Coal Ministry's and Coal India's Dilemma
Coal, a sensitive commodity for Indians who are largely dependent on this non-renewable fuel for its power needs, has always been in talks for some or other reasons.
By: Business Consultant
Coal ministry has proposed to set up an agency very similar to Power Finance Corporation to bid for ultra mega projects to identify mines, explore reserves, get preliminary clearances, government nods, acquire land and auction blocks, analysis Sachin Karpe.
This is a complete rejig of the auction policy, with a fresh list of big and mineable blocks. The earlier such list which was prepared in 1990 had gone redundant and unattractive to new companies. The new policy will ensure speedy and a smooth process. Coal ministry will identify big blocks and update the available list as auction for most mines have been rejected by Coal India Ltd. Some of the redundant blocks are placed in Jhirki and other in Shahdol, Madhya Pradesh. There were no takers for the Jhirki, Jhirki-West and Tokisud-II blocks in Jharkhand and the ministry believes the insignificant reserves and difficult mining conditions prevented companies from bidding., reported a leading national business daily.
The coal ministry did not receive any bids for two of the three mines auctioned to steel and cement companies though over 40 firms purchased bid documents in March this year. Only two Kolkata-based firms have evinced interest in Andal Babuisol coal block.
Coal India has under-performed since many years and produced only 462 million tones against the FY14 target of 482 million tones. Imports have gone up, raising bills for the coal ministry. However, the government is still not open about opening up the sector to commercial miners. Therefore, there is an urgent need to instantly increase coal production. Dependency on imported goals raises electricity tarrif as well as country’s current account deficit, said Sachin Karpe. Government is eying to allocate mines to state governments. As for commercial miners, while this is what has bolstered India’s petroleum sector, both in terms of production as well as in terms of reserves accretion, the government’s concern is what this will do to prices if allowed in the coal sector. As in the case of the oil sector, commercial miners of coal will have to be paid international prices—the government, however, is finding it difficult to increase even natural gas prices, reported Financial Express.
However, it is unlikely that the sector will a healthy competition if commercial players are not allowed, leaving Coal India lethargic with no tough competition. Country will then continue to be burdened in current account deficit, Sachin Karpe concludes.
Know more about Mr. Sachin Karpe at http://sachinkarpe.org and his blog post at http://sachin-