Government sets up coal regulator

The government has set up a regulatory authority for the coal sector through an executive order, months after deciding to set up a similar authority for tariff setting for Indian Railways.

The move comes amid proposals for setting up regulatory bodies forthe roads, biotechnology and real estate sectors too. The coal regulator will advice the government on principles and methodologies for price determination while state-owned Coal India Ltd (CIL) will continue to fix prices, subject to coal ministry's approval.

The government had approved the decision to set up the regulator in June last year. The ministry had introduced Coal Regulatory Authority (CRA) Bill in December which is still pending in Parliament. Apart from prices, the regulator will advice the government on allocation of coal reserves, procedure for coal sampling, standards of performance but will not venture into mines safety-related matters, a domain of the labour ministry and environmental issues.

The regulator will also advice on "promoting competition, efficiency and economy in the activities of the coal industry; on promotion of investment, development of mining technologies, beneficiation methods and conservation of coal resources," the ministry said in its official notification of the decision.

The authority will bebased in Delhi and consist of a Chairperson and four members looking after legal, technical, finance and consumer interest areas. These will be selected on there commendations of a six-member committee headed by Cabinet Secretary. The formation of the coal regulator, called "teethless" by experts, comes at a time lack of transparency in grant of reserves has raised a controversy over allegedly favorable allocations that led to a notional loss of Rs 1.86 lakh crore to the exchequer, according to the Comptroller and Auditor General of India (CAG).

The basic framework of the CRA Bill 2013 was prepared by a ministerial panel headed by Finance Minister P Chidambaram. The panel, which met five times between July 2012 and May 2013,redrafted an earlier version of the legislation to ensure the regulator's powers do not overlap with safety laws administered by the labor ministry and environment laws of the Ministry of Environment and Forests (MoEF).

The pricing power too was taken away from the regulator based on the argument that coal prices were decontrolled in stages between 1996 and 2000 and de-nationalization of the sector is not envisaged. The government, however, decided to ensure that the autonomy of the board of CIL, the Bombay Stock Exchange (BSE) -listed world's largest coal miner, is not impacted.Coal mining is an exclusive domain of the public sector in India.

CIL and Singareni Collieries(SCCL) account for 82% of the domestic 557 million tonne production annually. Private companies are allowed to mine coal for their small captive use. Consumers currently blame CIL of monopolistic behavior to set prices and terms of supply apart from poor quality of coal.