Companies & Sectors
Coal industry: Supply-side bottlenecks!

Estimates of India’s large proven coal reserves are not disputed. But, due to the slow movement of mined coal, power generators, which feed the hungry industry and masses, end up importing coal at a much higher price

 

In a candid admission of facts, finance minister, P Chidambaram, stated, while tabling the mid-year economic analysis in parliament, that there is an urgent need for the government to take responsibility of addressing supply-side bottlenecks in the coal industry.

 

The country is actually facing a crisis in nearly every industry. Each of them must be handled urgently, and with care, in order to overcome the crisis. It can start anywhere, but start it must!

 

Take the coal industry, for instance. With the dwindling supply of fossil fuels and gas supplies from Reliance Industries, it has become imperative to mine the known sources of coal in the country.  India's proven coal resources are estimated at 100 billion tonnes.

 

There are probably hundreds of millions of tonnes of coal yet to be discovered. Let it be that way for now. The need of the hour is the extraction of coal from existing sources, where mining has been taking place for decades.

 

So what’s the problem? Our methods of extraction are archaic and the machinery employed is outdated. Western countries have, for several years now, been profitably employing modern technology.

 

Need for urgent decision on the Coal Regulator

 

Besides the issue of equipments, what else ails our industry? Too many ministries are looking into the issue and none of them is doing so well enough.

 

Narasing Rao, CMD of Coal India, has reiterated that “it is moving of coal and not producing it” which is the biggest issue the industry is facing. As much as 50 million tonnes of coal are lying at the pitheads for want of rakes. The logistics provided by Indian Railways (IR) is shoddy. IR is unable to create the infrastructure necessary to move the cargo.

 

Proven coal reserves estimates, whether they will last for 50 or 100 years, is not an issue in dispute. In fact, many more will be discovered and a few abandoned, but in the meantime, due to inadequate movement of mined coal, power generators, which have to feed the hungry industry and masses, are paying a very high price for imported coal. Some enterprising Indian companies have coal mining operations abroad so as to ensure supplies for their units back in India.

 

However, this overdependence on imported coal is rather risky, to say the least. Despite agreements and heavy investment overseas, what happens if the political set up in a country changes? The most recent example is the GMR episode in Maldives.

 

Power “less” dilemma: Coal industry at the cross-roads

 

It is well known that the Inter-Ministerial Group (IMG) set up by the coal ministry, comprising 14 members from various key departments, has been working on the issue of allocation of coal blocks. Although 54 new coal mines for allocation have been identified, it looks like the government will not go ahead with the issue of auctioning.  So, here again, we are back to square one!

 

The tug-of-war between the power ministry and coal ministry officials must stop. It seems the power ministry “wants the captive coal block allottees to participate in tenders for PPAs (power purchase agreements) floated by the power distribution companies, but the ministry of coal has not even responded to the proposal” as per media reports. Inordinate delays on all such issues of ‘clearances’ from ministries and state governments must stop, if we want to make any progress at all.

 

Although details have not been made public, Coal India appears to have at least made the right decision to spend a billion dollars in buying new equipment, such as dumpers of various capacities, to overcome the transport bottleneck.

 

It seems as if Narasing Rao means business and, given the freedom to work his way, he can hopefully make some good progress in the year ahead.

 

To read more articles by AK Ramdas, please click here.

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

 

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