has shown an impressive growth rate in recent months, but there are still challenges to contend with. Lack of modern technology, issues with manpower, land acquisition and problems with environmental clearances need to be addressed if the country is going to get anywhere close to its ambitious target. Added to this is the issue of productivity; CIL’s is among the lowest among organised miners in the world, at just 0.8 tonnes per man-shift. Also, although 60 per cent of CIL’s manpower is deployed in underground mining, such mines account for only 10 per cent of its output. While the Centre has taken commendable steps to reform the coal sector by auctioning coal blocks, making a small disinvestment in CIL, and now allowing limited commercial mining, the task has only just begun. The next step is to have an independent regulator for the sector. Although coal prices have been nominally deregulated since 2000, given CIL’s monopoly, this has meant little. An independent and statutorily empowered regulator, and further opening up of commercial mining to the private sector can provide the necessary impetus to the sector and attract fresh investments.

source: http://www.thehindubusinessline.com