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Coal: Turning India into a Bird of Gold

Coal: Turning India into a Bird of Gold

By Sidhant Srivastava

Edited by Maria Liz Kuriakose, Associate Editor, The Indian Economist

The world energy market is coal dominated. The consumption grew by a whooping 3% last year, making it the biggest share of demand since 1970. Coal’s share of global energy use reached 30.1 percent, just below the 32.9 percent share for crude oil.

India, which has the fifth largest reserves of coal is still the third largest importer of coal. India’s coal production in the 11 months through February was 497.2 million tonnes, according to data from the Ministry of Mines. Output was 557.8 million in the whole of 2012/13. The Ministry of Coal said in February that imports hit 145.8 million in 2012/13.

68% of the country’s electricity comes from coal, which is still one of the cheapest forms of energy.

The country’s coal sector represents one of the biggest failures of the UPA government and has emerged as a major bottleneck for the economy. Corruption, red tape, land acquisition problems and the holding back of environmental clearances has seen the country’s mining output shrink and made India one of the largest importers of coal despite being abundantly endowed with the raw material.

There are high hopes resting on the new government, which under the dynamic leadership of Narendra Modi, came to power with quite a majority. As head of the state of Gujarat, a position he held prior to being elected prime minister, he oversaw annual economic growth of 10 percent. He is also credited for bringing electricity to all 60.4 million Gujarat residents—a first for India.

Coal India is the biggest player in this market. It accounts for India’s 80% coal output.

A member of the BJP’s economic policy team said “What we have in mind is bringing changes inside-out in the company within a stipulated time period.”

Credit Suisse analysts Neelkanth Mishra and Ravi Shankar wrote in a May 19 note that disappointing domestic coal output is one of the main reasons for the slowdown in India’s investment cycle. Raising coal volumes is likely to be a top priority for the new government, they added.

Boost Coal Mining

They said “The only meaningful solution, though much harder to implement, is to either break Coal India up, and divide ownership of its subsidiaries among the states where they operate, or in some way introduce an incentive structure so that the respective state governments participate in the growth of coal mining in their states.”

Apart from using modern mining technologies to boost efficiencies and convert “challenging mines into modern mines”, the government will also explore international private-sector partnership in a significant way, said the BJP source.

Another idea under consideration would be to auction coal blocks through open tenders, as India already does for oil and gas deposits.

In the rising superpower China, coal accounted for 67.5 percent of the total energy demand. With the hope of increased diplomatic alliances with China, if India can manifest its coal reserves in an optimal amount, it can even see itself exporting to countries like China in the next couple of years.

So let us just hope that Modi fixes the coal sector quickly to ensure unbroken electricity supply across the country, as in his home state of Gujarat where manufacturing has flourished. Coal generates more than half of India’s power and is the cheapest form of energy.

Sidhant graduated from IIT and discovered his creative bent of mind towards writing after having a near death accident, he had never thought of taking his writing to a professional level. He started blogging just last year, but got an amazing response to his blogs, he then joined a fashion and lifestyle magazine as the sub editor. He is more than happy to contribute insightful articles on diversified topics to The Indian Economist.

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