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Sorting out the coal mess

The government should consider shrinking the equity of the existing coal-block allottees to minority stakes
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First Published: Tue, Sep 18 2012. 06 13 PM IST
The optimal solution lies in opening up the coal mining sector, unshackling it from the current fetters of captive use in specific sectors such as power and steel. Photo: Noah Seelam/AFP
The optimal solution lies in opening up the coal mining sector, unshackling it from the current fetters of captive use in specific sectors such as power and steel. Photo: Noah Seelam/AFP
Updated: Wed, Sep 19 2012. 05 58 PM IST
The government’s thrust after the coal scam report by the Comptroller and Auditor General of India (CAG) is in the direction of cancelling allocations of coal blocks to companies that haven’t achieved satisfactory progress in developing them. The inter-ministerial group that’s looking into the matter has already cancelled some allocations.
This approach, however, is grossly inadequate given the magnitude of the problem highlighted by CAG. The government auditor has assessed the exchequer’s revenue loss from coal blocks awarded through the nomination route at Rs.1.86 trillion.
If anything, the current inter-ministerial audit goes to show the sloppiness of the existing audit process that goes back as far as 2009. The coal ministry, on its website, has put out minutes of two audit meetings held that year. The question is: why did the committee of civil servants go easy on the tardy progress in the development of several mines?
The government should penalize the bureaucrats responsible for the shoddy audits undertaken in the past. This will deter bureaucrats from colluding with the political class in furthering the latter’s fortunes.
In regard to mines allotted for fuelling power plants, the solution proposed by the power ministry, as reported by Mint last week, is a step in the right direction. However, it is a poor one at that. The ministry has suggested that captive miners should sign up with states for supply of power on a long-term basis. No doubt this will ensure that the miners do not make “windfall” profits by selling electricity in the spot market. The optimal solution lies in opening up the coal mining sector, unshackling it from the current fetters of captive use in specific sectors such as power and steel. In such a situation, the allottees should be forced to share profits from the mines (that they got for free) with the government by giving the latter a large equity in the project for free.
If the government is unable to undertake reforms in the coal sector by allowing open marketing of coal, it should consider shrinking the equity of the existing coal-block allottees to minority stakes.
How should the coal sector be cleaned up? Tell us at views@livemint.com
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First Published: Tue, Sep 18 2012. 06 13 PM IST
More Topics: power | Coal | block | allocation | controversy |
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