Free Press Journal

Rolling back coal take-over

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Another excess of Indira Gandhi’s type of socialism was sought to be undone, albeit partially, when the Government last week allowed the private sector to enter the coal sector. Since her post-split, Congress Party was supported by the Communists, she undertook nationalisation of key sectors of the economy in order to keep them in good humour and to burnish her pro-poor image. Nationalisation of banks was one such move. We know the heavy costs the country has paid, and continues to pay, for that economic folly. Banks under public sector allowed crony capitalists to flourish with added vigour.

Paupers became millionaires accessing cheap bank credit exploiting proximity to the ruling party. Nationalisation of coal mines was another blow to sensible management of the economy. Coal mining was largely in the private sector till she took over the industry, driving out old and established mining firms. The Coal Mines (Nationalisation) Act, 1973, created a State monopoly in Coal India, transferring all coal holdings under it. Corruption and inefficiency have dogged the public sector behemoth ever since. Allocation of coal wagons in itself became a lucrative source of income for politicians and bureaucrats at a time when coal was in short supply. Coal India accounts for some 80 percent of the entire coal produced in the country. Lately, the government had allowed a few power and steel plants in the private sector to have their own captive coal mines.

But, here too, there was a misuse of discretion with some power plants given the facility while others were denied. And some captive mine owners were allowed to divert coal to other plants while others were denied permission. The public sector Singareni Collieries Company accounts for a small portion of the indigenous production of coal. Though, Indira Gandhi had justified coal nationalisation on the ground that it was needed to meet the demands of power and steel sectors, the fact is that for quite some time, Coal India has not been able to fulfill the requirement of local industries for specialised varieties of coal. India has been importing a lot of coal from Indonesia and other coal-producing countries, despite the fact that we have the world’s second richest coal resources. Also, since our power generation is heavily dependent on coal — over 70 percent of the total — the importance of coal in the economy cannot be exaggerated. In recent years, especially following the advent of the Modi Government, there is a concerted move to shift the focus on clean solar energy, but despite a sharp increase in the installed capacity, it will take years to reduce the reliance on thermal power.


Fortunately, we are now an energy-surplus economy. The share of nuclear power in our overall power capacity is relatively small, and not a single nuclear reactor to generate power has gone on stream since the much-ballyhooed civil nuclear deal of 2008. Due to the growing energy needs of the economy, the previous government had allocated coal mines to private parties in a most capricious manner. After the Comptroller and Auditor General pointed out glaring departures from the allocation process, the Supreme Court had cancelled the allocations en bloc. Subsequently, the Government evolved a fair and transparent process to allocate coal mines in order to ensure that the delay did not cause disruption in supplies of coal to the industries. The Coal Mines (Special Provisions) Act, 2015, contained the proposal to open the sector to private parties as well. Following the framing of guidelines by a cabinet committee, the way was now clear for the auctioning of mining rights to the private sector. Hopefully, the process will not be marred by any malpractices and the mines open for auction would not be those discarded by Coal India. Meanwhile, the long-awaited disinvestment process in the white elephant called Air India is still to fructify into reality.