Cabinet approves creation of coal regulator through executive order

Written by fe Bureau | New Delhi | Updated: Feb 21 2014, 17:40pm hrs
CCEACIL would continue to unilaterally determine the prices of the fuel.
Even as the bill for setting up a statutory coal regulator, albeit with no power to regulate sale of coal or fix its prices, is with Parliament, the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved its formation through an executive order. Analysts feel the move would further undermine the proposed entity, which was anyway seen to be toothless and incapable of pushing the much-needed reform in a sector afflicted by state monopoly.

Practically, the views of the coal ministry will continue to prevail on the states' granting of mining leases, and the ministry and CIL would continue to unilaterally determine the prices of the fuel.

The regulator's role would be restricted to formulating the methodology for pricing, and analysts say that being not adequately empowered, even here, the ministry would be in a position to influence the regulator. The regulator can set the terms and conditions for opening a mine, but would have only a advisory role on the cancellation and suspension of mining licences.

Though not equipped with coal pricing power due to opposition from the coal ministry, the proposed coal regulator is mandated to frame rules and methodologies for determination of coal prices as well as for sampling of coal quality. Even this modest step towards coal sector reform was hailed by bulk coal consumers from power, steel and cement industries when the CCEA had last May approved a proposal to set up a statutory watchdog and, later, when the coal ministry introduced the coal authority regulatory Bill in the winter session for approval. Now it is a big question if the proposed watchdog will be able to perform its assigned functions effectively.

The CCEA's move to abandon its earlier decision to set up a statutory regulator and go for a non-statutory watchdog is unfortunate given the alarming pace at which the country's dependence on imported coal is growing. India's coal imports are projected to hit 180-185 million tonne in the current year of 2013-14, sharply up from the 135 million tonne reported in the previous year.

CIL, which accounts for 80% of domestic coal production, is struggling to increase output. The PSU, which produced 452.5 million tonne of coal in 2012-13 against the target of 464 million tonne, is projected to miss its production target of 482 mt for the current year.

Meanwhile, the idea of stepping up domestic coal production by allocating captive blocks to user industries from sectors like power and steel has also run aground, with the coal ministry deallocating 28 out of the 61 blocks allocated to private players this week for delay in production. More deallocations are likely to follow in the coming week when the government reviews status of ten captive coal blocks whose allocatees were asked to secure final forest clearances by February 12 or be prepared to lose those blocks.

But the industry has mixed feelings about the government's move to appoint a non-statutory coal regulator. While it may have wanted to see a statutory watchdog in place who could restrain CIL from fixing coal prices and deciding on quality unilaterally, it feels a non-statutory regulator is not that bad under the prevailing political scenario.

Kameswara Rao, leader for energy, utilities, and mining in PWC said: "This is an important development for the coal and end-use sectors, and will address a wide range of issues from licensing, pricing, terms of supply contracts, sustainable use of resources etc., in a more economic and scientific manner, moving away from current administrative arrangements. An independent regulator will also give confidence to end-user investors that their investments will be better protected, and the sector will be able to better attract commercial funding." He added, The proposed regulator will be able to bring economic and sustainability perspectives besides efficient pricing and use of coal.

Conversion of 7,200 km of state roads to NHs cleared

The Cabinet also decided to convert 7,200 km of state roads into national highways.

"The Cabinet Committee on Economic Affairs (CCEA) has given nod for declaring 7,200 km of state highways as national highways," a senior minister said after the meeting here.

With this the total length of the state highways converted into National Highways during the UPA regime would reach about 17,000 km.

About 10,000 km of state highways were declared national highways during the last 10 years.

These roads, sources said, are spread across states including Andhra Pradesh, Madhya Pradesh, Bihar and Uttar Pradesh.

Plan to create new forest cover okayed

Facing criticism of ignoring environmental concerns in rush to clear projects, the government has cleared a plan to create new forest cover and improve the quality of existing forests for an expenditure of R13,000 crore in the 12th Plan.

Besides the two components, which are to be implemented through various measures including decentralisation of forest governance, the proposed National Mission for a Green India (GIM) as a Centrally Sponsored Scheme will also strive to achieve increased forest-based livelihood income of households living in and around the forests.

The Cabinet Committee on Economic Affairs chaired by PM Manmohan Singh approved the proposal of the ministry of environment and forests.