The coal crisis, reminiscent of 2014, is back. Amid dangerously low levels of domestic coal availability threatening to hit power supplies, it is the Coal India Limited, or CIL, that has, unfortunately, become the whipping boy. However, the real problem with the devastated power sector, with the failure of the Ujwal DISCOM Assurance Yojana, is the Rs 20,000 crore that the power generation companies owe the CIL and the fact that they did not maintain a 20-day stock.
In 2014, it was on account of a rampaging Comptroller and Auditor General who made his calculations just like an accountant and played to the gallery. The consequences were devastating and coal production suffered. However, the crisis was managed through a meticulous plan and immaculate execution. There was a record additional production of coal of 34 MT during 2014-15. This was more than the cumulative increase during the previous four years. This production increased further by 44 MT during 2015-16, so much so that not a single power plant in the country was short of coal and there was an attempt to explore the possibility of exporting coal to Bangladesh.
The present-day crisis is on account of both demand and supply-side management issues. There has been a spurt in demand as the economy is recovering after the pandemic. The international prices of coal have shot through the roof and there have been unseasonal rains in mining areas of the country. However, what is baffling is the stagnation of coal production levels by the CIL, which was 606 MT in 2018-2019, 602 MT in 2019-2020 and 596 MT in 2020-2021.
Probable causes of the coal crisis
After record production during 2015-16, why did the production stagnate? Let us look at some of the probable causes.
First, the increase in production during 2014-15 and 2015-16 was on account of an extremely competent team led by the then chairman and managing director Sutirtha Bhattacharya. His tenure should have been extended but for some inexplicable reason, it wasn’t. What was worse was that after he completed his tenure in 2017, a regular CMD was not appointed by the Narendra Modi government for more than a year. A few directors were also not appointed. The momentum built was lost.
Second, the Incremental growth in Coal India production is dependent on new mines that are taken up regularly. This expansion plan was put on the back-burner once Bhattacharya left. Ironically, the CIL was asked to invest in three fertilizer plants.
Third, the Swachh Bharat Mission was a good initiative by the Modi government, but to ask mine managers to scout and focus on monitoring the setting up of toilets in schools was too far-fetched. The additional tagline for CIL was: “We set up toilets. We also produce coal”. I have made detailed observations about this in my book Ethical Dilemmas of a Civil Servant.
Four, most of the private entities plough back their profits to invest and increase their capital base. In the case of CIL (and many other Central Public Sector Undertakings), it was used as a milch cow by the government to seek dividends to balance its own budget. The CIL was obviously strapped for funds for its expansion plans. It had accumulated reserves and a surplus of around Rs 35,000 crore in 2015. This should have been used for expansion plans. However, as the Modi government sucked out most of these funds through forced dividends and buybacks, CIL was left with only around Rs 8,000 crore as reserves in 2019.
Lastly, most of the coal belts exist in states that are not ruled by the Bharatiya Janata Party. There are a number of issues relating to land acquisition and environment and forest clearances that have to be sorted out with the states. Between 2014 and 2016, not a single meeting was held in New Delhi. All the meetings (there were many of them) were held at the state level, where a larger number of regional officers participated. This approach enabled the resolution of a number of issues. As I have written before in my book, Not Just a Civil Servant, states were conveyed a definite value proposition in these meetings. The problem during the past few years has been the ongoing “war” between the centre and the states. Without the cooperation of the states, coal mining can’t happen smoothly.
What about the private entities?
CIL is the primary producer of coal in the country and still contributes around 80 per cent of the production. But why hasn’t the non-CIL coal production picked up?
An attempt was made to auction coal mines after the devastation caused by the CAG. Around 34 mines were indeed auctioned to the private sector. However, because of the irrational bidding by some companies, many others backed out. At the time of CAGs ‘imaginary revelations’, the private sector was contributing around 90 MTs for captive mining. This collapsed. It was only on account of increased production by CIL that the situation was salvaged. Mining is a complex operation that requires a variety of clearances. An inter-ministerial Coal Project Monitoring Group (CPMG) was set up in the ministry in 2015 that helped a number of clearances for both CIL mines as well as some private mines. However, this group became dysfunctional after 2016. It may also be noted that all the mines mentioned above for the private sector were for captive consumption and they were not allowed the commercial sale of mined coal. The fact of the matter is that such mines still do not contribute substantially to coal production.
In 2015, PM Modi was very keen on going ahead with commercial mining and had even given a verbal go-ahead. However, for some reason (perhaps apprehending a unions’ backlash), the file was never put up for a formal decision of the Cabinet. Precious time was lost as the final decision on commercial mining was taken only after five years. Had the nod of PM Modi been taken seriously and followed up, some mines could have been producing now.
The way forward
Now, what is the possible way forward? There are both short term and long-term measures that can and should be taken.
First, the CIL is fortunately blessed with an excellent team. They need to be supported. The Modi government should play the role of a facilitator and not a monitor. “Bossing” by the government was resisted stoutly between 2014 and 2016. CIL will have to be given the requisite freedom.
Second, there are issues with the Railways regarding the hauling of coal. The job of resolving issues with Railways has to be done by the government, as was done during 2014-2016, not by the CIL.
It also needs to be ascertained why power utilities weren’t maintaining the necessary stock of coal as mandated.
There are also coal supply management issues with regard to surplus coal with private sector entities that have captive mines. This coal can be diverted to shortage areas through an arrangement of replenishment, subsequently by the CIL.
The expansion plans of CIL should be facilitated by the Modi government by allowing the organisation to plough back its accumulated reserves and profits for such expansion. The Centre will have to engage with the states for faster acquisition of land and processing of environment and forest clearance applications and then follow up with the Ministry of Environment and Forest at the central level. This will have to be done for the private sector mines as well. The CPMG will need to be revived in letter and spirit.
If these measures are taken quickly, the crisis can be managed.
The author is a retired civil servant and former secretary in the government of India. Views are personal.
(Edited by Srinjoy Dey)
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