Cabinet approves creation of coal regulator through executive order

Feb 21 2014, 12:10 IST
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CIL would continue to unilaterally determine the prices of the fuel. CIL would continue to unilaterally determine the prices of the fuel.
SummaryAnalysts say move will undermine the entity, seen toothless anyway.

Even as the bill for setting up a statutory coal regulator, albeit with no power to regulate sale of coal or fix its prices, is with Parliament, the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved its formation through an executive order. Analysts feel the move would further undermine the proposed entity, which was anyway seen to be toothless and incapable of pushing the much-needed reform in a sector afflicted by state monopoly.

Practically, the views of the coal ministry will continue to prevail on the states' granting of mining leases, and the ministry and CIL would continue to unilaterally determine the prices of the fuel.

The regulator's role would be restricted to formulating the methodology for pricing, and analysts say that being not adequately empowered, even here, the ministry would be in a position to influence the regulator. The regulator can set the terms and conditions for opening a mine, but would have only a advisory role on the cancellation and suspension of mining licences.

Though not equipped with coal pricing power due to opposition from the coal ministry, the proposed coal regulator is mandated to frame rules and methodologies for determination of coal prices as well as for sampling of coal quality. Even this modest step towards coal sector reform was hailed by bulk coal consumers from power, steel and cement industries when the CCEA had last May approved a proposal to set up a statutory watchdog and, later, when the coal ministry introduced the coal authority regulatory Bill in the winter session for approval. Now it is a big question if the proposed watchdog will be able to perform its assigned functions effectively.

The CCEA's move to abandon its earlier decision to set up a statutory regulator and go for a non-statutory watchdog is unfortunate given the alarming pace at which the country's dependence on imported coal is growing. India's coal imports are projected to hit 180-185 million tonne in the current year of 2013-14, sharply up from the 135 million tonne reported in the previous year.

CIL, which accounts for 80% of domestic coal production, is struggling to increase output. The PSU, which produced 452.5 million tonne of coal in 2012-13 against the target of 464 million tonne, is projected to miss its production target of 482 mt for the current year.


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