Stuck in a mine of neglect

Raisina Hill

There are some Central ministries that do not get the attention they deserve "" neither within the government nor outside. And this neglect continues in spite of their enormous potential to make a difference to the Indian economy.

The coal ministry is one of them. It presides over India's coal industry, which is largely nationalised. Coal meets over 63 per cent of India's energy requirements. If the power sector has to raise its generation capacity to 1,00,000 MW by 2012 (the end of the Eleventh Five-year Plan), India's coal-mines, too, have to double their production from the current level of 310 million tonnes during this period.

Yet the only time the coal ministry appears on the front pages is when there is a cabinet reshuffle or a mine accident. It is often used to appease a disgruntled aspirant for a ministerial job. But even politicians no longer see the coal ministry as an important and glamorous portfolio.

Fortunately, the ministry has kept itself lean, with only about 450 employees, compared with, say, the civil aviation ministry (over 1,500 employees) or the department of industrial policy and promotion (about 3,400 employees).

The finance ministry has also stopped providing budgetary support to any of the coal projects being taken up by Coal India Limited (CIL), the giant public sector undertaking that accounts for 88 per cent of India's annual coal production. Since 1997-98, CIL has been meeting its investment requirements through internal resources and borrowings.

How large is CIL's investment requirement? The Tenth Plan, ending in 2006-07, had projected a total investment of Rs 14,310 crore in coal projects, the bulk of which will be implemented by this public sector giant. Given CIL's overall resource constraints, the investment target is going to be difficult to meet.

Not surprisingly, CIL has embarked on a major cost-cutting drive. Already, it has reduced its staff strength to 5.2 lakh. That is a drop of about 15 per cent over its staff strength of 6.1 lakh five years ago.

This has also helped it improve productivity from 1.78 tonnes of coal output a person to 2.44 tonnes. Decontrol of coal prices in 2000 helped in a big way. It recovered from a loss of Rs 1,414 crore in 2000-01 and earned a profit of Rs 1,754 crore (before tax and dividend) in 2001-02.

All this, however, has not resolved the two most critical issues affecting CIL and the Indian coal industry's fortunes.

One, the government has not yet found a viable solution to the three perennially loss-making subsidiaries. CIL's profits would actually double if it were freed from the burden of absorbing the combined losses incurred by these three subsidiaries "" Eastern Coalfields, Bharat Coking Coal and Central Coalfields.

There is no reason why the government should not move speedily on restructuring CIL "" by first separating the three sick subsidiaries and then subjecting them to an independent and viable rehabilitation plan. If these subsidiaries need to be liquidated, the government should move on that proposal as well.

The simple point is CIL's resources should not be used to finance the losses of these three sick units. Instead, these resources should be used for setting up new viable coal projects.

Two, the government has so far dilly-dallied on its proposal to allow private investment in coal-mining. Twice, a Bill to amend the Coal Mines (Nationalisation) Act, 1973 and allow private investment in coal mining was cleared by the Union Cabinet "" once in February 1997 and again in February 1999.

The first Cabinet clearance, by the United Front government, evoked massive protests from the trade union leaders and the government developed cold feet because it was readying to face general elections. The second Cabinet clearance, by the BJP-led coalition government, resulted in the Bill's introduction in the Rajya Sabha in April 2000.

But the Bill was referred to the Standing Committee on Energy of Parliament in view of the protests by trade union leaders and some political parties. The Standing Committee also approved the Bill in its report submitted to Parliament in August 2001.

The Bill is still pending in the Rajya Sabha. A group of ministers has been reconstituted to address the concerns expressed by trade union leaders. No one knows when and how soon the group of ministers will meet the trade union leaders and remove their doubts.

Trade union leaders fear that permitting private investment in coal mining will pave the way for privatising CIL. Thanks to the Supreme Court verdict on HPCL's privatisation, the group of ministers can now at least assure the trade union leaders that CIL cannot be privatised unless a specific piece of legislation to de-nationalise the public sector giant is passed by Parliament.

Meanwhile, private investment in coal-mining can be permitted to help achieve the ambitious target of doubling coal production in the next ten years.