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Keeping power cheap justified captive block allocation: Sriprakash Jaiswal

Interview with Coal Minister

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A day after petrol prices were raised by the government-owned companies, coal minister Sriprakash Jaiswal felt vindicated. He administers a fuel that constitutes not only the biggest chunk in the energy basket but is the cheapest source of energy. In an interview with Sudheer Pal Singh and Jyoti Mukul, the minister says unlike import-dependent oil industry, the benefit of giving out captive mines to private companies translates into a cheap source of power for the common man. Edited excerpts:

With the in a bit of turmoil now, when do you think the government will be in a position to get a coal regulator in place?
The has been submitted to the Cabinet Secretariat. It will be put up to the GoM [Group of Ministers] soon. We plan to get it passed in the monsoon session.

What powers will the regulator have and what role will the government have in fixing prices?
The regulator will provide a push for increasing production. It will conduct inspections at mining sites, monitor washeries and set standards for grading. It will also monitor the production and mining plan of private miners and adherence to safety standards. Besides, it will have the power to make recommendations on pricing. While pricing decisions will be taken by the board the government will maintain oversight over the reasonableness of the proposals. So, Coal India will continue to decide on price changes, as is done now. A final view, though, will emerge only later.

When will the surplus coal policy be announced? Also, would the Sasan case be the only instance in which coal is allowed to be used for other projects without a policy in place?
We do not have any final view on the policy as of now. A Committee of Secretaries will take a decision on it. A commitment was made in the case of Sasan. The EGoM [Empowered Group of Ministers] allowed the diversion of coal in the Sasan case when RPower said it was in a position to produce surplus coal from Chattrasal. The Sasan Ultra Mega Power Project had come up through competitive bidding and surplus coal was allowed to be used in Chitrangi project, which was also given out on tariff-based bidding. It is a settled case. In future, whatever decision will be taken will be according to the new policy.

The Comptroller and Auditor General [CAG] has pointed out that surplus coal has given RPower undue benefit. If there was no policy in place, why was the company allowed to use surplus coal and not asked to give it to Coal India.
There was no policy even to give surplus coal to Coal India. So, it could not have been given to anybody. If there would have been a policy to give coal to Coal India, we could have given to them. Whatever decision was taken by the EGoM, it was not taken during my tenure.

How damaging are the CAG’s allegations of “undue benefits” for the government’s image?
Whatever was done between 1993 and 2009 [coal block allocations] was to meet the country’s power requirements. The aim was to ensure power availability at cheaper rates. We would have been helpless if lack of reserves forces us to opt for imports. If we have to import coal to run power plants and sell that power at high prices, the poor would not have been able to bear this burden. Would it not have been foolish to import coal even as we have huge reserves domestically? This is why the policy of giving away captive blocks was correct. If we had not given blocks to the private sector and had remained dependent on CIL, imports would have been the only way out.

But why were these blocks not given on market price?
What was the market price at that time? There were no takers for coal when the blocks were being given. Blocks were given to almost all those companies that had applied. It was not as if there were not enough blocks for applicants. This situation developed only after 2009 and prices, too, went up in the international market at the same time.

But would you deny that undue gains of over Rs 10 lakh crore were extended to private companies, as the has allegedly argued?
If there were really huge “undue gains”, would there not have been production from captive blocks? Mining coal is not easy. It takes seven to eight years. There are many clearances, an elaborate land acquisition process and law and order issues involved. The CAG has a limited perspective. It only sees the amount of coal given and its market price to arrive at a figure for undue gains. The CAG has its own method of calculation. Our job is to think of the country’s coal requirements. The country is not in a position to absorb the petrol price increase. But we are helpless since we do not have enough petroleum reserves. In coal, we have enough reserves and, thus, blocks were given to private companies. And most importantly, how can a question of undue benefit arise if power companies supply power on regulated tariff through PPAs [power purchase agreements]?

Coal companies would have to share 26 per cent of their profits with the local populace under the new mining legislation. But how would the captive mining companies share their benefits?
The mining Bill is yet to become a law. It is currently with the standing committee after which debate on the draft legislation will take place in Parliament. It is only then that the picture will be clear. All stakeholders are making their representations to the standing committee.

The vexed issue of Fuel Supply Agreements [FSAs] with power companies, rather than being resolved, seems to have become more complex. What is the government doing?
It is a long-drawn process. Power companies need to sign PPAs. Companies are rethinking whether they should sign PPAs for 100 per cent power, and without that they will not get FSAs in place. We do not have a single case in which the PPA has been signed and CIL has not signed an FSA. Fourteen FSAs have been signed so far. There are some complaints over the model FSA but these pacts are being signed at the same time. I cannot comment on the penalty that Coal India has fixed.

Is it justified to force Coal India to import? Who will bear the price risk for imported coal since power companies are saying no imports will be accepted without pooling?
This question will arise only when Coal India opts for imports. First, we have to see how many PPAs have been signed and what is the quantity needed. We are sure domestic production will be able to meet the entire requirement. But why could CIL not import? If there is a commitment to supply 80 per cent coal, it has to be met. According to the New Coal Distribution Policy, it is Coal India’s responsibility. Also, if there is a shortfall, it can be adjusted from e-auction quantities. Pricing of imports is not an issue. At the moment, there is no risk for Coal India. A policy will be formed to addressing the matter of covering risk. Whether Coal India will be allowed to pass on the price will be seen when imports occur after two years.

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