In its report on India’s coal sector, Pune-based non-governmental organisation (NGO) Prayas Energy Group has made a strong pitch for the setting up of an independent regulator to improve the performance and accountability of coal companies and provide a level-playing field. An independent regulator, however, needs to be responsible not only for issues such as pricing, quality and contract adherence, but also meeting production targets, safety, mine restoration and compliance to environmental norms.
The 34-page report titled “Black & Dirty: the real challenges facing India’s coal sector” suggested that the current market structure of the coal sector, which is monopolistic by design, through the Coal Mines (Nationalisation) Act, 1973 should be changed. The prevailing dual pricing of coal for core and non-core sectors be revisited as it could provide yet another motivation for coal diversion. State-run Coal India (CIL), which produces 81 per cent of Indian coal, increased coal prices in January 2012 while moving to gross calorific value (GCV) pricing, which gave a price shock to consumers and the hike had to be partially rolled back.
The current fuel supply agreement (FSA) structure is biased towards the seller and does not provide for effective grievance redressal. Development of a fair and effective contractual structure with functioning grievance redressal mechanism would be crucial to improve the sector, the report noted. On e-auctions, the report said until the supply situation improves, FSAs and other such commitment for coal supply should take precedence over any guidelines about quantities of coal that should be e-auctioned.
Limited quantities of e-auction be allowed to enable small consumers to access coal, but large consumers with FSAs should not be allowed to participate in such auctions. On environment management, the report said the current regime is unable to ensure good environmental practices or compliance to environmental norms.
There is an urgent need to augment the capacity of the Ministry of Environment and Forests (MoEF) and other agencies to effectively monitor operations and actively seek the participation of local communities in environmental monitoring, the report said.
On the contentious issue of delays in seeking various clearances, the report said the current clearance process needs to be streamlined. In case of land acquisition and rehabilitation, land should be leased, not purchased, on a long-term basis to ensure that the asset continues to belong to the land owner and the land owner is assured of a long-term regular source of income.
Further, all those who stand to lose their livelihood could be offered part of the developed land whose value would have appreciated. These lands can be commercially exploited by the people to generate livelihood. All affected people, including the landless, can be offered equity in the development projects for which the land has been acquired. This would ensure that they continue to receive the benefits of the development.
On coal supply and demand, the report said that even as installed coal-based power capacity increased at 9.5 per cent annually during 11th five-year Plan period to 112 giga watts (GW) from 68 GW, coal production increased only at 5 per cent annually to 540 million tonnes per annum (MTPA) from 431 MTPA. The difference was starker in 2011-12 wherein the installed coal-based capacity increased by 19.3 per cent, while domestic production of coal went up by only 1.4 per cent, the report noted.