Power and steel are the two sectors contributing the most to coal consumption. In the first quarter, the power sector's consumption declined by 2 per cent and of steel fell by 4 per cent. The cement and fertiliser sectors also consumed less. In fact, the fall in consumption from these two sectors was steep. Coal consumption by the cement industry dropped by 38.1 per cent, whereas that of the fertiliser industry fell by 20 per cent.

But a drop in production of coal does not mean a proportionate drop in itsconsumption by domestic users. Import of coal particularly from Indonesia and South Africa continues to be attractive. Cement companies like Gujarat Ambuja Cements continue to import and stock their one year's coal requirements well in advance. Suppose these players had bought imported coal before April, they will continue to use it for now also. The fact that these companies neither imported coal nor bought it in the domestic arena does not mean that they are not consuming coal. The recent depreciation of the rupee and across-the-board hike in import duty are barriers coal import. But this barrier has been overcome with the drop in the price of coal in the international markets. Imported coal is preferred to domestic coal because of its low ash content. The high ash content in domestic coal reduces the efficiency of plants using coal.

Liberalisation had little impact in disturbing the near monopoly of Coal India. In fact, the coal industry continues to be dominated by the inefficient state control and theall-powerful mafia. Even joint ventures have not materialised because the private sector and foreign miners are afraid to enter this sector.

The fact that Coal India is supplying sub-standard coal to its clients needs no proof. None other than the Gujarat State Electricity Board has demanded recovery of Rs 800 crore from Coal India as compensation for supplying poor- quality coal to its coal-based thermal power stations located at various places in the state. GSEB has been purchasing 1.3 crore tonnes of coal per annum at a cost of Rs 1,100 crore from Coal India.

Apart from the poor quality of coal supplied, the coal is mixed with stones and other rubbish things. Even this coal is stolen while it is travelling in open wagons to the destination by the mafia.

Even the financial position of Coal India and its subsidiaries does not inspire confidence in their future. M/s Eastern Coalfields is likely to be referred to the BIFR in 1999-2000 for the second time. It came out of the BIFR net only in the currentyear. ECL posted a loss of Rs 547 crore in 1997-98. Public-sector monopoly has kept productivity of coal at rock- bottom levels. Private-sector power plants in the offing complain about the lack of comfort in coal contracts. Promoters of Bona, Daewoo, Bhilai plants, Siemens ABB and a US-based company all have been kept in tenterhooks. The Hindujas have refused to sign a contract over coal supply owing to lack of a penalty clause.

If these fast-track thermal power projects are held up or delayed, the power scenario will worsen and no industrial growth is possible. Other industrial players also may be driven to opt for imported coal to domestic coal.

The coal ministry plans to introduce ad valorem rates of royalty for coal. Henceforth, royalty will be based on the value of the coal produced rather than the quantum of coal produced if the plan is accepted by the union cabinet. The implications will become clear only when it is implemented. The government is also planning retail distribution and open marketsale of coal as a short-term measure to liquidate huge stock pile-up in coal companies. The coal companies have been instructed to open dumps in different parts of the country, and to begin with, 15 dumps are planned to be opened.

But these short-term measures will not solve the problems plaguing the coal industry. It is like applying an ointment to a cancer patient. The problems have come to such a level that Coal India has decided to drop its plans to diversify. Its proposal for a joint venture with NTPC to generate power has been shelved. Coal India cannot go it alone for mega mining ventures for power projects and will have to invariably opt for the joint-venture route.

The writing is clear on the wall. The government has to break the monopoly of public-sector coal companies and allow private sector entry in the coal sector immediately. Any delay or hesitation on the part of the government will spell doom for the Indian economy.