Coal sector: journey begins from monopoly to competition

By opening the door to private players for commercial mining, the coal sector this year witnessed its biggest reform in over four decades.

However, it may still take some five-seven years before coal blocks are auctioned and results become visible as exploration and mine development for actual production of private commercial mines begin, say people associated with the coal sector.

But, this has not deterred the management of Coal India to sensitise its employees about the looming threat that the private sector poses in the long run.

The world's biggest coal miner has asked its staff to pull up their socks and embrace the new challenges facing them.

Former Coal India chairman Partha Bhattacharyya observed that revenue maximisation should not be the only focus of the auction methodology and mining experience and core competence should get more weightage in the bidding process.

He emphasised that in order to attract large domestic and global miners it is important to offer larger coal blocks, such as 50 MT annual capacity or more, for a period of about 25-30 years.

Coal Minister Piyush Goyal had earlier said the reform is expected to bring efficiency to the coal sector by moving from an era of monopoly to competition.

India is said to have coal reserves of up to 300 billion tonnes. The move of ending monopoly will also lead to greater energy security as 70 per cent of India's electricity is generated from thermal power plants.

State-owned Coal India and Singareni Collieries Company together accounted for 91.6 per cent of the total coal produced in the country during FY2017-18.

According to observers, CIL is unlikely to face major issue from privatisation beyond competitive pressure, as its prices are not import-linked and always been at a sharp discount despite its monopolistic position.

Coal consumers are hoping that the move would address their long-pending demand of supply and quality constraints.

"Allowing private sector in coal mining is likely to increase supply and a competitive scenario will help in improving quality," said Subhashri Chaudhuri, secretary general of the Coal Consumers Association of India.

This far, coal mines were auctioned only for captive power generation.

The Cabinet Committee on Economic Affairs in February this year approved the methodology for auction of coal mines for sale of coal, the most ambitious coal sector reform since its nationalisation in 1973.

The year also saw a sharp rise in dry fuel demand from the power sector owing to rise in electricity demand, drop in hydel generation among a few others and that led to higher coal imports as Coal India failed to meet the 'sudden' spike in demand.

From April 1, 2018, to October 12 2018, Coal India Ltd had despatched 1.27 million tonnes (MT) of coal per day to the power sector as compared to 1.16 MT per day during the same period last year, a rise of 9 per cent.

Overall, coal and coke imports during the first half of the current fiscal increased by 13.9 per cent to 119.42 MT.

There had been allegations of the shortage of coal by several power plants during the last peak summer season. But, the allegations of short supply were also from non-power consumers also.

Vedanta Ltd CEO Abhijit Pati recently complained saying, "Due to coal scarcity, power plants are operating at 60-70 per cent of their installed capacity which is ultimately hampering the interests of the state and nation."