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The Union Cabinet has approved a proposal for a coal sector regulator, after prolonged discussion spanning a year. The move is aimed at infusing transparency in pricing and efficiency in mining operations of the key raw material for infrastructure industries.
According to today's decision by the Cabinet Committee on Economic Affairs (CCEA), the regulator will not have the power to decide domestic coal prices and state-owned monopoly Coal India Ltd (CIL) will continue to enjoy freedom in this regard. "The authority will only determine the terms and conditions for fixing prices, to check abuse of monopoly by any producer," said a senior government official.
Currently, CIL accounts for 82 per cent of the 562 million tonnes of yearly production. While the prices are theoretically decontrolled, the government continues to control the decision, a trend that has irked Coal India's stakeholders. In today's decision, prices of coal in the domestic market will be decided by CIL, based on the methods suggested by the regulator. The coal ministry will, however, have the final say.
The CCEA decision was based on the recommendations of a nine-member Group of Ministers (GoM) headed by Finance minister P Chidambaram. The Cabinet had in May 2012 asked the GoM to look into the matter after inter-ministerial differences over key issues. The ministerial panel met five times. It had favoured keeping the CIL board's autonomy. It, however, also held the regulator should have the power to counter the methods and practices of a monopolistic player. The GoM had also suggested the core functions of the ministry need to be preserved.
The regulator will also have no say in the allocation of coal blocks. Lack of transparency in distribution of reserves had raised a controversy recently, with the Union comptroller and auditor-general saying the government might have extended benefits totalling Rs 1.8 lakh crore to companies by not allocating reserves through auctioning.
The draft of the Coal Regulatory Authority Bill, approved by the CCEA, has provisions to ensure the regulator does not interfere with laws related to safety in mines and the environment, sources say. Independent regulation of the sector is aimed at ensuring competitiveness of market sales, fixing guidelines for price revision and increasing of transparency in allocation of reserves.
