The delay by corporates in signing the fuel sharing agreements, which basically favour Coal India, is seen as a main reason for the shortage of coal-based power. Will the establishment of a coal regulator help in sorting issues?
 
Recently Coal India announced its annual results. For the year ending 31st March 2012, the balance sheet shows very healthy Revaluation Reserves of Rs26,997.84 crore against a paid up capital of Rs6,316.36 crore. Against the actual demand of 696 million tonnes (MT) of coal, during 2011-12, Coal India was able to meet about 80% (426 MT), with other sources supplying some 98 MT leaving a shortage of 161.50 MT.

 Power minister Sushil Kumar Shinde has projected 11,000 MW of new coal-powered electricity generation, to be commissioned by 2012-13, actual but the supply position of coal is far from satisfactory.  Based on current supply position, CIL itself feels that supplies may fall short by 45 MT in the next three years. And mining work is hampered for a variety of reasons.
 
In order to commence mining operations, the miner has to overcome several hurdles in terms of laid down procedures. At the very outset, an agreement in principle is to be signed with the Government of India, after which, in Stage I, a forestry clearance is to be obtained. This involves the plantation of an equal number of trees displaced (felled?).  Once the mining area is allocated and is formally handed over to the miner for exploitation, it becomes the miner’s responsibility to rehabilitate the households besides complying with fees and other formalities.
 
At the moment, CIL hopes to get 70 MT of additional coal from its subsidiaries, which have a total of 50 cases pending for approval—31 with various state governments and 19 with the ministry of environment & forests.  Once done, CIL hopes to reach a target of 464 MT in 2012-13 as against 436 MT mined in 2011-12. It is rather unclear at this stage, for how long has these been pending with the above authorities?
 
In the meantime, the Government of India wants CIL to complete 48 FSAs (Fuel Supply Agreements) with power plants commissioned till December 2011.  Only 17 of them have signed so far.
 
Why is this delay? It is presumably because FSA is drawn up manifestly in favour of CIL and the GoI does not approve of the terms which show a penalty of 0.01% payable by CIL if they fail to meet 80% of the coal supply committed, and that too applicable after three years!  Besides, the FSA’s force maejure condition protects CIL against equipment breakdown, failure of (third party) contractors to deploy the machinery, shortage of explosives and even power failures!  Literally, buyer of power is at the mercy, in every way, of CIL.
 
CIL, as a sequel, is now expected to bring about changes in the FSA in about two weeks or so.
 
Perhaps, when FSAs become more realistic and practical, other power producers will sign them. After all the power producers would want to be compensated for non-delivery of coal committed at actual replacement cost? In the end, the ultimate consumer should not suffer. It would automatically follow that the 17 FSAs signed earlier will also have to be amended in line with the revised contract. Why not the government give a clear cut and approved draft, as a directive, to CIL so that such procedural delays are avoided?
 
In a statement issued by S Narasing Rao, CMD of Coal India, prices of coal from select blocks of its subsidiaries like Eastern and Western coalfields will be increased by 5 to 10% and this is likely to have a domino effect on power tariff in regions where electricity is produced from coal supplied by them. NTPC takes all the coal produced from most of these blocks. Even though
NTPC can (and will) pass on the increased cost to state electricity boards, they in turn, can only revise their tariff after getting approval from the respective regulators.
 
In another development, the coal ministry, in order to increase coal supplies, has allocated three coal blocks (Kerndari, Chatti-Bariatu I & II) which were de-located earlier. This measure will enable CIL to increase output by 8.5^ to 9%, one-third of which will go to NTPC.  Such a linkage will also enable NTPC to add 14,500 MW capacity in the 12th Five Year Plan (FYP), as per Arup Roy Choudhury, NTPC chairman.

Mr Narasing Rao strongly feels that a coal regulator, as envisaged by the Centre (GoI) would make pricing issues more or less transparent.
 
CIL has invited expression of interest from companies for carrying out studies to assess methane reserves in coal fields. CBM—coal bed methane—produced in 2011-12 amounted to 0.23mmscmd (million metric standard cubic metres per day) and is projected to reach 4 mmscmd by 2016-17. So far, 33 blocks have been awarded.
 
Finally, it is obvious that coal continues to be India’s primary source of energy. The GoI had appointed a committee, led by TL Sharkar in 2007 submitted its recommendations, most of which, unfortunately, remain unimplemented. These include establishment of a coal regulator, time-bound mapping exploration of the entire country and a NELP-like approach in the coal sector.
 
It is now time that the authorities, considering the lower estimated and actual production of oil and gas resources, and increasing cost of importing these, must devote more time and energy in the development of the coal industry in terms of introducing more sophisticated equipment for extraction, faster distribution by dedicated railway lines, eliminating the inordinate delays in clearances of various approvals for the mining industry to work efficiently and successfully.