Hit by short supply, 'black diamond' fails to dazzle sector

For the coal sector, the year 2011 started with a bang amid rosy announcements to augment 'black diamond' production by removing all bottlenecks, but it ended with a whimper.

Against a widening 142 MT demand-supply gap and a huge over 12,000 MW power capacity addition plans, warring ministries, specially Coal and MoEF, remaining at loggerheads throughout the year over contentious issue of 'go' and 'no go' mining zones gave much fodder to media.

Silver-lining emerged, when after Prime Minister Manmohan Singh intervened and a ministerial panel, headed by Finance Minister Pranab Mukherjee, was announced early in 2011 to address issues hurting production.

Twelve-member GoM, comprising ministers from key infrastructure ministries including environment, power and coal, formed in February, however, could not address the issue to unlock 660 million tonne potential production.

The Ministry of Environment and Forests has put as many as 203 coal blocks on 'no go' zones, thereby banning mining in these, hurting 660 MT production, and as per Coal Ministry this has potential to generate 1,30,000 MW power.

A staggering Rs 35,000 crore (Rs 350-billion) investment plans committed by cement, steel, power and other firms for end-use projects in lieu of coal blocks, which were later categorised as 'no go' mining zones, could not translate into reality.

With virtually no solution to address green hurdles, ever-widening deficit of the dry fuel is set to touch 200 MT in the coming years.

The coal crisis which persisted throughout the year became acute at the end with the shortage leading to many parts of the country plunging into darkness as power plants did not get adequate supplies.

The government had to swing into action by supplying firms from e-auction quota as well as allowing them to lift coal from the pit-heads.

"Coal shortage issue is a serious concern which has largely been due to heavy rains, problems of land acquisition and in want of other regulatory clearances. But I am hopeful that by the end of the ongoing financial year we will be able to meet the target," says Coal Minister Sriprakash Jaiswal.

In its efforts to jack up coal production, the government cancelled allocation of 14 coal blocks and one lignite block to public and private sector firms for failing to develop the blocks in stipulated time.

The Coal Ministry also issued warnings to 29

coal and three lignite blocks allocattees for bringing their blocks into production at the earliest, sending warning signal among those sitting idle.

"Deallocation was done to expedite coal production and to chuck out those players who had been sitting idle on the coal blocks allocated to them for captive use," Jaiswal said.

The Coal Ministry, however, failed to allot 54 blocks through competitive bidding despite repeated announcements.

To augment production and as part of energy sector reforms, it also plans to open the coal sector for commercial mining and the ministry during the year started trying to evolve a consensus on it.

After nationalisation of the coal mines in 1973, the mining in the sector is done exclusively by public sector companies including Coal India Ltd.

The private sector is allowed coal mining only for meeting their captive requirements in sectors like power, steel and cement.

The need to liberalise the sector was also felt in the wake of widening demand-supply gap of the dry fuel.

Coal India, which accounts for 80 per cent domestic production, missed the production target with an output of 431.32 MT of coal in the last fiscal even against the revised target of 440.20 MT.

The state-run firm missed the production target in April-September period by about 20 MT, recording an output of 176 MT, as against 196 MT planned.

CIL chairman NC Jha has said that firm's production has been hit due to adverse circumstances due to delays in environment and forest clearances.

What brought some respite to the sector was conferring of coveted Maharatna tag on CIL and Navratna on Tamil Nadu-based Neyveli Lignite.

CIL and Neyveli both were conferred on the prestigious status in April this year, which as per Jaiswal 'was one of the major achievements' during the year.

However, even the Maharatna status could not prompt CIL to overseas acquisitions, it failed on the front even after keeping aside Rs 6,000 crore (Rs 60 billion) war chest for such buyouts.

On CIL's request for a relaxation in the PSU guidelines stipulating a minimum 12 per cent internal rate of return on investments, the Finance Ministry at the fag end of 2011 said it can proceed with such proposals if they are of strategic nature, but these will have to be cleared by the government.

Moreover, the Finance Ministry in November also gave its approval permitting the public sector firm to go-ahead with the buyout of overseas firms that are unlisted.