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Coal climes

Coal climes

Author: Editorial
Publication: The Indian Express
Date: December 22, 2011
URL: http://www.indianexpress.com/news/coal-climes/890470/

Introduction: No alternative to solving power and other sector's crises apart from opening up coal-mining

Coal is in crisis. That is old news. But when the power sector runs out of the fuel, post-facto analyses and serial standstills across the economy will be all left us. As reported in this newspaper on Wednesday, 70 thermal power plants are staring at disaster. According to the power ministry, 26 of these units have entered "super-critical coal-stock positions", with their coal likely to be exhausted within a week. Forty-four plants are "critical", with stocks for 15 days. Coal India Ltd (CIL) has been consistently inefficient in getting coal off pitheads and delivering them. As such, power generation losses could reach paralysing proportions if CIL - registering negative growth April through October - continues to miss the supply target. For instance, in April-November 2011, CIL supplied 192.5 million tonnes of coal as against a target of 221 MT. During the same period, coal-based power generation has been 370.8 billion units as against the targeted 375.1 BUs.

The net result of this state of affairs could be defaults in power supply by units as per their power purchase agreements, defaults in debt repayments due to capacity non-recovery - when loss-making power utilities were already rushing to banks for restructuring loans. But CIL is the effect, not the cause. The heart of the matter is the government's obsolete and counter-productive coal policy. With coal as a nationalised mineral, CIL enjoys a monopoly which jeopardises not only those depending on the coal but also the Navratna PSU itself. Its inefficiencies have been raising coal imports - a more expensive alternative. Meanwhile, Fitch Ratings has warned that rising costs of imported coal and a declining rupee could push some power utilities to default on debts.

As things stand, there are three clear imperatives. First, a coal regulator is needed to look into pricing, which is not transparent. Second, e-auction of coal must be encouraged as policy - an unfortunate culture has been allowed to entrench itself whereby power units insist on coal through linkages, seeking to avoid higher prices. Third, and overarching, coal has to be opened up. Not only should units with captive mines produce extra coal and sell it in the open market, but the private sector must be allowed to enter commercial coal-mining. There is no alternative.

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