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Privatization Of Coal Sector

Privatization Of Coal Sector

Introduction

  • Coal is the most important and abundant fossil fuel in India. It accounts for 55% of the country’s energy needs. The country’s industrial heritage was built upon indigenous coal.
  • Commercial primary energy consumption in India has grown by about 700% in the last four decades.
  • The current per capita commercial primary energy consumption in India is about 350 kgoe/year which is well below that of developed countries.
  • Driven by the rising population, expanding economy and a quest for improved quality of life, energy usage in India is expected to rise.
  • Considering the limited reserve potentiality of petroleum & natural gas, eco-conservation restriction on hydel project and geo-political perception of nuclear power, coal will continue to occupy centre-stage of India’s energy scenario.

Coal Production in India

  • Through sustained programme of investment and greater thrust on application of modern technologies, it has been possible to raise the All India production of coal at 730.354 million tonnes in 2018-19 (Provisional) with a positive growth of 7.9%.
  • Coal India Limited has set up Regional Sales Offices and Sub-Sales Offices at selected places in the country to cater to the needs of the consuming sectors in various regions.

Import of Coal  | Privatization Of Coal Sector

  • As per the present import policy, coal can be freely imported (under Open General Licence) by the consumers themselves considering their needs based on their commercial prudence.
  • Coking Coal is being imported by Steel Authority of India Limited (SAIL) and other Steel manufacturing units mainly to bridge the gap between the requirement and indigenous availability and to improve the quality of production.
  • Coal based power plants, cement plants, captive power plants, sponge iron plants, industrial consumers and coal traders are importing non-coking coal.
  • Coke is imported mainly by pig-Iron manufacturers and Iron & Steel sector consumers using mini-blast furnace.

Coal Reserves in India

  • As a result of exploration carried out up to the maximum depth of 1200 m, a cumulative total of 319.02 Billion tonnes of Geological Resources of Coal have so far been estimated in the country till April, 2018.
  • Hard coal deposit spread over 27 major coalfields, are mainly confined to eastern and south central parts of the country. The lignite reserves stand at a level around 36 billion tonnes, of which 90% occur in the southern State of Tamil Nadu.
  • Top 5 States in terms of total coal reserves in India are: Jharkhand > Odisha > Chhattisgarh > West Bengal > Madhya Pradesh.

Categorization of Coal Resources

  • The Coal resources of India are available in older Gondwana Formations of peninsular India and younger tertiary formations of north-eastern region.
  • Based on the results of Regional/ Promotional Exploration, where the boreholes are normally placed 1-2 Km apart, the resources are classified into ‘Indicated’ or ‘Inferred’ category.
  • Subsequent Detailed Exploration in selected blocks, where boreholes are less than 400 meter apart, upgrades the resources into more reliable ‘Proved/Measured’ category.

Classification of Coal  | Privatization Of Coal Sector

  • Coal is originated from organic matter wood. When large tracts of forests are buried under sediments, wood is burnt and decomposed due to heat from below and pressure from above. The phenomenon makes coal but takes centuries to complete.
  • Classification of Coal can be done on the basis of carbon content and time period.
  • On the basis of carbon content it can be classified into following three types:
    • Anthracite: It is the best quality of coal with highest calorific value and carries 80 to 95% carbon content. It ignites slowly with a blue flame and found in small quantities in Jammu and Kashmir.
    • Bituminous: It has a low level of moisture content with 60 to 80% of carbon content and has a high calorific value. Jharkhand, West Bengal, Odisha, Chhattisgarh and Madhya Pradesh have deposits of Bituminous.
    • Lignite carries 40 to 55% carbon content and is often brown in colour with high moisture content thus, gives smoke when burnt. Rajasthan, Lakhimpur (Assam) and Tamil Nadu has deposits of Lignite.
    • Peat is the first stage of transformation from wood to coal with low calorific value and less than 40% carbon content.

