Coal India rejig to benefit private players

The government’s move to restructure Coal India might have been triggered by a desire to make the near-monopoly player more productive and efficient, thereby boosting energy security.

Yet a major beneficiary of this restructuring exercise could be the private sector, particularly mining companies.

“If Coal India’s subsidiaries were spun off as separate companies, they could be encouraged to develop their own strategies for production improvement including joint venture with private sector players and acquisition of overseas assets,” a coal ministry official told DNA.

The coal ministry on Monday took the first step by inviting expression of interest from consultancy organisations “to take up a study for restructuring of Coal India”.

Officials pointed to the draft paper for the 12th Five Year Plan (2012-17), which recommended greater participation of the private sector in coal exploration and mining.

“Coal India will continue to play a major role in meeting the coal requirements of the country, but the growth in CIL production will not be enough to meet the rising demand. Hence, efforts need to be made to ensure that additional captive coal blocks start producing in Twelfth Plan to meet the rising coal demand. It is also necessary to plan for larger imports of coal,” the document said.

“We need to be build consensus (on privatising Coal India). But one proposal being talked about is that Coal India can use the private sector as agents, to use them to open up new fields and enter into contracts with them so that they would supply the coal to Coal India at some agreed prices,” C Rangarajan, chairman, Prime Minister’s Economic Advisory Council, had said recently.

While delays in land acquisition and environment and forest clearance have affected Coal India’s productivity, lack of expertise and investment in implementing state-of-the-art mining technologies have also played a role, as indicated by low level of underground mining.

“CIL can have joint ventures or formulate PPP projects with appropriate terms with renowned international players to shore up the underground production level in the 12th and the 13th Plans,” the Planning Commission noted in its  in its approach paper to the 12th Plan.

“Given the importance of expanding supply and the indifferent performance of Coal India in increasing production, there is need for inducting private sector investment in coal. It is already allowed for captive mining. There is no reason why it should not be opened up generally. In this context there is a case for reconsidering the merit of nationalisation of the industry,” it said.