Modi Government May Decide on Coal Reforms: Your 10-Point Cheat-Sheet

NDTV Profit Desk

20 Oct 2014, 06:22 PM IST

The government may announce the re-allocation of 214 coal blocks cancelled recently by the Supreme Court, through transparent auction rules, sources told NDTV.
These coal blocks, allocated by the government over the past two decades, were cancelled because the allocation process was arbitrary and illegal, the court said. It ordered that the operational ones among them be returned to state-run Coal India by end-March next year.
The government may also decide to open up the coal sector by allowing private firms in coal mining, ending the monopoly of state-run Coal India.
Coal India accounts for 80 per cent of domestic coal output, but has failed to raise production fast enough to meet domestic needs.
Coal India has been unable to ramp up production quickly because of difficulties in land acquisition and access to railways. Its huge workforce consisting of around 3.70 lakh employees has resisted attempts to introduce new technologies, fearing job losses.
The large gaps between required and available coal supply is met through imports. India has become the world's third-largest coal importer despite having the fifth-largest coal reserves in the world.
The government is likely to announce price-pooling of imported and domestic coal to bring down overall coal prices in the country, sources said. Price-pooling means setting a common price for similar grades of coal by taking the average of domestic and imported coal prices. This helps to offset the higher cost of imported coal with that of the cheaper domestic produce.
Fixing short supply of coal is necessary to ensure uninterrupted electricity supply across the country, a precondition for Prime Minister Modi's "Make in India" push that aims to transform the country into a global manufacturing hub.
According to Reuters, the government has been exploring spinning off some of the eight units of Coal India into independent firms, making respective state governments equity holders to help speed up land acquisition.
Analysts have also asked the government to open up the coal sector to global mining developers to increase supplies. Augmenting loading and transportation infrastructure to increase coal supplies is also necessary.