Coal sector needs independent regulator: Prayas Energy Group

09 January, 2013

The Prayas Energy Group while releasing its latest report, 'Black and Dirty - The real challenges facing India's coal sector', has sought the appointment of an independent regulator for the coal sector following planning coordination failure between the power and coal sectors.

AS PER the report, Coal India, a monopoly supplier of domestic coal is taking undue advantage of its dominant position. One sided fuel supply agreements, ever increasing complaints about quality and quantity of coal received, and increasing profitability without significant increase in production, stresses the need for appointing an independent regulator for the sector.

The report has suggested rationalizing coal linkages, suspending or minimizing e-auctions until the shortage is addressed, exploring the possibility of augmenting coal production in the short term and ensuring that the country does not get locked into expensive long term import contracts to address the short-term shortage.

The report also mentions that there are no easy solutions to the current coal supply shortage, which is the result of poor co-ordination between power and coal ministries. The coal sector, which contributes over half of India’s power generation, is facing insufficient coal production.

The demand supply gap for domestic coal has increased rapidly. In 2011-12, installed coal-based thermal plants capacity increased by about 19% while domestic coal production went up by just over 1%, leading to a rapid increase in imports. Actual production in 2011-12 (540 million tons) was well short of even the target.

Coal linkages given to power plants are well in excess of possible increases in coal production. This is perhaps one reason for the spurt in coal-based thermal power capacity without corresponding increase in coal production – leading to the current supply shortage.

The report shows a serious concern as reserve estimates are the basis for planning the country’s energy future. There is considerable uncertainty about the coal reserves of the country because of the estimation and classification methodology adopted by the Central Mine Planning and Design Institute. Adopting the modern United Nations Framework Classification (UNFC) methodology may show exact coal reserves.