Restructuring of Coal India Ltd. on the cards; Consultants being identified, says Coal Minister Sriprakash Jaiswal at India Electricity 2013

NEW DELHI, January 16, 2013.With a view to infusing competition in the coal sector and to review the existing institutional mechanism, the Government proposes to restructure Coal India Limited for which expression of interest has been floated by the Ministry for identifying suitable consultants, said Mr. Sriprakash Jaiswal, Union Minister of Coal, Government of India, while inaugurating the 7th edition of ‘India Electricity 2013’, organized by FICCI and Ministry of Power, Government of India.

The theme of the 3-day international exhibition and conference is ‘Re-Energising Indian Electricity Sector’.
Mr. Jaiswal said that "For increased transparency in coal block allocation the provisions of MMDR Act have been amended and new set of rules have been framed for allocating new blocks through competitive bidding. Recently, 14 blocks for power and three for mining have been put on offer under government dispensation route. A few more blocks for offer to private sector are in the pipeline," said
He said that to adopt international best practices on trading of thermal coals and for ensuring consistency in quality of coal supplies, the Government has introduced GCV based grading and pricing of thermal coals in place of the earlier system of UHV. Emphasis is laid on strengthening the infrastructure for crushing, sizing and processing of coal besides strengthening sampling infrastructure in coal fields.
"Our efforts to acquire coal equity abroad have thus far resulted in acquiring two coal blocks in Mozambique by state-owned CIL while the private companies have been successful in acquiring the assets in countries like Indonesia, Australia, South Africa and South America. We need to be aggressive in this regard from long term energy security point of view," he pointed out.A knowledge paper ‘Re-energising Indian Electricity Sector’ prepared by FICCI and ICF was released on the occasion.

Mr. B. K. Chaturvedi, Member, Planning Commission, Government of India,said that the issues faced by the power sector related to capacity creation, problem of availability of fuel, pressures faced at the time of land acquisition for mining, power losses of 16-17% and dismal performance of private sector in coal production.



He said that if the gas prices made remunerative, the Southern region is integrated with the national grid and new LNG capacities are created, many major hurdles of the electricity sector can be crossed. He further suggested that now that the tariffs have been revised in all the states of India except Assam, periodical revision of tariffs must be undertaken as and when the prices of the raw materials get escalated.

Mr. P. Uma Shankar, Secretary, Ministry of Power, Government of India,said that this year the focus is on Chhattisgarh and how best the state’s assets can be utilized. The issues of distribution reforms, role of regulators, enhancing viability of distribution companies, availability of domestic fuel, fuel pricing & contract management, project financing, transmission line planning and capacity building, peaking power and system reserve, power markets and demand side management needs to be deliberated upon to enhance the power sector. Also, renewables are becoming an important source of power generation therefore, integration of it needs to be planned.


It should be noted that coal is the mainstay of India’s energy and will continue for some time in future. About 55% of primary energy supply and about 70% of power generation ij the country is coal based. This is on account of availability of coal reserves in abundance and lower price of the fuel compared to other fuel resources. At the current level of coal production of about 540 million tones, the country’s coal reserves are likely to last for over 100 years. However, efforts were being made to enhance exploration for enlarging resource based.

Ms. Naina Lal Kidwai, President, FICCI,stated that according to a FICCI study Indian coal mining productivity is one-tenth that of the United States, the second largest producer of coal. Coal production of Coal India Limited (CIL) had stagnated in previous two fiscal years FY12 and FY11 at 434 million tones. In the face of rising demand for coal demand this was clearly unacceptable. Though to a certain degree this deficit can be bridged by coal imports, the average premium of imported coal incurs an additional cost anywhere between 30-50% of domestic coal, resulting in steep hike of input costs. India imported 103 million tones of coal in FY12, resulting in a foreign exchange outgo of Rs. 78,840 crore.

She said, "Ministry of Coal must explore gradual disinvestment of CIL and hiving off its subsidiaries as independent entities which can compete in an open market. In the long run, it will be necessary to amend the Coal Mines (Nationalisation) Act 1973, to allow for private participation in coal mining and production."


Mr. Nitin Zamre, Managing Director, ICF International, India,highlighted the challenges faced by the power sector in India. Some of them were poor financial health of utilities; inadequate fuel supply; decline in gas production, inadequate increase in coal supply; stranded assets on account of fuel shortage; huge deficit in Southern region leading to power holidays in some states and low despatch of W3 (Chhattisgarh) plants on account of transmission bottleneck.
He suggested both short-term and long term key measures that should be adopted to re-energise the sector such as commitment to buy, acceptable fuel price, operate stranded capacity, commercial orientation of utilities, domestic fuel availability, integrated national grid with enhancement of inter-regional transmission capacity and promote competitive markets in all elements of the chain.

Mr. R.S. Sharma, Managing Director, Jindal Power Limited and Chairman, FICCI Power Committee,



remarked that coal auction for PSUs and private sector will help in stepping up the coal production in the country. At present, inadequate fuel supply is proving to be a major hindrance. Once productivity is enhanced and restructuring of Coal India is undertaken, the sector is bound to narrow the gap between the demand and supply of electricity in India.

Dr. A. Didar Singh, Secretary General, FICCI,
moderated the session.