India has the fourth largest reserves of coal (estimated at more than 300 billion tonnes) in the world and the annual requirement of coal in the country is only around 900 million tonnes. Yet, we are short of coal and import almost 25 per cent of our requirement. Hence, the announcement made by the finance minister, as part of a Rs 20-lakh crore package announced by the Prime Minister, relating to “opening” up of coal mining for commercial purpose by private entities is a welcome one. A leading English daily ran a headline, “Government ends monopoly in coal”. This was a trifle misleading. Yes, commercial mining is the need of the hour and a great decision but the decision relating to commercial mining was taken more than a year ago. In fact, government ‘monopoly’ in coal mining had ended long ago. Private sector had been mining coal for quite a while but the end-use of coal that they mined was restricted. These mines were for captive use only. Accordingly, they were not entitled to sell the coal in the market. The decision to allow sale of mined coal by private sector in the open market was taken last year. The announcement made by the finance minister recently thus was a reiteration of the decision taken earlier.
Whether commercial mining of coal will actually happen and lead to targeted additional production of more than 200 million, whether the overall production in the country will reach the targeted 1.5 billion tonnes per annum by 2024-25 and whether the “new” policy will eliminate import of coal are all moot points. These have to be analysed and discussed in the context of what happened and didn’t happen during the past five years.
Encouraged by a record level production during 2014-15 by Coal India Limited (CIL), the first announcement for increasing coal production to 1 billion tonnes by 2019-20 was made in 2015. Despite the fact that coal production saw an unprecedented increase during 2015-16, we are nowhere near 1 billion tonne production by CIL in 2019-20. In fact, on account of shortage of coal in the country, imports have been going up since 2016-2017 from 191 million tonnes to 235 million tonnes in 2018-19.
CIL will continue to be a major player as far as coal production is concerned. It is hoped that commercial mining will add to the kitty after a few years. However, the success of commercial coal mining will depend upon a number of factors.
The first and the foremost factor would be the quality of the coal blocks that are earmarked for the purpose of coal mining. The best of coal blocks (in terms of stripping ratio and the quality of coal) are with Coal India. Most of the coal blocks that are left have problems relating to stripping ratio (the depth at which coal becomes available), accessibility and quality of coal. Thus, the geo-technical feature of the coal blocks will be an important factor that will determine the viability of the block. The size of the block will also be a factor as commercial miners would prefer large blocks
The next step would not be that difficult. The protocol for auction of coal blocks is already there and was hailed as transparent and objective when coal block auctions (non-commercial) were held in 2014. No one raised any doubt about the process and the same process can be used now.
The real problem in mining coal will be around (1) land acquisition, (2) environment and forest clearance and (3) evacuation of coal. During the period 2014-16 when coal production reached unprecedented levels, the first two elements were tackled by engaging intensively with the state governments because these problems relate primarily to the states. The clearances were fast tracked through the instrumentality of the Project Monitoring Group (PMG) as were the coal evacuation projects
As coal is embedded in inaccessible area, evacuation was always a key concern. Additional investment is welcome. Evacuation will be a major issue even for commercial coal block allottees. It is not clear from the announcement where the money for evacuation projects will come from. However, even if such funds become available, new projects will take a long time to fruition. For the immediate future, what needs to be done is to fast track the existing evacuation projects that are languishing on account of variety of reasons but primarily on account of delays in clearances. Yet again, activating the PMG would help as would an intensive engagement with state government.
All the factors mentioned above will determine the viability of commercial mining projects. This viability will also be dependent upon the capability of the end-user of coal to pay up. The situation at present appears to be very grim in this regard. Most of the power generating companies (GENCOs) are in serious trouble because the distribution companies (DISCOMs) to whom they supply power are not in a position to pay up. These GENCOs owe CIL more than Rs 15,000 crore and DISCOMs in turn owe GENCOs more than Rs 30,000 crore. Ujjwal DISCOM Assurance Yojana (UDAY) was put in place to improve the health of DISCOMs but it didn’t travel much distance. Most of the DISCOMs are in a bad shape. Apart from other announcements as a part of the package mentioned in the first paragraph, the finance minister also declared that Rs 90,000 crore would be made available to improve the finances of DISCOMS. However, this alone will not help. UDAY (or its new version) will have to be implemented in letter and spirit.
Even if the production of coal increases as envisaged, import of coal is not likely to be eliminated. Out of the coal that is imported, 50 per cent is of such quality (coking coal and the quality of coal for power plants located close to the ports with boilers that require a specific quality) that is not available in India. The focus, therefore, should be on eliminating import of such coal that is available in India
The government will have to get down to business immediately if commercial mining has to make headway. The bidders will have to be assured that the government or its agencies will not sit on clearances as has been the case in the context of coal mines that were auctioned earlier. The previous auctions were quite smooth but the processes thereafter were debilitating. Consequently, mining could not commence expeditiously in most of the blocks that were auctioned. This will need to be taken care of while auctioning blocks for commercial mining. Government will have to act as a facilitator, hand hold those that win the bids. The Union government will also have to take the states concerned on board. Incidentally, all the coal-bearing states are ruled by non-NDA parties and some of them have already making a noise. Clear-cut action plan will have to be worked out outlining what needs to be done, how will it be done, who will do it and by when will it be done?
The decision to go ahead with commercial mining is a sound one but if it has to happen on the ground, lessons have to be learnt from the success achieved in coal production during 2014-16. The approach needs to be understood and replicated. It can be done because it has been done in past. It happened for Coal India then. It can happen for commercial mining now.
(The writer is a former Secretary, Ministry of Coal and Mines. Views expressed are personal.)