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Fresh push to coal reforms

New Delhi, Oct. 21: The government is planning a series of liberalisation measures for the coal sector which includes dismantling the holding company structure of Coal India Limited (CIL), de-blocking unused coal blocks held by CIL for eventual re-bidding and allowing coal trading by removing it from the list of essential commodities.

The move has been initiated following pressure from the finance ministry and the Planning Commission and has the approval of the Prime Minister’s Office (PMO). It is being viewed as yet another attempt to push through reforms in a contentious area where the Sangh family has not managed to agree on which way it wants reforms to head.

The BJP government has recently backtracked on reforms in the coal sector after labour unions, including BJP-supported Bharatiya Mazdoor Sangh, protested opening up of the sector to private enterprises through the Coal Mines Nationalisation (Ammendment) Act 2000. At present, privately held coal mines are allowed only as captive mines attached to various steel and power projects.

By changing tack and also by spinning off individual coal companies into independent entities, the government may actually succeed in breaking up resistance to it moves.

The plan, which has been incorporated in working group reports on the coal sector and also in the final Tenth Plan document that is slated to be cleared by the Union Cabinet this week, calls for autonomy to individual coal producing company in order to “promote competitiveness and revival/disinvestment/closure of selected coal producing PSUs.”

At present, the state-owned monolith Coal India Ltd owns the mines and its subsidiaries, like Eastern Coalfields, merely work on them. Due to the unviability of various coalfields many coal mines are being shut down leading to huge number of workers being declared surplus.

By handing over ownership rights of coal mines to them and then spinning them off, the government hopes to work out separate plans for each of the coal subsidiaries. These sub-plans would obviously include the possibility of joint ventures with private players.

The stratagem of de-blocking unused coal blocks is designed to make available a pool of proven coal reserves which can be put for bidding by the private sector, including global players who have been eyeing the sector. The government can put this pool up for sale whenever it actually manages to push through privatisation of the sector.

Of particular interest to the Indian private players would be opening up of coal trading by taking it off the list of essential commodities. This will make trading and transportation of the fuel free from various restrictions. Many of the larger business houses in India had at one time or the other been involved in coal trading and are known to be keen to enter the area once again.

Economic strategists in the finance ministry and Planning Commission say they are pressing for these reform measures as they fear a huge demand-supply gap in the coal sector could put paid to the country’s overall energy plans.

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