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Give De-allocated Mines To CIL: PMO Tells Coal Ministry

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[The Prime Minister's Office (PMO) has asked the Coal Ministry to fast-track the process of taking back the coal blocks from private firms which have not developed them and giving the deallocated coal mines to Coal India (CIL). "Recently, the PMO has asked to expedite the process of coal blocks deallocation and give the deallocated blocks to Coal India," an official with the Coal Ministry privy to the development told the news agency PTI. Also, the PMO has said the CIL should appoint mine developer and operators (MDOs) to begin production from these deallocated coal blocks without delay, the official said. The Coal Ministry had recently allotted 116 mines to CIL for expansion to help it boost production capacity amid the PSU drawing flak for coal shortage across the country. Though the CIL had asked for 138 mines, the Coal Ministry asked the coal major to recast its plans. Since CIL is a government-owned company, the Coal Ministry under the government dispensation route has the right to allocate mines to the CIL, an official in the Ministry had said earlier. Despite having 287 billion tonnes of reserves, India is in the midst of an acute coal shortage. Consider this: India produced 532 million tonnes (MT) of coal in 2010-11 against a demand of 650 MT. The 20 per cent shortfall was met by imports, but not before it had brought cement plants close to shutting down and forced power plants to operate sub-optimally. "Domestic production was targeted at 680 MT in the Eleventh Plan ending 2012, but is expected to be only 554 MT," says the Planning Commission's draft report for the 12th Five-Year Plan. A Central Electricity Authority (CEA) assessment says that as of 29 February, 34 power plants had less than 7 days' stock and 25 less than 4 days' stock. With plans to add 100 GW of power generation, India is staring at a shortfall of 200 MT by 2017, says the Planning Commission. The coal ministry has been preparing a draft on public-private partnership in the form of mining, development and operations agreement for exploration of coal mines by private entities in close association with Coal India Limited (CIL) to push up coal production and induct new technology through private sector participation in the XII Plan. This is being seen as a step to ease the coal supply situation especially in view of the failure of state-run CIL to meet the requirements of the power sector. The matter has also been discussed with the Planning Commission, which is backing the PPP model for exploration of coal mines. The MOD would stipulate that the coal mines as well as the ownership and sale of coal shall continue to rest with CIL while the selected private sector player would undertake mining operations on the basis of agreed costing to be determined through competitive bidding. Show-Cause To Private Cos Coming down heavily on the private companies delaying the development of coal blocks allocated to them for captive use, the government had recently issued show-cause notices to 58 coal block allottees which have delayed the production from the mines. The notices were issued to firms such as Reliance Power's Sasan, Tata Power, Hindalco, Grasim Industries, JSW, Bhushan Steel, TVNL, Jharkhand State Mineral Development Corporation and Chhattisgarh Mineral Development Corporation, among others. The notices sought reasons for delay in developing blocks and warned them of cancellation of mines if no explanation was given in 20 days. In May last year, the government had cancelled allotment of 14 coal blocks and one lignite block of companies like NTPC, DVC and Andhra Pradesh Power Generation Corporation. The Coal Ministry has been in the news following disclosure of a draft report of the Comptroller and Auditor General (CAG) which had pointed out that the government lost Rs 10.67 lakh crore on account of allotment of coal blocks to 100 private and public sector companies during 2004 to 2009. While replying to the questions in the Lok Sabha on March 14, Jaiswal had said coal sector would soon get a regulator as the government has finalised a draft bill for the purpose. The government has also propsed to set up a coal regulator which could prove to be good news for the power sector. As per the Coal Regulatory Bill, the body would look into timely development of the blocks, penalties on non-performers as well as pricing of coal. An effective, independent watchdog could bring in much needed transparency and efficiency in the coal sector. These plans though, have met rough weather with senior ministers opposing the excessive executive powers of the regulator. Concerns exist over its power to fix and revise coal prices annually. It would not only take away Coal India's right to do the same but judging by company's unsuccessful past attempts to raise prices (due to resistance from power producers), there's no guarantee a coal regulator would be able to regulate prices any better. Asked about removing Coal India's monopoly, in an interview to BW (Read: <a href="http://www.businessworld.in/businessworld/businessworld/content/No-Power-Plant-Will-Shut-Down.html">Interview</a>), coal minister Sriprakash Jaiswal had said there was no doubt coal production can increase substantially with commercial mining. But since  this is a regulated sector that was nationalised in 1972, to bring it into the open market, a new law must be passed. He also ruled out privatisation saying it would be impossible in a a coalition government.