History of Coal Mining in India

  • India has a long history of commercial coal mining covering nearly 220 years starting from 1774 by M/s Sumner and Heatly of East India Company in the Raniganj Coalfield along the Western bank of river Damodar.
  • However, for about a century the growth of Indian coal mining remained sluggish for want of demand but the introduction of steam locomotives in 1853 gave a fillip to it.
  • Within a short span, production rose to an annual average of 1 million tonne (mt) and India could produce 6.12 mts. per year by 1900 and 18 mts per year by 1920.
  • The production got a sudden boost from the First World War but went through a slump in the early thirties. The production reached a level of 29 mts. by 1942 and 30 mts. by 1946.
  • With the advent of Independence, the country embarked upon the 5-year development plans. At the beginning of the 1st Plan, annual production went up to 33 mts.
  • During the 1st Plan period itself, the need for increasing coal production efficiently by systematic and scientific development of the coal industry was being felt.
  • Setting up of the National Coal Development Corporation (NCDC), a Government of India Undertaking in 1956 with the collieries owned by the railways as its nucleus was the first major step towards planned development of Indian Coal Industry.
  • Along with the Singareni Collieries Company Ltd. (SCCL) which was already in operation since 1945 and which became a Government company under the control of Government of Andhra Pradesh in 1956, India thus had two Government coal companies in the fifties.
    • SCCL is now a joint undertaking of Government of Andhra Pradesh and Government of India sharing its equity in 51:49 ratio.

 Advantages Of Privatizing Coal Sector 

  • Expands the pool of Potential bidders:  This will lead to better competition during auctions thus fetching better revenues for the government.
  • Development of Coal market: End use restriction inhibited the growth and development of the market thus driving down the Coal production and also distorting free price discovery of the mined coal.
  • Reduces Coal imports: India imported 235 million tonnes worth 1.71 Lakh Crore Rupees. Of these 135 million tonnes could have been substituted by domestic Coal production. Reduction in Coal imports leads to saving on foreign exchange reserves and also betters our trade balance.
  • Brings an end to Monopoly of Coal India Ltd.: Movement from State controlled system to free-market economy which incentivizes the private sector to act as engines of growth.
  • Efficient use of resources: Enhanced competition will inevitably lead to better utilization of the natural resources available in the country.
  • Employment: Large investments in mining will create jobs in the country.
  • Demand creation for other Sectors: Opening up of the sector will set off demand in critical sectors such as mining equipment and Heavy commercial vehicle industries.
  • Infusion of Modern technologies into Coal Sector: The move will also help India gain access to sophisticated technology for underground mining used by global miners. Helps achieve government target of 1.5 billion tonnes of domestic coal production by 2023-24.

Challenges | Privatization Of Coal Sector

  • Procedural Delays: Government should ensure that approval and compliance procedures are not archaic & draconian which will increase the upfront cost thus deterring private players to enter the sector.
  • Climatic Concerns: When countries across the world are moving away from fossil fuel resources this step to enhance Coal production is criticized by environmentalists
  • Health Concerns: Coal burning releases Carbon dioxide, particulate matter, sulphur dioxide, nitrogen oxide and mercury- thus damaging the health of many people around the region.
  • Interest of Coal India Ltd:This is a Maharatna PSU which is considered as a National asset and is listed in the stock exchanges. Opening up of the sector should not compromise the capability of CIL and avoid the way BSNL went down in telecom market.
  • Employers of CIL: Nearly 3 Lakh people are employed in CIL. Opening of the sector should not endanger the growth prospects of CIL and the livelihood aspects of the employers.
  • Labour Standards: Private companies in order to reduce their input costs and maximise their profits may subvert labour guidelines which may have detrimental effect on workers engaged in those enterprises.

Conclusion | Privatization Of Coal Sector

  • The arrival of private players in the coal mining practices can bring a lot of better things into the picture.
  • In the long term, India needs to look at coal to gas i.e. more cleaner energy sources.
  • Clean coal as an idea has huge potential in India because of the age and inefficiency of some of our plants.
    • With government’s efforts to push renewable energy due to international conventions on climate change, increase in carbon cess and other initiatives for lesser use of coal, there is a need for ‘Vision 2030 for the coal sector’, which takes into account the environmental factors such as reduction of carbon footprint, abatement of global warming.

 

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