By Annapurna Sinharay
After nearly 41 years of state domination in the coal mines of India, the chorus backing its privatisation seems to have gathered intensity over time. During the planning period, from 2002 to 2007, the industry fell pitiably short of coal as against its increasing domestic demand. To add fuel to the fire were elements, examples being, a dearth of underground mining technology, diminishing recovery rates and sluggishness in mining practices. Under such grim state of affairs, the Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi on Tuesday invited private companies, both domestic and foreign, to spearhead the future of India’s non-renewable energy sector.
Earlier, in 2014 the Supreme Court of India cancelled 204 coal mines earmarked for governments and private companies, albeit for captive use only, since 1993, declaring it “illegal and arbitrary”. Following the Apex Court’s findings, the decision was aimed at creating increased accountability and transparency in the allocation of coal blocks.
New proposal with new goals
In contrast, the recent move was calculated to boost productivity and help check the sizeable demand-supply gap. It should usher in greater efficiency into the coal sector and slash power tariffs by “moving away from an era of monopoly to that of competition”. The reform will most likely command increased investments and employment. To quote Piyush Goyal, “It will increase competitiveness and allow the use of best possible technology into the sector. The higher investment will create … employment in coal bearing areas especially in the mining sector and will have an impact on the economic development of these regions.”
According to the official statement, “The entire revenue from the auction of coal mines for sale of coal would accrue to the coal-bearing states, this methodology is aimed at incentivising them with increased revenues which can be utilized for the growth and development of backward areas and their inhabitants including tribals.” The move would further buttress domestic production by exploiting the country’s 300 billion tonne rich coal pits, enough to last for the next 400 years at current consumption levels. According to the officials behind this reform, it is expected to relax reliance on imports, saving India’s precious forex in the long run.
Overcoming existing hurdles
Paving way for the free play of market forces may not be a cure-all for the coal industry. While there is no denying that there could be a definitive upsurge in the amount of coal produced, the challenges surrounding its transportation from mines to the markets, loom large. Underdeveloped modes of transportation are posed to interfere with the supply of coal. Also, the possibility of such a move to bring down coal imports drastically is bleak. Today, most of the coal is found in the country’s hinterland. The cost per tonne of imports is much lower for consumers who are closer to India’s vast coastline. Besides, imported coal being of better quality has higher calorific value in comparison with India’s low-grade coal which is mostly, bituminous and peat.
Nevertheless, it has been no secret that the coal industry has been failing to meet its mark under the government. In addition to increased productivity of coal, privatisation can also improve working conditions of labour employed for mining purposes. Progressive implications seem to be imminent, especially when it comes to ease of doing business, investment in environmentally friendly technologies for mining, employment, labour rights, and transparency in coal block allotment. Thus, the move taken by the Modi government is indeed welcome.
Featured Image Source: Visual hunt
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