Striking truths in the coal sector

The government may have won the first round in its tussle with employees of public sector monolith Coal India, but stiffer challenges lie ahead as it attempts to reform an industry that is critical to the country’s growth. Last week, Coal India employee unions called off on the second day what was to have been a five-day strike. This was after the government managed to convince them that there were no plans to denationalise Coal India, and set up a high-level committee to study the contentious provisions of the ordinance to auction coal blocks that was issued late last month. The unions were also exercised about the disinvestment plans of the government. In the event, assurances from the government that workers’ interests would be protected and that disinvestment did not mean privatisation of Coal India were enough to prematurely end what would have turned out to be a debilitating blow for the economy. Coal stocks, never healthy in power stations across India, dipped to critically low levels within two days of the strike. Ironically enough, the key lesson to be drawn from the strike is exactly what the employees’ unions were protesting against — broad-basing the industry by opening it up to private commercial mining. It is unhealthy for a critical infrastructure industry to be the sole preserve of a single, monolithic enterprise.

Statistics prove the point. Coal output in the country has grown at an average of 6 per cent over the last five years even as power generation capacity — three-fifths of which is coal-based — has raced ahead at a much faster pace. Coal India has failed to meet its targets for each of the last six years, with the result that India is now the third largest coal importer in the world despite boasting of the fourth largest reserves. Last fiscal the country spent around $17 billion of precious foreign exchange to import 168 million tonnes of coal to cover up for Coal India’s inability to meet demand. Mercifully, coal prices have been on the downswing in recent times, helping importers. However, imports are projected to rise to as much as 240 million tonnes in 2015-16. This is where private investment in commercial mining comes in as the latter can add to incremental output and reduce imports. Coal India’s unions need to be reassured by the government that there is space for both — Coal India and the private sector — as GDP grows and along with it, power demand. If anything, the terms of work and wages will only improve with the entry of the private sector; telecom and banks are good examples of this. The government needs to take Coal India’s unions into confidence about its plans as the company is crucial to meeting the Prime Minister’s target of round-the-clock power for all by 2022.

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