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Coal sector growth stifled by sickness

Rabindra Nath Sinha

THE COAL sector closes 2001 with none of the key issues, such as unrestricted entry of the private sector, sickness of three subsidiaries of Coal India Ltd, abolition of the CIL subsidiary concept and payment of arrears accruing from the National Coal Wa ge Agreement VI, resolved.

If the country has not witnessed a shortage of coal, it is primarily because industrial activity has slowed down in the past two years and the addition to thermal power generation capacity has been much lower than projected in the Ninth Plan document. Th e importance of the second factor can be gauged from the fact that the power sector accounts for over 70 per cent of the total domestic coal demand.

While final estimates for coal demand at the end of 2001-02, which is the terminal year of the Ninth Plan, may be well below the projected 354 million tonnes (mt), what is worth mentioning is that the Planning Commission's exercise for the Tenth Plan per iod, 2002-03 to 2006-07, shows a gap of 111 mt on the assumption that demand will rise to 511 mt, while availability, taking into account the existing and planned capacities, will be 400 mt. On the basis of past experience, it may be conceded that demand growth even in the Tenth Plan period may be finally lower on estimates. Which means the gap may not be as much as 111 mt as now envisaged. But, gap there will be and even if a mid-term review suggests a lower gap of, say, 75-85 mt, it is a pretty seriou s situation. This highlights the need for policy back-up well in advance. The First Generation reforms in the coal sector comprised mainly the provision for captive mining for production of power, steel and cement. That no worthwhile progress has been re gistered is borne out by the fact that only three blocks out of 26 allotted out of over 120 blocks identified for private sector participation in coal mining has seen action on the ground. Proceeding on the premise that the end-use clause has been acting as a damper on private sector investors, the Union Government proposed to amend the Coal Mines (Nationlisation) Act to facilitate unrestricted entry of the private sector, that is, permission for coal mining per se. But, this has remained a pious intent ion because of the stiff opposition to the move.

The ruling NDA does not have a majority in the Rajya Sabha. Unless it is able to work out a political consensus on this sensitive issue, the chances of unrestricted private sector entry seem remote. But, the NDA leadership is yet to take any initiative i n this direction. It is important to assure the central trade unions operating in the coal industry that the total opening up of the sector will not pose a threat to the existence of CIL, Singareni Collieries Company Ltd and Neyveli Lignite Corporation. New Delhi cannot lose sight of the fact that CIL accounts for 88 per cent of the domestic coal production. Ideally, while trying for a political consensus, the Centre should create conditions that allow the existing coal producers to expand capacity. Coa l projects have long gestation periods and, therefore, even if a political consensus is hammered out, the private sector's unrestricted entry cannot make an impact on the coal production scene in the short-term. It will be at least five years before the private sector is able to establish a fairly respectable presence in coal. There is, therefore, a strong case to initiate urgent steps to tone up the operations of Eastern Coalfields Ltd, Bharat Coking Coal Ltd and Central Coalfields Ltd -- CIL's three sick subsidiaries.

It may even be necessary to consider limited budgetary support for a limited period for this purpose. Trade unions, on their part, must extend all cooperation to the management to raise man-machine productivity and thereby make the operations of the thre e subsidiaries viable within a pre-determined timeframe.

It is equally important to implement early the proposal to make CIL a SAIL-type outfit by abolishing the subsidiary concept. There will be huge savings because the tax outgo under the new arrangement will drop substantially.

The issue of arrears accruing from the National Coal Wage Agreement VI should be resolved at the earliest. On this issue, the non-Intuc unions organised a three-day strike in early December. Given the clout of the trade unions, strikes in coal mines are always successful. Which is a clear indication that industrial relations in the coal industry are far from normal. Honest efforts by the management and trade unions brook no delay for a break with the past. Another issue that warrants urgent attention of the authorities relates to clearance for new coal projects in forest areas. A proposal has to pass through several stages in the forest department of the concerned state before it is remitted to the Union Ministry of Environment & Forests (MoEF). Coal m ining is site-specific. Forest land usually accounts for 30 per cent of the total land requirement. Past records show that it has taken the authorities anything between 3-5 years to give final clearance. There are instances of clearance having been given in two stages. As a result, the projects invariably are victims of cost and time over-runs.

The MoEF and the State Governments must jointly address this matter

and see how the whole process can be expedited. One way, of course, is to standardise the format of applications at the state level and cut down the number of stages.