Will auction of captive coal blocks solve the power sector’s woes?

Auction of captive coal blocks is not going to solve the woes of power generation sector, feels Hemant Kanoria, Chairman of the Kolkata-based SREI group and the electricity generation and distribution outfit, India Power Corporation.

The former Manmohan Singh Government initiated the first round of auction of captive coal blocks in March. Three assets are currently put on the block for steel, cement and sponge iron sectors. Having assumed office in May, the Narendra Modi Government asked the Ranchi-based Central Mine Planning and Design Institute (CMPDI) to identify assets to be offered to power sector, soon.

But, Kanoria is apprehensive if such a measure has anything to do in addressing the fuel crisis in the foreseeable future. “How many captive blocks could be brought in production?” he asks.

The UPA Government dished out approximately 40 per cent of the country’s identified coal assets to captive users. The exercise added a mere 15 million tonne production in a decade.

“How will they get land? Can the Government undo Land Acquisition Rehabilitation and Resettlement Act, 2013?” Kanoria tells Business Line .

Focus on CIL Land is definitely not the only hurdle before mining. But, surely a major hurdle. And, the track record proves State-owned Coal India could negotiate it better thanks to its generous employment offers to land losers.

Kanoria strongly feels it is better to focus on improving the efficiency of Coal India or other State-owned miners by appointing private sector mining contractors at this juncture, so as to increase production. The idea caught the fancy of CIL, two years ago. To attract global miners having access to cutting-edge technology, the company wanted to revisit its contract documents.

The idea was to spread the risks evenly, between both sides, to make the offer attractive enough to private miners. But, the Centre ended up advocating a model that loaded key risks on CIL. The national miner ended up opposing the move.

There is another reason why Kanoria is not keen to rock CIL’s boat at this juncture.

“As an essential commodity, power has to be fairly priced,” he says. It means coal should be available at a fair price not a free price.

The entire argument on reviving the fortunes of electricity generation sector, therefore, must start from the perspective of cost economics. And, improving productivity of State-owned miners may ensure availability of cheap coal to power sector.

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