Pratim Ranjan Bose
Now, it’s the turn of Narendra
Modi government to propose de-nationalisation of commercial coal sector, in the
Coal Mines (Special Provisions) Ordinance, 2014 that will be placed before
Parliament in the ongoing winter session.
It is now to be seen if the
Parliament approves the bill.
There is every possibility that it
would be blocked. Because Modi’s, BJP that has a brute majority in the Lok
Sabha or the House of the People; is a minority in the Rajya Sabha
or the Council of the States.
The government is yet to clarify
on the road-map to privatise coal sector.
But rest assured any hasty move
will put the country face-to-face with major disruptions in fuel supplies,
which has been growing at a healthy pace for last two years, as coal unions
have taken the agitation path.
Simply put, privatising India ’s
coal sector is not an easy choice. And, politics apart, there are some valid
reasons behind it.
All monopolies are not bad
That cheap electricity is a corner
stone of growth, is a common knowledge.
And, a look at growth economies
around the world will tell you, there are reasons for the Indian government to
maintain a firm grip on the coal mining sector so as to achieve this goal.
The developing China and Developed South Korea
does it through State monopoly in power sector. In both the countries industry gets
electricity at relatively cheaper rate than in India .
Ideally, it should be cross
subsidised by the retail and household sector. But, in reality, utilities often
absorb huge losses or sacrifice profit potential for national good.
The India model is just opposite. Here
electricity generation companies, half of which are owned by private capital,
make money. The national miner sacrifices profit opportunity to provide them with
cheap fuel.
Disturbing the set up may lead to
as dangerous consequences, as evident in coal-rich Indonesia
and South Africa .
Little scope in surface
mining
The liberals, however, argue that
it is possible to regulate a private coal mining sector.
The large number of complains of
windfall gain against the Chinese miners indicate it is easier said than done.
Yet, assuming they are correct, it
is doubtful if a whole-hogged privatisation would increase the country’s coal
production significantly.
The reason lies in limited scope to
fast forward the growth in surface mining, the least-cost production method, contributing
93 per cent of India ’s
550 million tonne (mt) coal production.
Need to step up production at a
higher rate, low price of fuel, coupled with failure to bring in new
underground technologies; led the national miner - Coal India (CIL) - to focus
its energy on low hanging fruits of opencast mining.
If allowed, private sector would
surely try to enter this area. But that has to come at the cost of national
miner’s growth and greater social tension over land acquisition.
To cut the long story short, India can only expect
to add to its trouble, by opening up the surface mining to private
participation.
Open underground mining
Do I sound a pessimist? Not at
all. And, here is a prescription for the Prime Minister to reform the coal
sector.
Ask the national miner to reserve
cheap opencast coal only for the regulated electricity generation sector. And, throw
underground mining, which has little relevance to the country’s energy needs, open
to competition. Allow free market price of fuel produced from such mines to
make it lucrative opportunity for the private capital.
Let us face it. With a mere 40
million tonne (seven per cent) production India ’s underground capacities are
highly under utilised. Going by the reserve potential India underground mines should
contribute 25 per cent of domestic production.
Approximately 20 per cent of Australian
production (over 400 mt) comes from underground, nearly 40 per cent in USA (over 1000 mt) and 86 per cent in China (over
3500 mt).
While the world is moving towards
10 mt a year long-wall phase; the largest underground project in India promises produces
2 mtpa. (Long-wall technology helps extract more coal from the same mine.)
Private players can correct this
anomaly. Low requirement of land acquisition will reduce the scope of social conflict.
The country should enjoy rapid production growth at minimum compromise with
nature.
It’s a win-win strategy and, is
destined to change the face of Indian coal mining for ever without disturbing
the electricity sector.
Win-win strategy
Cancellation of allotment to steel,
cement and other such sectors, operating in the open market; should improve immediately
availability of cheap fuel for electricity generation. This coupled with CIL-led
growth in surface mining should be adequate to feed the power sector for some time
to come.
Since steel and cement sector currently
meet majority of requirement through imports (200 million tonne per annum
including metallurgical coal), creation of domestic market should go in their
favour. The country will save precious foreign exchange by replacing part of
the import demand.
The national miner should be
happy as well.
Free market pricing should offer
a fresh lease of life to its nearly 300 underground mines losing approximately
Rs 10,000 crore a year. Higher realisation will directly reflect on the
company’s bottom line. And, a happy CIL means, coal unions may not find much
logic in opposing the move.
Only the
illegal miners - extracting anything between 20 and 30 million tonne coal a
year - may be hard hit.
***
(Disclaimer: Graphics are collected from the web. Will be removed in case of any objection)
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