Privatizing India's Coal Sector to Narrow Demand-Supply Gap?

Continued from Part One.

Last week, Indian Junior Coal Minister Prakashbapu Patil said in a written reply to the upper house of the parliament (Rajya Sabha) that the gap between projected demand and supply has increased to 161.5 million metric tons in 2011-12.

Imports of the fossil fuel during the period also went up from 59 million tons to 98.9 million tons, the minister said.

In a reply to a question, the minister said that the projected demand of coal was 696 million tons in 2011-12 while the supply was 534.5 million tons.

Analysts say the demand/supply gap is increasing because CIL is not only unable to enhance its production, but also failed to meet projected production targets in the last few years.

State-run CIL had missed its production target, producing just 431.3 million tons of coal in the just-ended fiscal year, against the lower, recently revised target of 440.2 million tons due to green hurdles.

CIL had a production target of 460.5 million tons for 2010-11, which was revised to 440.2 million tons barely a few days before the close of the fiscal year.

As many as 154 of the firm’s projects, spread across over 26,000 hectares of land and with a potential output of about 210 million tons, are awaiting environmental clearances at the center- and state levels.

The coal ministry expressed concerns in December last year that delays in the granting of environment clearance to the miner were likely to result in a production loss of about 190 million tons, valued at about Rs 188 billion ($3.76 billion), by March 2012.

The coal sector in India was nationalized in 1973. But during recent times, there have been demands from certain quarters, particularly from the private sector, to denationalize the coal sector.

In a recently published PTI report, Indian Coal Minister Sriprakash Jaiswal was quoted as saying that opening up the coal sector for commercial mining is not possible now in the wake of stiff opposition by trade unions and lack of consensus among political parties.

A bill for amending the Coal Mines Nationalization Act, which gives the exclusive rights of commercial coal mining to the government-owned companies, has been pending in the upper house of parliament for over a decade.

But due to huge pressure from various sectors, India’s government is considering some options to involve private players in the coal sector.


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