Millennium Post

Fair, not free, this national resource

The question of redistribution of the precious natural resource, coal – also a heavily polluting, utterly depleted fossil fuel – has been at the centre of a massive storm over what exactly is the best method to reallocate it. After the 25 August observation by the Supreme Court deeming all 218 coal blocks allocated between 1993 and 2011 ‘illegal and arbitrary’, debates and discussions on how to check the illegality of previous allocations as well as come up with a mechanism of fair and effective pricing to minimise losses to the government exchequer have been heating up the public sphere.

Even though the union government has decided to go ahead and arrange auction by the end of this financial year, despite SC’s observation that government should have little role in it and should allow competitive bidding in a fair and transparent manner, there are technical problems to be solved first. It seems the coal and power ministry is grappling with dilemmas that might end up benefitting private entities in its bid to allow captive coal blocks to be accessed at highly subsidised prices.

Latest reports suggest private firms stand to gain as much as Rs 6,000 crore per year after minister Piyush Goyal’s ‘rescue plan’ by proposing to give coal linkage (or supply allotment from the government-owned Coal India Limited’s mines at below-market prices) to new and upcoming power projects stuck in the middle. Reports say nine private power projects, accounting for 10,580MW and expected to consume 24 million tonnes of domestic coal per year, would be provided coal at Rs 1,500 per tonne, about 40 per cent of the open market price of Rs 4,000 per tonne (imported coal or CIL produce bought in e-auction).

Given that the price difference is likely to unduly benefit the firms by over Rs 6k crore per year, which over a period of 25 year life span of a power project could yield as much as Rs 1.52 lakh crore (just under the estimated loss to government exchequer in the 17-year-long coal scam, at Rs 1.86 lakh crore), how will this be any different from what went on in the period between 1993 and 2011? If it only were a question of legality, such scruples could be tweaked and removed by legislators at the drop of a hat. But the real implication of coal scam was in the staggering loss of revenue that occurred as private corporations profited from obtaining free to cheap coal blocks, instead of buying the raw material at standard prices. Moreover, because selling cheaply obtained coal (which by the way is a scarce fossil fuel under great demand) to open market is more profitable than generating power from it, several blocks have not been developed at all, prompting scathing criticism from authorities. It is therefore important that Modi government takes the desirable step and ensure this national resource gets its due, while power tariffs remain under control.       

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