• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
  • Editorial Calendar 19-20
BW Businessworld

Strongarm Tactics

Photo Credit :

Apresidential  directive is the government's latest attempt to rein in Coal India for consistently delaying signing of new fuel supply agreements. While this may be good news for the power industry, it is debatable whether decrees can plug efficiency loopholes.

Coal India's problems, after all, go deeper. First, the rudderless monopoly needs to take its onerous role far more seriously and align with the market economics of today.

Also, genuine problems such as poor offtake and overstocked pitheads do exist. In 2010-11, offtake stood at 424.5 million tonnes against a production of 431.32 million tonnes. Pithead stocks stood at about 57.21 million tonnes till January. That is roughly the amount needed to generate about 10,000 MW of power.

While expansion could be one solution, 180 proposals of different subsidiary companies of Coal India are still awaiting forest clearances. Any positive change mooted is usually met with resistance from labour unions and lobbying from the power industry.

Simply twisting a Maharatna's arm to sign FSAs (fuel supply agreements) would be of little use unless there is a cohesive action from all parties involved. In the event it cannot meet the 80 per cent threshold, Coal India would have to pay from its own pocket.

The same goes for importing coal to meet shortfall. That is also a loss to the government. It is more likely that the company, to avoid penalties, will divert its entire production to power producers mentioned in the directive.

What happens, then, to the rest of the generators and, of course, other critical sectors such as cement and steel?

(This story was published in Businessworld Issue Dated 16-04-2012)