PMO’s intervention takes care of short-term needs. Long term calls for coal policy overhaul
The crisis of coal appears to have been stemmed, for the short term at least. With the PMO stepping in and directing Coal India Limited (CIL) to convert its preliminary fuel supply pacts into legally binding fuel supply agreements (FSAs), India’s fuel-starved thermal power projects will not come to a standstill any time soon. But last December, that fear did not seem exaggerated, when 26 thermal plants had entered “super-critical coal-stock positions” and 44 others were “critical”. The PMO’s intervention will ensure FSAs for all projects that came up till last December and all due for commissioning till end-March 2015 — for the latter lot, as long as they sign long-term power purchase agreements (PPAs).
This takes care of domestic needs for a while, supplying almost 35 thermal projects and adding more than 14,000 MW. A fresh 30,000 MW awaits commissioning. Private power producers, battling CIL for a couple of years now — and reduced to watching their assets get stuck in CIL’s consistent inefficiency in getting coal off pitheads and delivering it — will be relieved. With the FSAs, CIL has to provide the full quantity of coal mentioned in the letters of assurance (LoAs) for 20 years. In case of a shortfall, CIL will have to import. All of this is welcome, but there is much more the government needs to do.
It is an understatement to say CIL’s record is discouraging. For instance, registering negative growth through Q1 and Q2, it had supplied 192.5 million tonnes of coal in April-November 2011 as against a target of 221 MT. But CIL is only the effect. The cause lies in counter-productive coal policy. CIL’s continued monopoly over the nationalised mineral spells continued trouble. Imports, necessitated by CIL’s inefficiencies, can only provide for a fraction of the deficit — and it is more expensive. Not only will CIL have to step up production, but the government has to move on the pending Mines and Minerals (Development and Regulation) Bill 2011. Coal must be opened up and competition added to reduce dependence on the sole provider. Units with captive mines need to produce extra coal and sell it in the open market, along with opportunities for the private sector to enter commercial coal-mining and the encouragement of e-auction of coal. Also, a coal regulator is needed to take care of pricing — not transparent at the moment. Last but not least, CIL itself needs a full-time chairman to get the results expected of it.
