Not so dark

In 10 months of this fiscal,coal production in the country has risen by 5.7 per cent. In the same period,the supply of coal by monopoly producer,Coal India Limited (CIL),has risen by 8 per cent. The gap is accounted for by the pithead stock that the company is now partially clearing. The rise in production still leaves CIL with the challenge of achieving a 24 per cent growth in production in each of the last two months of the fiscal to reach this year’s target of 470 million tonnes. At the current pace,it might just reach last year’s production target. This would mean that,for three years,coal supply in India by CIL will have remained flat. The impact on coal fired power plants is evident. In two years,the capacity of the power sector has gone up by 30 per cent but the utilisation is half of that.

The economy must suffer shortage of electricity due to indecision and delay on a long-overdue reform in the sector — the abrogation of the Coal Mines (Nationalisation) Act. As a result,the economy must depend on coal imports,expected to reach about 100 million tonnes per annum,to make up for the shortfall. Since CIL is unwilling to share the impact of the higher price ofimported coal,while powerproducers are not sure if they can pass on the full cost of the imports in the tariffs,the price pooling mechanism has run into difficulties,more than a year after it was mooted.

The plan to bring in private-public partnership in the sector,outlined in Budget 2013-14,is welcome. The PPP will utilise the existing arrangements to make way for more production. Private sector miners will get the right to run mines for a period of 30 years and more,making them stakeholders in the system. They will have an incentive to produce more under the partnership. This incentive is the freedom to sell excess coal by contacting the buyers directly and even settling the transport of the mineral between themselves,without waiting for CIL to take delivery. In this plan,CIL will act only as the trading platform. Since the sales will be handled and booked on the CIL account,there will be no violation of any act. But by keeping the public sector company out of the deals,the stage will be set for more domestic production in the economy with the third largest proven reserves in the world.