The case against privatization of coal sector


The case against privatization of coal sector

Articles / Environment   /   Feb 26, 2015
karuna Gupta
karuna Gupta
She is a writer. She has done post-graduation in Political Science from Delhi University. She likes writing news stories, blogs and articles. She also likes to analyze political and international events and write stories on them. She wishes to bring a change to the lives of women by attracting the attention of leaders as well as society at large through her articles. Truth is what she stands for.

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There is a myth that the shortage of coal in the country is due to the inefficiency of the public sector undertaking (PSU), Coal India Limited. Coal had to be imported in 2013-14 due to the current demand of 730 million tonnes (MT). 462 MT was provided by CIL. Another 50 MT was produced by another PSU and only 46 MT was procured from private companies or state PSUs running captive coal blocks. It is important to note that in 1993, the production of CIL was 210 MT. After 21 years and 218 blocks, private companies could produce only 46 MT of coal in 2013-14. CIL, in spite of vested interests to sabotage its production programme, manages to produce 462 MT. Hence, we can see that in 2013-14, private sector participation was less than 10 per cent of total coal production.

It is also not true that shortage of coal is responsible for closure of any power plant. According to the latest Central Electrical Authority reports, presently we have 2.5 lakh MW of installed capacity, against our peak demand of 1.45 MW. The peak demand deficit is only 5% (some states might have 10-15%) in the current year.

The real cause for our erratic power supply is transmission and distribution network. Several private power plants also charge very high tariff, as in Uttar Pradesh.

Contrary to popular perception, mining PSUs are making huge profits. Mining in India which is done up to a depth of 1,200 m is a sure-shot profitable business. CIL gave Rs. 16,485 crore i.e. 90% of the dividends in 2013-14 of the total of Rs. 18,317 crore by the coal sector. All major PSUs like ONGC (for oil and gas exploration) are also making huge profits.

In spite of CIL’s massive revenue, government has diluted its share from the PSU.

The Negative imapact of private coal mining

• It will increase the price of coal and eventually the price of power.

• It will result in unscientific mining and compromise workers’ safety.

• It will lead to environmental damage.

• It will negatively impact our economy and competitive capability of our enterprise.

• CIL sells coal at lower prices. Private mining would lead to increase in prices of steel and coal.
• This will hit small scale industries, agriculture etc. 

Deficiencies of the bill in Parliament

• There is no provision of barring increase in tariffs of power plants after getting a coal block on a reverse tariff bid auction.

• Government could have spared the coal blocks falling in dense forest areas from the 204 listed in Schedule 1 to minimize the environmental and social costs of mining.

• The government can chalk out a plan to leave out bio-diverse areas.

• According to the Environment Ministry, 15% of coal deposits lie in dense forests.

• Even if those in dense forests are not included, it is sufficient to fulfill current demand.

• These dense areas also have a majority of India’s tribal population. They are not literate enough to be part of the development process, if all the coal deposits are opened up at one go.

• Some deposits also need to be spared to fulfill the needs of the future generations.

The views expressed here are those of the authors and doesn’t reflect the official policy of Janpratinidhi. The views expressed here are those of the authors and doesn’t reflect the official policy of Janpratinidhi.
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