To meet the growing
demand of electricity in the country, the approach paper of 12th Five
year Plan (2012-2017) targets to set up 100 GW of capacity. However, if
the government wants to achieve this desired growth, it certainly needs
to undertake immediate reforms to augment domestic coal supply.
The issue of coal availability also assumes significance because to sustain the economic growth rate of 8-9% over the next few decades, India has to invariably depend on coal. While demand for coal from the power sector is set to grow by around 10% (driven by new capacity additions), the supply through domestic production is seen at around 7-8%. However, it is still difficult to understand who is to be blamed. And if analysts are to be believed, coal demand and, hence, coal prices are only going to rise because the existing demand-supply mismatch is only going to get worse. According to the BP Statistical Review of World Energy 2011, while global coal production grew 6.3% between 2009 & 2010, consumption rose by 7.6%. In India too, the rapidly rising demand is seeing an increasing dependence on imports. Coal imports this year are estimated to be a whopping 84 MT, a figure likely to double in the next two years. In fact, as per data available with the Commerce Ministry, $8,183.38 million was shelled out in FY2010 for importing coal. Well, this figure has already reached $6,993.69 million in FY2011.
In view of growing mismatch between demand and supply, the government is said to be in plans to allow private companies into commercial coal mining. Mining giants like BHP Bilton, Rio Tinto, and Sesa Goa are expected to be allowed access to captive coal blocks reserved for cement, steel and power sectors. Having faced stiff opposition to this proposal from the Left in Parliament earlier, the government is now in plans to achieve the same without having to face the Parliament. Under the captive mining policy, coal blocks are offered to private players in approved end-user segments like cement, power, steel, syngas and liquefaction. These firms, in turn, are free to form joint ventures in mining. Even under the auction route, only these sectors are eligible to participate. As per sources, the coal ministry has already sought legal opinion on its plans to allot captive coal blocks to private miners on the condition that they tie up with approved end users for supply. There are also plans to review the current coal distribution policy to ensure that priority sectors get adequate fuel. Capacity addition in India’s electricity sector in the 12th Plan (2012-17) too runs the risk of getting derailed due to uncertain domestic availability and volatile international prices of coal, unless immediate reforms are undertaken to augment coal supply, warns a paper by industry chamber FICCI and consultant in energy sector ICF. In fact, the paper asks for allowing captive mines to sell surplus coal at market prices to incentivise additional production and full-scale commercial mining at market prices through amendment in the Mines & Minerals (Development & Regulation) Act.
In view of growing mismatch between demand and supply, the government is said to be in plans to allow private companies into commercial coal mining. Mining giants like BHP Bilton, Rio Tinto, and Sesa Goa are expected to be allowed access to captive coal blocks reserved for cement, steel and power sectors. Having faced stiff opposition to this proposal from the Left in Parliament earlier, the government is now in plans to achieve the same without having to face the Parliament. Under the captive mining policy, coal blocks are offered to private players in approved end-user segments like cement, power, steel, syngas and liquefaction. These firms, in turn, are free to form joint ventures in mining. Even under the auction route, only these sectors are eligible to participate. As per sources, the coal ministry has already sought legal opinion on its plans to allot captive coal blocks to private miners on the condition that they tie up with approved end users for supply. There are also plans to review the current coal distribution policy to ensure that priority sectors get adequate fuel. Capacity addition in India’s electricity sector in the 12th Plan (2012-17) too runs the risk of getting derailed due to uncertain domestic availability and volatile international prices of coal, unless immediate reforms are undertaken to augment coal supply, warns a paper by industry chamber FICCI and consultant in energy sector ICF. In fact, the paper asks for allowing captive mines to sell surplus coal at market prices to incentivise additional production and full-scale commercial mining at market prices through amendment in the Mines & Minerals (Development & Regulation) Act.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Management Guru Arindam Chaudhuri
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
