Planning Commission member B K Chaturvedi started handling energy portfolio in June 2007. This was a year after coal block allocation by the government rocketed at a pace that led Opposition parties to later smell foul play generate public anger over the alleged mega scam. In an interview with Sudheer Pal Singh, Chaturvedi argues the commission had been advocating cancelling of non-performing blocks for long. Edited excerpts:
The Union Budget has proposed setting up a regulator for the roads sector and introducing Public Private Partnership (PPP) in coal mining. What is the broad idea behind the two moves?
The road sector is passing through difficult times. There are issues related to claims on National Highways Authority of India (NHAI), impact of delays in environmental clearances, road safety, service obligations and similar other issues. Once the full outline of the proposal comes forward, the focus will be clear. As far as PPP in coal mining is concerned, it is different than the Mine Development and Operator (MDO) model currently in place. The concession agreement will have to be worked out with private players and in terms of it, both parties will have to bear the risks and meet their obligations for production of coal.
India’s energy policy has received flak post the surfacing of alleged irregularities in coal allocation which occurred in the absence of screening of applicant companies. As the government’s principal policy advisor, where did Planning Commission fail?
There was a sharp jump in the creation of new power capacities projected for the 11 th Plan. There was an explosive growth in new capacities post 2003-04 as many merchant and captive power capacities came up. Therefore, there was a pressure on fuel side, particularly for coal. So, a large number of coal blocks were given to private players. Based on an earlier policy, private players had been permitted to enter into captive mining. Some Blocks were wrongly awarded. On this, the Planning Commission’s view, and my personal view, has always been that if during the course of implementation of this policy blocks have been given to people who were not entitled or who wanted to grab reserves and sit on them, they should be cancelled. The Planning Commission mentioned in several meetings and in Mid-Term Review of 11 th Plan that such awards should be cancelled. The ministries were asked during the course of the reviews why were they not cancelling the blocks as production is not happening?
But these blocks have been allocated since 1991 and yet the government started the review only in 2009. Why should it take so long?
I feel more attention should have been paid to cancel allocations of people who were sitting on blocks and not taking any action to exploit the reserves in a license raj fashion. Many of them have put forward the justification that there were difficulties in getting clearances. I personally do not buy this argument. There must have been difficulties. But blocks are given to the private sector to see that they work on these difficulties. Sitting on reserves is not the way. The Planning Commission raised this issue in the Plan documents saying that this is not proper. The Planning Commission’s view has been mentioned in the minutes of meetings and other documents that coal production from captive blocks has been low and disappointing. But at the same time, we are now trying to look forward. We should see what is to be done now to ensure production goes up; what policies should be in place so that these non-serious players are kept out and that serious players increase production. We cannot only continue to highlight what went wrong.
The issue received public attention because it is not trivial in nature. The government’s own auditor has put the figure of notional loss at Rs 1.86 lakh crore. It is not a cooked-up figure and, particularly in a poor country like ours, this is huge money. Could this not have been channelized properly for social welfare schemes?
This is absolutely wrong. All this is wrong logic. If these blocks were not to be given to private players, we still had to supply them coal. We have had to supply them from Coal India. Was CIL in a position to supply coal? If not, what do you do? Do you stop producing power? What is the answer? We assume that CIL is busy producing adequate quantum of coal. And that CIL has been done great injustice by taking away these blocks and giving them for captive power production. This is an erroneous assumption. If CIL was really so efficient, the policy would not have come at all in 1990s. Secondly, if the private players are using coal from captive blocks for merchant sales of power, we can come down very heavily on them and a separate levy should be charged to curb windfall profits. I am all for it. There is, however, a critical need for expanding coal production both with the help of private and public sector. This view of loss is absolutely wrong.
Why do you discard the CAG’s view of loss to the exchequer?
To say that if the government had adopted a certain policy on this issue, it should have earned a certain amount and since it did not happen there is loss, is wrong logic. All computation of loss or gain is on current policies. If coal is to be used for regulated power, it is only appropriate whether this coal comes from captive blocks or CIL is immaterial.
The government has brought in import parity in prices across the energy sector, beginning from deregulation of petrol and recently diesel too. Now, price pooling in coal is being worked out. How would the consumer bear this burden?
Consumers have to be educated properly on this issue. We are importing 80 per cent of our crude requirement and the value addition done is very marginal. Most of the cost of petroleum products is the cost of crude oil itself. Value addition accounts for less than 10 per cent of the cost. In such a scenario, cost recovery becomes very important. Otherwise, subsidy bill goes up. The government is currently giving subsidies to the tune of Rs 1.5 lakh crore. Supposing this amount would have been given for railways, all the pending rail lines across India could have been built twice over with this money. Having subsidy of Rs 1.5 lakh crore over a total plan budget of Rs 5 lakh crore means that we are cutting down on crucial sectors like education and health. No growth can take place with this level of subsidy.
The government is trying to formulate a policy on utilization of surplus coal produced in captive blocks. What is the Planning Commission’s view?
This matter has been a bone of contention. The Planning Commission’s view is that we should incentivize captive block holders to produce as much coal as they can. And since this is meant to be an incentive, we must offer a price which is a reasonable price (cost of production) plus an incentive. Otherwise, they will not produce. We must allow the private players an incentive over whatever is the reasonable price.
What if the overall price that a private company is allowed for surplus coal becomes more than the CIL’s notified price?
So what? It is this mindset of which I am against. Incentive should be given over whatever is the normal formula for allowing cost to private player.
Should such a company sell surplus coal in the market or it should be supplied to CIL only?
It is best that surplus coal is supplied to CIL only. This is because CIL has to meet its linkage obligations.
