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Saturday, November 28, 2020

The case against private coal

It will increase the price of coal and eventually the price of power.

Written by Sharad Yadav | Updated: February 26, 2015 3:54:29 am
coal sector,coal mining, (PSU), Coal India Limited, coal mining india, private coal companies,  sharad yadav, private coal industry, coal  power plants, coal mining blocks, coal blocks allocation, sharad yadav column,  indian express column, IE column Not many are aware that CIL sells coal at a price that is substantially lower than the market price. Higher coal prices will increase prices of steel and cement further, and consumers would be badly hit in turn.

So much has been written about the need to open up the coal sector, especially in terms of private commercial coal mining, that a common misperception prevails among those who agree with this. But no one seems to have thought of cross-checking the facts or weighing the pros and cons of such a move.

There is a myth that the shortage of coal in the country is due to the inefficiency of the public sector undertaking (PSU), Coal India Limited, and that it was responsible for the import of coal, which is far from true. Importing coal in 2013-14 was necessary. First, out of the current demand of 730 million tonnes (MT) of coal in 2013-14, 462 MT was supplied by CIL. Another 50 MT was produced by another PSU, and only 46 MT was sourced from private companies or state PSUs running captive coal blocks. It is important to note that in 1993, when this process of captive mining was started, the production of CIL was 210 MT. After 21 years and 218 blocks, private companies could produce only 46 MT of coal in 2013-14, whereas CIL, in spite of all the attempts by vested interests to sabotage its production programme, manages to produce 462 MT. One can see that in 2013-14, private sector participation was less than 10 per cent of total production.

It is also incorrect to say that coal shortage is responsible for the closure of any power plant. As per the latest Central Electricity Authority reports, presently we have 2.5 lakh MW of installed capacity, against our peak demand of 1.45 lakh MW. The peak demand deficit is only 5 per cent (a few states have a 10-15 per cent deficit) in the current year. The real villain behind our power woes is the transmission and distribution network, which delivers erratic supply. The desire of private power plants to charge super high power tariffs is also one reason for the closures, as several state discoms, as in Uttar Pradesh, are incapable of buying power at high rates.

Contrary to popular perception, mining PSUs are making huge profits. Mining in India, which is being done up to a depth of 1,200 m (leaving out deep-seated deposits) is a sure shot profit business. No wonder that CIL gave another Rs 16,485 crore dividend to the exchequer (the 90 per cent owner) in 2013-14, of the total dividend of Rs 18,317 crore. The IPO issued by CIL three years ago was also hugely oversubscribed, which is a clear sign of its financial importance as financial institutions worldwide queued up for a stake in this Maharatna.

Not just CIL, all major PSUs like ONGC that are involved in exploration/ mining of natural resources are making huge profits. ONGC, which is engaged in oil and gas exploration, has been making a lot of money over the years and is such a powerhouse company that it has also acquired oil and gas assets in other countries. Its net profit was a whopping Rs 26,507 crore in 2013-14. Similarly, National Mineral Development Corporation, a PSU in iron ore mining, earned a profit of Rs 6,420 crore in 2013-14. Similarly, manganese ore mining company Moil made a Rs 217 crore profit in the first half of 2014-15. In spite of CIL’s massive revenues, the government of India has diluted its share from the PSU. This is shortsighted.

The biggest and foremost negative impact of private commercial coal mining will be that it will increase the price of coal and eventually the price of power. Private commercial mining will result in unscientific mining, compromise workers’ safety and cause environmental damage. Obviously, this will impact negatively on our economy and will hit the profitability and competitive capability of our enterprises. Not many are aware that CIL sells coal at a price that is substantially lower than the market price. Higher coal prices will increase prices of steel and cement further, and consumers would be badly hit in turn. It will also hit agriculture, small scale industries, etc.

The bill in Parliament has many deficiencies. First, an important aspect has been deliberately left out — a barring provision for seeking escalation of tariffs by power plants after getting a coal block on a reverse tariff bid auction. Second, the government could have spared all the coal blocks falling in dense forest areas, earlier classified as “no go” areas (around 20-25 per cent), from the 204 listed in Schedule 1 of the bill so as to minimise the environmental and social costs of coal mining. Since all the blocks are certainly not required to be mined at one go, the government can chalk out a comprehensive coal mining plan to leave out biodiverse areas. As per the environment ministry, 15 per cent of Indian coal deposits lay beneath dense forest. What remains is sufficient to fulfil current as well as future demand. The allocation of coal blocks in dense forest areas needs to be spared at any cost. These areas also house the majority of central India’s tribal population, who are not literate enough to be part of the development process, as of now, if all the coal deposits are opened up at one go. Some deposits also need to be spared to fulfil the developmental needs of future generations.

The writer is a JD(U) MP in the Rajya Sabha

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