Sutanu Guru writes on how policy disasters in coal mining have damaged the Indian economy
In 2006, when this author was the Managing Editor of Business & Economy, he wrote an editorial warning about how the coal mining sector was a disaster waiting to happen. The coal gate scam took much longer to break into media headlines and public hand wringing and disgrace. By then, P. C Parakh had retired as the coal secretary of the Government of India. But his new book called Crusader or Conspirator? Coalgate and Other Truths released just a few days ago blows the lid off the coal scam and disaster even more tellingly. This is election season and anything that embarrasses the UPA regime is bad news for the coalition. However, we are not concerned with the political consequences of such revelations. Our concern is to look at how mining- and virtually all other verticals in the infrastructure sector- have been adversely affected by capricious and often bizarre policy decisions of the UPA regime.
Everybody knows that thermal power plants that use coal as the basic raw material form the backbone of the electricity generation sector in the country. Everybody also knows that power shortages have virtually crippled many sections of Indian manufacturing and industry with peak hour shortages in the current summer months expected to cross 17%. Two of the most industrialized states of India, Maharashtra and Tamil Nadu face severe power shortages this year. This is not only disruptive, but also adds to the capital costs of manufacturing projects in India because companies, who cannot depend solely on the unreliable power supply, are compelled to invest in captive power plants. Various research bodies have estimated that that power shortages cost the Indian economy at least 1.5% in GDP growth rate every year.
In such a scenario, what has happened to the coal mining sector is almost criminal and unpardonable. Latest statistics indicate that that India imported more than 104 million tons of coal in the financial year 2013-14. This is about 14% more than the 86 million tons imported in the previous year. There seems to be no respite in the immediate future. In March, 2014, coal imports jumped by more than 40% to 14 million tons. The principal supplier of coal in the domestic market, the state owned Coal India Ltd remains moribund and reported a 2% increase in production in the year 2013-14 to a little more than 562 million tons. The message is clear: even if a new government in Delhi takes urgent and emergency steps to revive the coal sector, it will take a long time for domestic production to recover. That is because of the coal gate scam in which most of the coal blocks allocated by the UPA regime are under CBI investigation monitored by the Supreme Court.
Just imagine the cost if this debacle. Over the last few years, the value of the Rupee has declined by almost 20% against the dollar. That means thermal power companies that were forced to import coal because of do, Elric shortages have had to bear a far higher than expected cost. No wonder many of the new power projects stare at financial unviability. But the bigger crime is that India holds the third largest reserves of coal in the world. For an economy like that to import more than 100 million tons of coal a year is symbolic of the tragedy of the India Infrastructure sector and the Indian growth story.
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