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Coal shortage to beat mid-term projections

Within six months of the Mid-Term Review highlighting insufficient domestic coal production, current estimates have beaten the review’s coal shortage projections. The review’s assessment of coal production growth was already a downward revision from an initial estimate of 680 million tonnes by 2012.

Coal is a critical input for fuelling growth of major infrastructure sectors like power, steel and cement. Any irreversible slump in coal production, thus, directly affects the country’s gross domestic product (GDP) growth. Against the initial estimate of 680 million tonnes, the review document had pegged India’s annual coal production to reach only 630 million tonnes by the end of the current Plan period. This included production of 81 million tonnes from captive coal blocks and 486 million tonnes from the state-owned Coal India Ltd.

“However, latest estimates indicate a lower level of production from captive blocks. This is likely to be 43 million tonnes. Thus, the total likely production would be 592 million tonnes, against 630 million tonnes, leading to a demand-supply gap of 121 million tonnes in 2011-12,” the Planning Commission noted in a recent note on measures to enhance coal production. The note was prepared for the consideration of the Cabinet Committee on Infrastructure (CCI).

“It is a serious problem. Coal shortage directly affects power generation and GDP growth. The impact of this is that the country will have to import more. And, even imports are not easy. Any sudden surge in demand of coal will push up international prices as well,” said a senior Planning Commission official.

“With the 11th Plan drawing to a close, the time period to act is less. The ministry will have to make arrangements from now itself and take advance actions to make arrangements,” he added.

Among the reasons likely to act as major impediments for enhancing coal production, according to the note, is the move by the environment ministry to classify the country’s forests as ‘Go’ and ‘No-Go’ areas. The categorisation specifies regions where coal mining can be permitted only after stringent forest clearances are obtained. Though this is only indicative in nature, it has worried power project developers, as several existing and upcoming mines now fall in areas barred for mining.

“One of the main reasons for slow increase in production could be the sudden change in policy for clearance of coal blocks (referring to competitive bidding mechanism) and adoption of ‘Go’ and ‘No Go’ method of clearance,” the note says.

This would affect production not only from the captive blocks awarded to private players but also from Coal India’s coalfields, it says.

The coal ministry has so far allotted 208 coal blocks to various private and public sector companies for captive production. However, only 26 of these are currently under operation and are producing around 35 million tonnes of the dry fuel annually. “Since a large number of these captive coal blocks are located in ‘No Go’ areas, few more mines are likely to commence production in the 12th Plan period,” according to the note.

The ‘No Go’ criterion covers nine coalfields, including Singrauli, North Karanpura, IB Valley, Mand-Raigarh, Talcher, Sohagpur, Wardha Valley, Hasdeo-Arand and West Bokaro. While Hasdeo-Arand in Chhattisgarh falls totally under ‘No Go’ area, the share of ‘No Go’ is 60 per cent in Mand-Raigarh, 44 per cent in Singrauli and 35 per cent in IB Valley. Overall, 203 coal blocks, with reserves of over 600 million tonnes and linked power projects of over 50,000 MW capacity, have been stuck due to the ‘No Go’ criterion.

The Prime Minister’s Office had earlier this year undertaken joint meetings with the officials of the coal and environment ministries. A high-level committee under Planning Commission Member B K Chaturvedi has been working on a mechanism to provide preference to companies developing the threatened projects during coal block allocation.

“The Planning Commission’s view is that the criterion of 30 per cent GFC and 10 per cent WFC on which the ‘No Go’ criterion is based is not a viable and realistic proposition, because the overall forest cover of India itself is 30 per cent,” said another senior Planning Commission official.

The commission has been pitching for replacing the controversial classification with a system of identifying dense and non-dense forest areas separately and not allowing any mining activity in dense areas, or allowing only underground mining.

To expedite production from the inactive captive coal blocks, the coal ministry has issued showcause notices to 50 private and public sector companies which have been sitting on the reserves allotted to them.

Coal minister Sriprakash Jaiswal had informed last month that an additional 39 million tonnes of coal would be produced during this financial year, owing to increased spending by coal utilities last year.

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