Supreme Court Order quashed all allotted coal mines from 1992 to 2010. Coal Ordinance Bill paving the way to mend the wrongs in to eyes of law has now been promulgated. This can be seen as damage control exercise. Is the damage control happening? Is anything missing? What more should be done that will help India?
Today India is supplementing its coal requirements with unabated imports. Indonesia has emerged as a major contributor to the imported coal. In 2014, India imported about 100 Million tons of coal from Indonesia. This is about 20% of total requirement and valued at around 400 billion dollars of foreign exchequers. Coal from mines in India costs about Rs. 1000 per Metric Tonne. Depending on the demand supply, India on average has to pay $40-$60 for coal from India. States which have got royalty rights in the imported coal lost its exchequers and most of the users ( around 90%) have done deals either with direct imports or on high seas thus avoiding State taxes. One decade of high imports of coal and asset creation in port areas largely depending on imports without proper tie up at assured rates proved to be costly and myopic. In one decade the power rates in India have risen from Rs2.50 to Rs 6.00. Ironically India is the only country in the world where exchanges are working for on deficit scenario. In addition to this creation of exchanges to quote high and higher rates during demand time speaks of ill motivated efforts of policy makers in making power as a scarcity and putting distribution companies to bear whopping losses of Rs. 2,50,000 Crores .
Coal is not the only sector with policies that hurt Indian consumers. Cement and steel are other sectors have similar such policies. However these goods do not directly impact the day to day lives of common consumers and so the effect is muted. Coming back to the coal ordinance, despite our past experiences with coal imports and investments in this sector, the much hyped Coal Ordinance Bill does not speak to hype for bringing in competition and foreign investment. In fact some clauses in Coal Ordinance like compensation etc. will scare a potential investor and keep him away from investing in coal mining in India. In addition, the ordinance also states that the earlier allotters , whose allocations have been cancelled by the Supreme Court, will be duly compensated for the expenditure they have incurred to date. The only positive coming out of this ordinance is the relief being given to the coal bearing states in the form of an additional royalty of Rs 295 per Metric Tonne. It would have been prudent if the Government of India, which had waited for more than two decades for the mine owners to start mining had waited few more months and after deliberation brought in changes that would have given the Coal India Limited(or other such corporations) the rights to mine rather than outsourcing mining activity to new players . Coal India is rich with cash surplus of Rs. 50000 crores and they could have taken control of all the 42 mines in hand and sold the coal on linkage basis to the needy consumers at linkage rates . This would have resulted in Coal India not only creating more jobs, but also with reliability parameters contributed to the meaningful development of coal mining in India. Further, this would have resulted in the private power producers receiving coal at a pooled price and keeping the prices uniform and low. Under the Government control and Regulatory watch this could have been better arrangement instead of one more round of playing in the hands of private players who would be keeping eyes on benefits of coal market instead of feeding coal to the electricity power generation units which should be the top most priority of the Government today. Even two major players Tata and Reliance have fought bitterly on selling surplus coal.
D. Radhakrishna (He runs a NGO for Energy Economics by name of Urja gyan foundation and known for policy advocacy in Energy Sector )
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