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FEB 22 2013

Frustration in coal sector spills over to captive miners

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 22nd FEB 2013

Coal is a key driver of the economy. And, in the background of power utilities struggling to sustain generation for want of the crucial input, the coal sector is in dire need of a major revamp to ensure adequate supply of this low-cost primary energy source.

Sadly, however, the sector has little expectation from the Budget. The reasons are simple. Coal mining is plagued with problems, so fundamental in nature that mere cosmetic changes in policy decisions will barely scratch the surface.

The frustration is apparent in the response of mining gear makers wanting to invest in India. For instance, Belaz-Enrika Mining Equipment Ltd a joint venture of Belarusian major Belaz finds little movement in captive mining sector.


"Most of the captive coal miners cannot take projects forward, due to issues related to land and environment, a company official told Business Line. Belaz has been trying to make inroads in Indian coal sector for the last couple of years, without much success.

TIL Ltd a dealer of US major Caterpillar sees little hope in the forthcoming coal block auction. "Allocation of coal blocks without land and environment clearance may prove to be a non-starter, says Managing Director Sumit Mazumder.


"Coal sector is independent of Budget proposals. If at all, we would expect steps to improve the financial health of State distribution utilities to ensure recovery of coal dues, Coal India Chairman Narsing Rao told Business Line.

He has a point. Throughout the last decade, the State Government-controlled distribution utilities have run up over Rs 2 lakh crore of under-recoveries. The cash shortfall was mitigated by bank finance forwarded without much guarantee.

As the Reserve Bank recently tightened credit flows, the State power utilities started defaulting on coal payments.

The net result is: CILs dues from the power sector nearly doubled to Rs 6,000 crore last year. The State power utilities of Tamil Nadu, West Bengal and Jharkhand top the list of defaulters.


Interestingly, CIL has no great hope in the Rail Budget either. This, despite the fact that the companys sales plans were always derailed by a logjam in rail logistics, resulting in piling up of inventories, that too when power generation capacities were stranded for want of coal.

The modified wagon investment scheme announced in Rail Budget 2010 was a non-starter, as the Railways did not grant CILs exclusive usage rights on rolling stock to be owned by the company.

"The rail projects linking CIL mines are funded by us. So the Rail Budget 2013 has nothing to do with it. Moreover, the Railways are unlikely to allow the private sector to create logistics as it would cost them (Railways) huge revenue opportunities, a CIL source said.


RAILWAYS Jharkhand West Bengal Tamil Nadu Coal Coal India Limited United States Budget CIL India

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