Self-sufficiency in Coal Production- Government policies and Challenges!
Coal is a blackish-brown sedimentary rock that is used primarily in thermal power plants for the purpose of electricity generation, steel making, and cement manufacturing. Since there are many types of coal; quality benchmarks like carbon and moisture content are used to determine its quality and price.
India has the 5th largest coal reserves in the world and is the 2nd largest coal producer.
2. Coal imports by India
According to the reports, India imported around 200 million tonnes of coal in 2019 from Indonesia and the USA for the fulfillment of its high energy- generation requirements.
But why India needs to import such large quantities of coal when it already has enough!?
There is a need to import coal because of several reasons. Firstly, the annual supply of coal from coal mines by ‘Coal India Ltd’ (Monopoly) is quite inadequate in relation to the demand by various coal- using industries. This hampers their performance.
Secondly, in order to extract more coal from new mines, people need to be relocated from that land and must be provided with occupations as compensation. This is a big challenge as India is a very populous nation.
Thirdly, for the transportation of coal, forests need to be cleared as mines are located in remote areas where there is little or no infrastructural development.
Lastly, the low cost of imported coal, stimulates its demand amongst coal using industries, leading to increased imports.
3. Government’s plan for Import Substitution
Importing such high quantities of coal is a very expensive deal for India. The government is planning to achieve self-sufficiency in coal production by the end of 2024.
The 4th tranche of the ‘Economic stimulus package, 2020’ seeks to cater to this issue. It provides for the commercialization of the coal sector. Entry norms for private investors have now been liberalized. Now, any private party can bid for coal blocks in India. Auctions for the same will commence soon. This is done primarily to break the monopoly of Coal India and introduce healthy competition in the sector. INR 50,000 Crore has also been allocated for infrastructural developments.
Privatization in the coal sector will not only help in Import Substitution but will also help the government to save up to INR 1.73 Lakh Crore.
4. India’s First Coal trading Exchange.
India is reportedly planning to launch its ‘First Coal trading exchange’ as a measure for import substitution for coal and termination of the monopoly of Coal India. It will be an electronically driven, online platform for various coal traders. It will bring orderliness to coal trading and open up greater prospects for the investors to invest in coal.
Industry experts feel that coal trading exchange will be much similar to commodity exchange and will give a boost to coal trading. It will turn the coal sector into a free market wherein, market demand and supply decide the price of a commodity. It will be done to organize the sale of coal in India. This model will aim at increasing the number of buyers and sellers in the coal market.
A top executive in a coal trading firm is of the view that many countries across the globe already have this online platform and it has been proved to be quite successful.
5. Cause of Concern
Many officials feel that Coal Import Substitution is a fallacious policy. They are of the strong opinion that the commercialization of coal will lead to the exploitation of workers and is a threat to the environment.
This policy has been opposed by various Coal trade unions like BMS, AITUS, Hind Khadan Mazdoor Federation, etc. Workers of these unions observed ‘Thursday’ as ‘Black Day’ and antagonistically shouted slogans against the wrong policies of the central government.
Environmentalists are of the opinion that mining is a complex process involving the evacuation of required land and resettlement of people; thus, private parties will tend to ignore such social factors.
It is even believed that privatization in this sector will lead to a hike in the prices of coal. Coal India is a government company that was charging much lower prices. According to NC Jha, former chairman of a coal company, the center should give Coal India a second chance after removing such environmental hurdles; if it fails then only they should go for privatization.
Now it is becoming a big challenge for the central government to attain self-sufficiency in coal production by the end of 2024!