Editorial: The Coal India problem

Jul 04 2014, 01:56 IST
Comments 0
SummaryCompetition is to be introduced, but only gradually

Though Coal India Limited has continued to under-perform, and badly—it produced just 462 million tonnes against the FY14 target of 482 million tonnes—it doesn’t look as if there is going to be any immediate solution with imports reaching 171 million tonnes. Speaking at the Express Group’s Idea Exchange, minister of state for power and coal Piyush Goyal ruled out the possibility of opening up the sector to commercial miners, whether from India or overseas in the near future. Though Goyal spoke of the urgent need to increase coal production and reduce India’s dependence upon costly imports—this both raises electricity tariffs as well as puts a big strain on the country’s current account deficit—he talked of the need to calibrate the entry of private sector players. To begin with, apart from allocating mines to state governments, Goyal stressed on how several mines were ready for auction to actual users. As for commercial miners, while this is what has bolstered India’s petroleum sector, both in terms of production as well as in terms of reserves accretion, the government’s concern is what this will do to prices if allowed in the coal sector. As in the case of the oil sector, commercial miners of coal will have to be paid international prices—the government, however, is finding it difficult to increase even natural gas prices.

If commercial mining is not to be allowed, how is competition to be fostered in the sector, how is Coal India to be made more productive? Goyal is not convinced that splitting Coal India into various companies—one of the suggestions made—is a good idea, and he is probably right. The oil marketing PSUs IOC, HPCL and BPCL are all supposed to be competing with one another, but in reality, there is no competition at all—in the case of the decontrolled petrol, for instance, all have the same price, and there is no discernible competition on quality of service or other parameters. In which case, for now, the best solution is probably to empower the coal regulator—right now, its pricing powers are only recommendatory. Were an empowered coal regulator to start benchmarking Coal India’s efficiency, and introducing improvement standards each year—in much the same way the electricity regulator sets loss reduction targets for electricity distribution companies—this would help improve productivity levels. In the long run, however, as the telecom regulator discovered the hard way, it is difficult to rein in a

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...