GoM Approves Only Part of Coal Reforms Package

CHERRY-PICKING WILL BE COUNTER-PRODUCTIVE: CHAWLA PANEL

GoM Approves Only Part of Coal Reforms Package

Ministerial team expands user list, but shies away from bold moves needed to expand domestic output

VIKAS DHOOT & SARITA C SINGH NEW DELHI

India’s coal sector, already plagued by inefficiency and scarcity, may face a much bigger crisis as the panel of ministers considering reforms in the sector has handpicked some easy steps such as expanding the number of approved coal customers, but shied away from bold moves needed to expand domestic output. Experts believe that this will aggravate the coal supply problem by widening the demand-supply gap rather than solving the problem that has threatened the viability of a large number of power plants and prompted the prime minister’s office to direct quick action to address the issue. The group of ministers had approved only five of the eleven suggestions made by the Ashok Chawla Committee on Allocation of Natural Resources for the coal sector. Members of the committee said ‘cherry-picking’ of its recommendations would be counter-productive.

“Our suggestions were holistic and inter-linked. The idea to expand approved end users was to attract more mining firms into coal extraction. If you do one without the other, you will have more users demanding coal without any rise in output,” said a panel member, who did not want to be identified.

The recommendations accepted by the GoM include basic steps such as making public the reasons why some companies are granted or denied coal, making e-auctions more systematic, and auctioning coal blocks only after all clearances have been secured.

The GoM has put on hold other suggestions of the committee, such as creating a platform for sale of Coal India output and use of surplus coal from captive mines. It has also put on hold a proposal to allow independent mining firms to bid for auctions of coal blocks for captive use. The coal ministry said that this proposal may not be possible under the Coal Mines Nationalisation (CMN) Act of 1973. The ministry also said that creation of a trading platform would make it difficult to monitor sales. It needs to monitor sales to ensure that only the designated end-users get coal.

Members of the Chawla panel said that the recommendations that have not yet been accepted were the most important ones, needed to boost production. “The suggestions put on hold formed the heart of our recommendations to improve coal production,” said a member of the panel.

Association of Power Producers’ director general Ashok Khurana agrees. “Expansion of end users will accentuate the scarcity of coal. We have asked the government to give power projects first priority in coal allocation and allow captive block owners to sell coal,” he said, though he backed the move to keep independent miners out of coal-block auctions.

Members of the Chawla panel disagreed with the coal ministry’s view that some of the recommendations violated the CMN Act of 1973. “We had discussed this issue threadbare with the then coal secretary (C Balakrishnan), who said that the suggestions were radical, but legally tenable,” retorted the panel member. “There was a bit of back-tracking on this later, but we refused to change our suggestions,” he added.

The committee had argued that its stance was backed by legal opinion given by the attorneys general over the years. This month, the Prime Minister’s Office directed Coal India to assure supplies for 20 years to 50,000-MW power plants likely to be commissioned by 2015.

Power projects commissioned post-2009, with a capacity of 22,000 MW, and projects under implementation with 55,000-MW capacity, are facing an acute coal shortage. Industry officials said far-reaching steps were needed to solve the problem. “You need to do something dramatic to fix the coal sector. Mere administrative orders are not enough to increase coal production on a sustained basis,” said Rajiv Kumar, secretary general of Ficci.

Kumar, who was also a part of the Chawla committee, said the most dramatic change would be to break the monopoly of Coal India (CIL). CIL controls about 80% of the country’s coal output. The country is in dire need of coal and these anomalies need to be ironed out of the system to increase production,” said Monnet Ispat & Energy executive vicechairman and managing director Sandeep Jajodia.

Source: ET 28.02.2012