That India has a problem supplying enough coal to its power and other industrial sectors has become something of a truism. Last month came further proof, as stockpiles of coal at power plants hit another low, this time the worst since mid-2012 when a huge blackout left hundreds of millions of people without power. Reuters reported that half of the country’s power plants were down to a week’s worth of supply and that generating levels were down – at one point 7 GW below peak demand.
Register for free »
Get started now for absolutely FREE, no credit card required.
Meanwhile, Coal India (CIL), the state-owned behemoth that monopolises coal output in the country, announced that it had again missed a production target (although it did record an 8% rise in profits). The company mined 108.3 million t in the three months to June against a target of 113.01 million t. Its goal of 507 million t for the year to April 2015 seems a long way off.
So far, so normal. But then India’s maverick and activist Supreme Court – a body with remarkable power and willingness to tackle corruption – entered the stage. Previous actions of this formidable institution include scrapping telecoms licences, forcing the resignation of the head of the powerful Board of Control for Cricket in India (considered untouchable until the court proved otherwise) and ordering buses in Delhi to switch from diesel to compressed natural gas.
Now the court has the coal industry in its sights. At the end of last month it declared the allocation of 218 coal mining licences to private companies to be illegal. These licences were handed out for free between 1993 and 2010, as part of an effort by the Indian Government to boost coal production. A 2012 report from the Comptroller and Auditor General of India had already done much to expose and criticise this process, claiming the government had missed out on billions of dollars in income as a result. The court may now bring the whole rotten edifice crashing down.
At the time of writing, the justices were still pondering what sanctions to take. Outright cancellation of the licences – as happened in the telecoms industry in a similar case two years ago – would devastate India’s already fragile power industry, starving it of the coal it already finds itself so woefully short of. The resulting blackouts would destroy investor confidence in the country, setting back the hopes of boosting economic growth raised by the election of Narendra Modi as prime minister. It is to be hoped that the court finds a better alternative.
The drama also highlights the desperate need for Modi and his new minister of coal and power, Piyush Goyal, to reform the industry. A repeal of the Coal Nationalisation Act, which states that only CIL can mine coal for sale on the open market, would be a good start. It is this law that ultimately led to the allocation of coal blocks for captive mining and the sorry mess the country now finds itself in. Such a step will not be easy: Modi’s BJP party does not yet control India’s upper house of parliament and will not get the chance to take it for another couple of years. But that doesn’t mean he shouldn’t try.