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PCPSPS Demands Independent Probe Into Coal Crisis

Coal India’s blocks are being auctioned to ‘less competent private promoters’.
COAL

The massive coal crisis, which has enveloped the country during summer and is likely to extend into the monsoon, has “crippled” the economy, caused “enormous economic losses” and imposed an “undue burden” on the already indebted state power utilities.

The Peoples’ Commission on Public Sector and Public Services (PCPSPS) has demanded an independent probe into the coal crisis and called for corrective action. The commission, which includes eminent academics, jurists, erstwhile administrators, trade unionists and social activists, intends to have in-depth consultations with all stakeholders and people concerned with the process of policymaking and those against the government’s decision to monetise, disinvest and privatise public assets/enterprises and produce several sectoral reports before coming out with a final report.

In a press release issued on Thursday, the commission demanded that the details of the “mismanagement” of Coal India (CIL) should be made public. “Coal reserves worth ₨ 35,000 crore accumulated to develop new coal mines and augment the existing ones were withdrawn”, resulting in the scrapping of the development programme, the PCPSPS said.

The primary role of the CIL, according to the commission, should be both the main producer of coal on scientific lines and the premier explorer and developer of new coal inventories. “By indiscriminately auctioning CIL’s coal blocks to less competent private promoters, the Centre has curtailed this role to hurt the overall public interest,” it alleged. The CIL has been “directed” to invest in the fertiliser industry thereby neglecting its primary function of meeting coal demand.”

Besides, key executives of CIL, like the CMD, have either “not been appointed or delayed for several years”. The deputation of coal mines managers and executives to Swachh Bharat Mission has “directly slowed down the development of coal mines”, the PCPSPS further said.

The Narendra Modi government has “failed” in anticipating electricity/coal demand, planning for it, arranging the logistics and ensuring that the country is self-reliant on coal supplies, the commission added.

Consequently, the CIL’s production was “stagnant around 600 million tonnes (MT) during 2018-19, 2019-20 and 2020-21. If the funds and manpower had not been diverted, production could have grown at 11%, as it was growing in 2015-16, and the CIL would be producing anywhere between 750 MT and 800 MT”, the PCPSPS claimed.

The commission mentioned that the Enforcement Directorate had probed some private Indian companies owning overseas coal mines that over-invoiced their exports to state power utilities but there has been “an enormous delay in investigating the show-cause notices issued by the Directorate of Revenue Intelligence (DRI) to the tune of about Rs 30,000 crore”.

However, there is “no scope for further delay” in an investigation, the PCPSPS, said mentioning the recent Supreme Court order staying the Bombay High Court order quashing all letters issued by DRI seeking information about “alleged Rs 29,000 crore over-invoicing by a corporate group exercising enormous influence with the government”.

Alleging that orders for coal imports benefit vested interests, the commission said: Coal imports in April were 15.92 MT, down 21.79 MT in March”. Bloomberg reported on May 19 that the “bullishness in coal prices helped flagship firm Adani Enterprises Ltd clock a 30% jump in profit for the three months ended March—the highest in six quarters”.

The government is giving away Coal India’s greenfield blocks to private companies. It has also failed in its responsibility of supervision of private mines to ensure that they fulfil their obligations,” the PCPSPS added.

Holding the government responsible for the crisis, the commission said that it has “unilaterally directed states to import coal without caring to take into account the technical implications of using imported coal in power plants”.

Burning different coals without proper blending could damage the boiler and reduce its useful life. Most power plants do not have the necessary facilities for proper and scientific blending of coal within the station compound. Compounding the states’ problems of importing coal at astronomical prices, the Centre has invoked its extraordinary powers under the Electricity Act,” the PCPSPS said.

The government has “allowed” independent power producers (IPPS) to import coal and “pass on the full coal import cost” to state utilities in “deviation” of the terms of the existing power purchase agreements (PPAs). “Earlier, Centre took umbrage at states trying to renegotiate regressive PPAs signed with the IPPs in the past thus overturning its own earlier diktat to suit the interests of the IPP promoters.”

The government has neither attempted to cap the import price nor use its own bargaining power to beat them down to a reasonable level of prices, the commission said. “This is very critical in view of the fact that the private overseas coal suppliers, many of whom are also domestic companies in India, have quoted prices far in excess of the cost of production to earn windfall profits at the cost of the states.” 

Insisting on centralisation of the procurement of imported coal, the PCPSPS said: “The government regulates the ports. Since all the instruments of policy are vested with the government, it has the sole responsibility for imports of coal. Independent import by several state governments from the same vendors will reduce the bargaining capacity of the various states and escalate the cost of coal.”

Calling for a “balance” between the possibility of load-shedding and pushing the financial condition of state GENCOs and DISCOMS to precarious conditions, the commission said: “The present policy would only weaken DISCOMs’ finances and benefit private companies supplying coal from overseas mines.”

Asking the Centre to “own the responsibility for the crisis without any hesitation”, the PCPSPS said: “Forcing states to import coal has encouraged the overseas coal suppliers to quote astronomical prices, implying that they would benefit by earning windfall profits at the cost of states.”

According to some estimates, coal imports would “cost” Punjab about Rs 800 crores and Haryana Rs 1,200 crore. According to a rough estimate, the “total additional cost burden on states on account of this would be in excess of Rs 24,000 crore”. “The Centre should immediately compensate states with the specific condition that the amount would be used for meeting the additional cost of coal imports. If the coal crisis is likely to continue, the amount of compensation thus due to states would be correspondingly higher,” the commission added.

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