Four Years on, Piyush Goyal is Struggling to Wean India off Imported Coal

After he took charge of the coal ministry in 2014, Goyal had promised to step up coal production and end India’s dependence on imported coal by 2016.

New Delhi: Even as Piyush Goyal is close to completing four years of his five-year tenure as coal minister, there is little relief for the power sector on the fuel supply front.

If anything, the fuel shortage has worsened for the industry despite Goyal’s promise of turning around the coal sector.

India’s coal imports stood at 217 million tonnes in 2017-18, higher than 212 million tonnes in 2014-15, setting back his plan to end India’s dependence on overseas reserves of the dry fuel to fire its power plants.

The average coal stocks of power plants fell to ten days in 2017-18 from 27 days in 2015-16 while the number of generating stations with critically depleted fuel inventory shot up from two to 56.

After he took charge of the coal ministry in 2014, Goyal had promised to step up coal production and end India’s dependence on imported coal by 2016.

While coal imports have risen by nearly 14% in 2017-18 after dropping by 5.6% and 4.5% respectively in 2015-16 and 2016-17, Coal India (CIL) is struggling to step up production.

The government had initially targeted 660 million tonnes of coal production target for CIL in 2017-18 but later slashed it to 600 million tonnes. The public sector coal producer has failed to meet even the revised target.

According to provisional data, CIL produced 567 million tonnes of coal in 2017-18, achieving just 95% of the target.

Goyal had played down the reduction in CIL’s production target, saying the decision was taken in keeping with the projection of weak growth in electricity demand.

“We don’t wish to import coal from anywhere in the world. We have sufficient coal capacity in our country,” said Goyal as recently as June 2017, in a re-affirmation of his promise.

As part of the strategy outlined by Goyal in this regard, CIL was given the target to produce one billion tonnes of coal by 2020. Now the coal ministry is considering lowering CIL’s 2020 production target too, said the top ministry official.

“We have hired KPMG for this study. The moment recommendations come we will see whether it (one billion production target) is needed by 2020. …it appears that much coal is not needed. Why should Coal India produce it?” coal secretary Susheel Kumar told reporters recently.

“So we will have to see when the country needs that much (of coal) …when Coal India needs to produce that much and that will be the year in which this (production target) will be recalibrated,” the secretary stressed.

CIL accounts for over 80% of the country’s domestic coal production.

On when the recalibration can be expected, Kumar said, “We will let you know by the end of this month how much is the production of Coal India for 2020, which was earlier one billion (tonnes) and when it will be one billion (tonnes). So that will be somewhere between 2020 and 2030. We will let you know.”

After the Supreme Court cancelled allocation of all captive coal blocks in August 2014, the coal ministry reallocated as many as 31 mines via auction to private sector end users in 2015.

Of these, only 12 have got permission to start production. The remaining 19 are still awaiting approval.

At the time of the auction, Goyal said that states would get Rs 1.93 lakh crore in revenue over the production life of these blocks, or Rs 6,500 crore a year. Against that, states have realised proceeds of just Rs 2,543 crore over last two years.

End users, who had already invested in associated power and steel projects, bid aggressively to regain their lost coal blocks. Now most of them find that their business has become unviable and want to surrender coal blocks.

Goyal’s performance as railway minister has been underwhelming too.

The railway ministry has undertaken construction of three critical rail links – Tori-Shivpur, Jhasuguda-Barpali and Mand-Raigarh – that will increase coal transportation volumes by 200-300 million tonnes per annum when completed.

While the first two projects were to be completed by June 2016, the third one was targeted for commissioning by December 2017. However, none of these projects has become operational so far.

Even as coal transportation bottlenecks continue to hobble power generators, they have been loaded with increased coal costs in the form of higher price and taxes.

The basic price of coal has risen by 36% since May 2014, when the Modi government took charge, whereas taxes and levies have doubled. Rail freight and taxes and levies thereupon have gone up by 22%.

The SHAKTI scheme launched by the Modi government in May last year to address fuel crisis of generating stations without long-term fuel linkage too has failed to live up to industry expectations. Coal supply has yet to begin to plants declared as successful bidders in the auction held in September, industry sources said.