Even when it announced a new policy on allocating coal mines, in response to the Supreme Court cancelling existing licences due to non-transparent methods of allocation, it was never clear why the government didn’t want to allot mines to commercial mining companies—after transparent bidding—and chose to restrict the process to just ‘actual user’ firms. After all, some of the biggest, and the most efficient, global mining firms are commercial miners and not ‘actual users’. Rio Tinto, for instance, is a miner, it doesn’t produce electricity or steel, and its reserves have grown at many times that of India’s. And even in the mining sector, India has allowed commercial mining in the non-coal sector, and with pretty good results. To put this in perspective, had the Indian government policy not allowed private sector firms to explore for oil and gas, and had allowed only PSUs like ONGC and OIL to do this, its production would be around 30% less than it is today for oil and around 22% less in the case of natural gas.
For reasons best known to it, however, the government chose to play it safe and, though the policy allowed the possibility of commercial mining in coal, the exact date was left to be announced later. Possibly, the government didn’t want to signal that Coal India Limited’s (CIL’s) days of monopoly profits were over, in the same way that ONGC’s and OIL’s were, once private firms like Reliance and Cairn were allowed to enter the oil/gas sector. Around a year ago, news reports suggested the government had made up its mind to allow merchant mining and 10 mines were to be offered for this purpose—four of these were to be in Odisha, four in Chhattisgarh and one each in Madhya Pradesh and Jharkhand.
But now, The Indian Express reports, the government appears to be having a rethink on this due to pressure from Coal India’s trade unions. According to the Express, a note prepared by the coal ministry for the approval of a Committee of Secretaries, says “there are issues of resistance by Coal India Ltd/its subsidiaries’ unions against commercial mining which does not make it conducive at present for the auction of coal mines for sale of coal”. If this is accepted, as is likely, it effectively puts an end to the proposal for commercial mining recommended by the High Power Expert Committee last July. In addition, the coal ministry is also uncomfortable with the idea of giving mines—even if after bidding—to the private sector since there is a possibility that the investigating authorities could object. While talking of the cases filed by the CBI against various officials like former coal secretary HC Gupta, the ministry has said “verification of net worth will remain a challenge and contentious”.
With elections coming up in less than a year, it is likely the government is unwilling to take any action that can possibly upset important interest groups, particularly one as large as Coal India’s trade unions. Indeed, in the case of labour reforms, too, opposition from the major trade unions has ensured that whatever limited changes were being planned have been shelved. That, more than anything else, reinforces the view that, if any government has a serious reforms agenda, this is best done in its first year in office.
Source: Financial Express