Indian Mining. When?

It isn’t India Mining. At a conspicuously low 0.6 per cent growth, the mining sector’s performance stands out in the rush of encouraging statistics from CSO’s quick estimates for 2005-2006. Even agriculture (2.3 per cent), not a recent star performer, has taken advantage of the monsoon cycle to clock a modestly good growth rate. The question why the mining sector must grow is as important as why it is flatlining. Coal accounts for the bulk of electricity production. Electricity demand grows with rising income. If per capita income increases by a conservative 5 per cent every year — the figure was 6.1 per cent in 04-05 and 5.9 per cent in this fiscal’s quick estimates — electricity demand is supposed to register 8 per cent annual growth. Coal production isn’t anywhere near meeting that demand. Since alternative energy sources, from wind to nuclear, are not pragmatic near term replacements, power shortage can short circuit growth.

Premonitions of that are already with us — many thermal power suppliers have complained about coal availability. CSO’s data will hopefully prod the policy establishment to think beyond the “it’s politics” excuse. The public sector — Coal India Ltd and Singareni Collieries Ltd — produces around 95 per cent of India’s coal. Productivity is average to appalling (between 150 to 2,500 tonnes compared to 12,000 tonnes in the US). The reasons — poor technology, financial insolvency of several CIL subsidiaries, many unviable underground mines — are well known. But so are the reasons for all governments, not only this one, shying away from straight reform: disband the public sector’s near-monopoly. Many jobs will be lost, at least in the short term, if mining is thrown open to private investment and market rules. A political set-up that can contemplate such a consequence, even if it is tempered by generous severance and re-training packages, hasn’t yet come to power in Delhi.

What needs to be done therefore are incremental changes, to break the current mood of stasis. Captive mining by the private sector can be broadened if CIL and Singareni are forced to allot parts of the coal block more fairly. Anticipating reforms, the supply of good geological data can be increased and procedures for land acquisition made simple. A legislative solution to the Samatha judgment — it restricts private mining in tribal areas — can be worked on. It will help, hopefully, in the eventual toppling of the coal nationalisation act. Let policymakers start chipping away.