The starting blip is that mining lease, i.e. access to land for mining is the state’s prerogative, while mining rights, i.e. access to the mineral below the land is the Centre’s call. The process of getting a lease and a license takes half a generation. AreclorMittal and Posco are some outsider victims in this lease-rights-land-acquisition jigsaw. However, thanks to a ‘gentleman’ named Madhu Koda, centre may have got a wake up call, albeit 2-3 decades late. With Finance Minister Pranab Mukherjee announcing the leasing of coal blocks for captive mining through open auctions and allowing captive miners to hold just 26% in FDI for any coal block, competition might just bring the black gold up a little faster. But the second and critical issue remains stuck. The Coal Reform Bill introduced in the Parliament in 2001 hasn’t even stayed on the table for long while its counterpart the Electricity Act 2003 has changed India’s power sector landscape. The bill, in essence, would open up coal mining for non-captive users and thus coal can be sold and bought in the open market. But the tentative script of the bill seems to be buried much deeper than its black protagonist.
Interestingly though, the talk of the town has been the cess of Rs.50 per tonne of coal mined. A first step towards incentivising the renewable energy sector in the country, it is at present just a needle in a haystack. “The cess levied on the coal mined will result in an increase in the power tariff for the companies who are in the regulatory business model (cost plus) as all the cost increase is a pass through for these companies. Those selling power on merchant basis would have to take a hit to that extent as the pricing is based on market forces,” says Solanki. However some experts estimate that the cess will lead to revenue, on a national basis, to the tune of Rs.30 billion per year, and will contribute massively to the National Clean Energy Fund (NCEF) proposed in this budget.
The third and not the least significant factor is the urgent need for an autonomous coal sector regulator on the lines of energy regulators in the US and UK, which again found mention in the FM’s budget speech this year. In fact, in the words of RV Shahi, Former Power Secretary, Government of India, “Gradual opening up of the coal sector will definitely require regulatory oversight. Even otherwise, in a monopoly situation with government control, companies occupy almost the entire space. Consumer’s interests can only be protected by a suitably structured regulatory mechanism. When such a mechanism is put in place, issues concerning pricing would automatically get addressed in a transparent manner, as is already happening in the power sector.”
Thus, there might still be time for redemption for our successive governments at the centre as well as states to unleash the power of the black rock to ‘power India,’ if only the state can remain awake and avoid sliding into a near perpetual slumber, something which lasted nearly 60 years.
Interestingly though, the talk of the town has been the cess of Rs.50 per tonne of coal mined. A first step towards incentivising the renewable energy sector in the country, it is at present just a needle in a haystack. “The cess levied on the coal mined will result in an increase in the power tariff for the companies who are in the regulatory business model (cost plus) as all the cost increase is a pass through for these companies. Those selling power on merchant basis would have to take a hit to that extent as the pricing is based on market forces,” says Solanki. However some experts estimate that the cess will lead to revenue, on a national basis, to the tune of Rs.30 billion per year, and will contribute massively to the National Clean Energy Fund (NCEF) proposed in this budget.
The third and not the least significant factor is the urgent need for an autonomous coal sector regulator on the lines of energy regulators in the US and UK, which again found mention in the FM’s budget speech this year. In fact, in the words of RV Shahi, Former Power Secretary, Government of India, “Gradual opening up of the coal sector will definitely require regulatory oversight. Even otherwise, in a monopoly situation with government control, companies occupy almost the entire space. Consumer’s interests can only be protected by a suitably structured regulatory mechanism. When such a mechanism is put in place, issues concerning pricing would automatically get addressed in a transparent manner, as is already happening in the power sector.”
Thus, there might still be time for redemption for our successive governments at the centre as well as states to unleash the power of the black rock to ‘power India,’ if only the state can remain awake and avoid sliding into a near perpetual slumber, something which lasted nearly 60 years.
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