The curious case of coal crisis
With Prime Minister Manmohan Singh’s office working on urgent measures to address the ‘coal crisis’, the private power industry’s hue and cry over the issue seems to have subsided for now. Experts, however, say private developers have no right to complain, as they have failed to develop their own captive coal reserves over the past two decades.
Currently, India requires 690 million tonnes (mt) of coal a year to fire plants, largely in the infrastructure sectors of power and steel. Domestic production was originally expected to touch 680 mt by the end of the current Plan period in March. This was scaled down to 630 mt in the mid-term appraisal and again to 554 mt at present, creating a 136 mt gap between demand and supply.
“While there is no denying CIL’s production has come down, the private sector has also failed to increase production to expected levels. This might be related to delayed clearances in some cases. But the private sector’s tendency to grab blocks and continue to sit over them for long is also to be blamed,” said Amrit Pandurangi, senior director at accounting and consultancy firm Deloitte Touche Tohmatsu Ltd.
The lack of captive output has led to the government’s coal production plan going completely awry, as projected production from captive blocks had to be brought down from the initial 104 mt to 81 mt in the mid-term assessment, and again to 56 mt, in line with the overall shortage. CIL’s expected production, too, had to be brought down from the 486 mt projected in the mid-term assessment to 447 mt now.
“In a number of cases, captive block holders have been slow in exploiting the block. Their problems have been primarily that of environment, forest clearances and land acquisition,” the Planning Commission said in its recent review of the coal sector’s performance during the current Plan period.
Taking note of the dismal progress in the development of captive blocks, the coal ministry had conducted a review last year. Threatening cancellation of their captive coal blocks, the ministry had issued showcause notices to 84 companies, including Tata Steel, Reliance Energy, Vedanta Subsidiary Sterlite Energy, GMR Energy, Lanco Group, Jindal Steel and Power and the world’s largest steel maker, ArcelorMittal. Blocks held by several firms, including NTPC and Damodar Valley Corporation, were cancelled.
Last month, an 18-member delegation of power company chiefs, including Tata Power chairman Ratan Tata, Lanco Infratech chairman L Madhusudan Rao, Reliance Power chairman Anil Ambani and Naveen Jindal, a Congress member of Parliament and chairman of Jindal Power Ltd, approached the prime minister and other key ministers, alleging their investments were hit. This followed the severe coal crunch for power stations in November.
The private sector does not agree that delays in developing captive blocks have played a major role in augmenting the shortages, and attributes the slump to unavailability of linkage coal. “Captive blocks have been delayed because of land and environment clearance issues. The nation lost over two years because of the ‘no-go’ policy. CIL’s production has stagnated,” said Ashok Khurana, director general of the Association of Power Producers.
The power sector’s requirement of coal in the current financial year is estimated at 470 mt. The sector is likely to suffer an overall shortage of 70 mt.
, with CIL supplying 343 mt, Singareni Collieries 33 mt and an additional 22 mt from captive mines. However, according to the Planning Commission, the shortfall can be easily met with 50 mt of imports, which is equivalent to 70 mt of domestic coal.
“Even otherwise, the 70 mt of pithead coal stocks with Coal India can be liquidated to meet the entire shortfall. So, where is the crisis?” asked a senior CIL official. The company has seen a 1.6 per cent decline in production between April and January 2011-12. The company’s output remained flat at 431 mt in the financial year ended March 2011.