Bungling with black gold

When it comes to the lords of Collieries, there is little method in their madness. While coal demand for power projects in the private sector outstrips supply, there is no clear rationale for allocating long-term coal supplies to fuel private sector power plants from the mines of near-monopoly public sector undertaking Coal India Ltd.

Recently, for the first time, the coal ministry decided to bring some sanity to this process, by laying down an allocation norm. What followed thereafter was more chaos.

Here’s why: the coal ministry informally decided to allocate coal for only one unit of the planned power capacity of the qualifying applicants. This meant that if a producer proposed to set up a 1,000 MW plant, with four units of 250 MW each, he would get coal supply for a 250 MW unit.

As against this, a 1,000 MW plant with two units of 500 MW each got coal for 500 MW. This rationing system does not factor in the efficiency of the producer or his credentials, argue industry executives. The unit size of the plant has only got to do with the equipment manufacturer, nothing else.

As a result, recently, Tata Power Company, the leading private power producer in the country, got supplies for only 500 MW against its planned capacity of 1,000 MW at Bulandshahar, Uttar Pradesh. The private sector power producers’ woes don’t end there. Rather than speed up the process of allocation of coal, the power ministry’s technical arm, the Central Electricity Authority, has only ensured further delays.

Recently, it did not adhere to the norms laid out for screening applicants before recommending them to the coal ministry. Further, rather than vetting the information provided by the applicants, it simply allowed for self-declarations. Result: the coal ministry is now undertaking the process of verifying the information provided by the applicants.

The question then is, what purpose did the CEA serve? Says Power Secretary Anil Razdan: “We have forwarded the CEA ’s recommendations to the coal ministry.” The power ministry, it appears, has little contribution of its own to make, merely carting CEA’s benign recommendations for 25 power producers to the coal ministry. For those who plan to mine their own coal and generate power, the situation is no better. With 745 applicants vying for 15 coal blocks capable of fuelling 15,000 MW, the prospects of bagging a coal block are dim. Worse, the procedure adopted in allocating coal blocks is anything but transparent, industry players argue.

With the economy reaching double-digit growth figures on the back of strong industrial ramp up, energy costs need to remain competitive— a compelling argument for reforms in the coal sector. Currently, in the absence of free (non-captive) sale of coal, the market is dominated by a near monopoly, inefficient public sector CIL. Moreover, the non-transparent working of the coal ministry in this situation of shortages adds to the woes of the sector. And then we wonder why India is still a power-starved nation.