In the pits

The impressive GDP growth in the first quarter of 2005-06 is marred by slow growth in agriculture and mining, which grew at 2 per cent and 3...

The impressive GDP growth in the first quarter of 2005-06 is marred by slow growth in agriculture and mining, which grew at 2 per cent and 3.2 per cent respectively, over the same quarter last year. While most of the country8217;s focus is on agriculture, a sector where production is in the hands of millions of private producers dependent on rainfall, soil and diverse state governments, the fall in the growth rate of mining has been ignored in general. In this sector, the bulk of the problem lies directly in the hands of the government. Ninety per cent of India8217;s coal production is accounted for by Coal India Limited, the holding company which operates most of India8217;s coal mines which are besieged by problems of low productivity, low investment, old production methods, safety issues, mafia presence and trade union disruption. While India has the third largest reserves of coal in the world, after the US and China, the import of coal has been high and rising 8212; due both to the high ash content in Indian coal as well as restrictive policies in the coal sector.

While we see a fall in the growth of coal production, 2004-05 witnessed at the same time a doubling in India8217;s imports of coal. India will not be able to meet the rising demand for coal in the next decade unless there is an increase in investment in this sector. Today, private production is permitted only in captive mines 8212; for use by the owner in power plants and steel and fertiliser units. Captive mines are not allowed to sell their coal in the open market. The attempt to amend the Coal Nationalisation Act and allow privatisation of coal mines has been met by sharp opposition from all trade unions.

Under the UPA government, trade unions may be expected to continue to oppose the privatisation of coal mines. The least the government can do is to focus attention on how to modernise the coal sector and increase investment within the current policy framework. By effectively not having a minister to head the ministry, and not expediting new exploration or research in the field for decades, the government has made sure that the sector is doomed to low efficiency and low productivity. Considering the NCMP8217;s commitment to the public sector, the UPA should at least now concentrate on raising growth rates in the mining sector.