A cleaner set-up for coal mines

The government must be commended for acting with alacrity in tackling the critical situation arising out of the cancellation of 214 coal mine allotments for captive use by the Supreme Court in September.

The ordinance issued on Monday will enable the government to allot coal mines to state-owned companies that need coal and also to private utilities and power, iron and steel and cement companies for captive consumption. The private companies whose allotments were cancelled will have to bid for coal plants afresh through a transparent e-auction process.

This move will eliminate any allegation of crony capitalism and ensure that power plants will not suffer or come to a standstill for want of coal.

The other advantages flowing from this ordinance are costly coal imports will be cut considerably from the present $20 billion and, more importantly, loans taken by power companies will hopefully not become non-performing assets in the bank’s books.

As Union finance minister Arun Jaitley said, this will clean up the colossal mess that the UPA government had created since 2005.

Fears that an e-auction will lead to an increase in the price of coal are unfounded as the government has as part of a well-thought-out strategy to curb aggressive bidding permitted only those companies that will use the mines for captive consumption to bid in the first phase.

Of course, the minister for coal and power, Mr Piyush Goel, has said that if  more coal is mined shortages would be eliminated and prices would be under control.

One would have to wait and see if this works in practice. About 74 mines where production has started, or is nearly ready to start, are expected to be put up for auction.

The reserve price that the government announces will also be crucial. Hopefully the government will be ready with an e-auction process within the next three to four months as the Supreme Court has given time for the so-called illegal mining to continue till March 31. So there will be a smooth transition to the new regime.

The ordinance also provides for permitting private mining for commercial purposes.

While Mr Jaitley was at pains to say that the interests of Coal India would be protected, the unions of Coal India, while welcoming the ordinance, have threatened action if there is any attempt at de-nationalisation of the coal sector by permitting private commercial mining.

This is odd because in Meghalaya, which has considerable coal reserves — 576 million tonnes — private mining is rampant.

The unions cannot be unaware of this nor will they have the guts to take on the bosses that control the mining there.