The country's economic engine has been derailed as a number of infrastructure projects continue to starve for want of fuel. Coal continues to be the most widely used fuel for fuel intensive sectors such as power, cement and steel. And India has the fifth largest reserves of the black gold in the world. But still the country is not able to fully meet its coal needs.
What prevents the country from utilizing its own natural resources? This is partly because these resources continue to remain under the domain of the government. The coal sector was nationalized in 1972 and Coal India Ltd (CIL) was formed in 1975. Today Coal India Ltd (CIL) accounts for more than 80% of the coal produced in the country. The government wants to prevent misuse of the country's natural wealth through this reservation. But this in turn has turned into a bane for the sector. CIL's coal output has hit a roadblock due to hurdles such as delay in getting land clearances and environmental approvals. The company was unable to meet its production targets in both financial years 2013 and 2014.
CIL with its seven subsidiaries is spread over eight states of India. One way to cut down the turnaround time is to split the subsidiaries into independent companies and allow state governments to hold stakes in these entities. This kind of de-centralization and state-level ownership will increase accountability. At the same time, it will speed up approvals and improve efficiency of the company in the long run.
Splitting up may ease CIL's regulatory burden to some extent. However, the company continues to be plagued by low productivity. CIL derives 90% of coal from opencast mines and balance from underground mines. The labour productivity from open cast mines has improved over the years. However, productivity from underground mines has stagnated due to lack of technological advancement. Therefore access to latest mining technology is the need of the hour. This can be achieved by partnering with global mining companies for technology sharing.
To boost investments in mining, the government can also consider auction of coal blocks. Privatization can no doubt make the coal sector more competitive and efficient. Also to safeguard national interests, the government can stress on production targets and penalty clauses at the time of allocation of mines. But private companies have a poor track record in holding national interests above their own commercial gains.Therefore according to us, providing autonomy to individual subsidiaries by bringing state ownership could a more successful way to ensure coal security in the country.
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