Coal shortage hits power sector again; how India can get its production right

New Delhi | Published: October 18, 2018 3:39:35 AM

By convincing states of the value proposition of increased production, the record production of Fy15 & Fy16 can be emulated.

coal. coal industry, coal sector, infrastructureIndia sits on an estimated reserve of 300 billion tonnes of coal. Yet, the country was short of coal.

The power plants are running short on fuel in the country. No, this is not 2014. It is 2018. There is coal shortage. Yet again. There were as many as 26 power plants that are considered “critical” as of October 9, 2018, for want of adequate fuel. In 2014, many thought, and still think, that the smooth auctioning of coal blocks was ‘the coal story’. It was not. The process of auctioning coal blocks was primarily to put in place a transparent mechanism to distribute a natural resource that was very critical. In fact, the real problem in the country was the shortage of coal and the auctioning of coal blocks had minor impacts on coal production.

India sits on an estimated reserve of 300 billion tonnes of coal. Yet, the country was short of coal. Consequent to the opening of the power sector in 2004, the demand for coal suddenly shot up. Import of 21.7 million tonnes in 2006 grew to 131.3 million tonnes in 2014. The gap between demand and supply, which was minimal at the beginning of this millennium, grew substantially.

The so called ‘coal scam’ emerged out of this scarcity, when there was a scramble for coal blocks. In 2014, the focus was obviously on the coal block auctions in the beginning. However, it was soon found out that the root cause of the problem was the acute shortage of coal. A quick analysis revealed that the following factors were critical to coal production in the country.

* Land acquisition

* Environment and forest clearances

* Availability of railway rakes to transport the coal

Land acquisition was becoming increasingly tough because of politics that had creeped into the entire process. The existing legislation had brought everything to a grinding halt in most of the sectors, including coal, even though land acquisition for coal mining was governed by Coal Bearing Areas (Acquisition and Development) Act, 1957. The process was, by and large, in the hands of state governments that were at best indifferent and unable to fathom the value proposition. Geologically, most of the coal reserves were in forest areas. Environment and forest clearances entailed a lengthy process involving various levels of bureaucracy. Most of the processing had to be done by state level functionaries before it came to the Centre for final clearance.

No matter how much coal was produced, it was of no consequence if it could not be transported to the user industry. Most of these user industries, including power plants, were at a substantial distance from pitheads. Transportation of coal by railways was not only economical but also environment-friendly. However, not all the coal mines were connected with rail heads. And, where they were, there was a perennial shortage of rakes. There were, indeed, competing demands for these rakes from the food and steel sectors. The following steps were taken to absolve these problems:

* A web-based project monitoring portal, based on the successful model of the project monitoring group (PMG), was set up to monitor and pursue various clearances. The information on the portal was updated in real-time.

* Institutional arrangements were made to hold meetings every month on a fixed date and time with the officers of the ministries of railways and environment and forest.

* Instead of holding meetings with the states in Delhi to resolve state level issues, regular visits were made to the states.

This provided an opportunity to interact with considerable number of field functionaries who were directly involved in the processing of applications for clearances. It turned out to be a game-changer as it enabled the conveying of a value proposition to the states. Excavation of coal resulted in enormous amounts of revenue for the states by way of taxes as well as direct and indirect employment generation.

Fortunately, there were pro-active officers like Rajiv Gauba (Jharkhand), Sanjay Mitra (West Bengal), Vivek Dhand (Chattisgarh) and A K Padhi (Odisha) who were at the helm of bureaucracy in these coal-bearing states. These officers and their teams rose beyond the politics of the states to facilitate a turn around. This brought greater ownership of the decisions taken based on such plans. The impact of these steps was unprecedented:

* More than 5,500 hectares of land was acquired by Coal India Limited during the year 2014-15. This was the highest ever acquisition during the past few years. This acquisition happened when all other organisations were struggling to acquire even a few hectares.

* Environment and forest clearances were obtained for more than 3,400 hectares.

* Against the availability of 194 railway rakes during 2014-15 (which in itself was a record), 213 rakes were made available during 2015-16. Both railways and coal benefitted out of this arrangement.

The resolution of issues led to an unprecedented incremental growth of 32 million tonnes in coal production during the year 2014-15. This was more than the cumulative incremental growth of 31 million tonnes during the preceding four years. The cumulative incremental production of 74 million tons during 2014-15 and 2015-16 was equivalent to the incremental production during the entire 11th five-year plan.

Consequent to this increase in production of coal, the thermal power plants had an average inventory of coal for more than 20 days. No plant was deemed critical by the Central Electricity Authority in terms of shortage of coal. Import of coal came down substantially during 2015-16, resulting in foreign exchange savings of more than Rs 24,000 crore. There was no rocket technology that brought about this turn around. It can be done again. However, it will have to be done not in Delhi, but by sitting with the states and by conveying a value proposition to them.

By Anil swarup. Former secretary of the government of India.

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