The government needs to engage with states and Coal India more actively to find a long-term resolution for the recurring issue of coal shortage in the power sector, Anil Swarup, former secretary at the coal ministry, told Moneycontrol. Swarup took over the position in the coal ministry at a crucial time in 2014 when the Supreme Court had cancelled over 200 coal blocks that the central government had allocated between 1993 and 2010, saying the allocations were arbitrary, illegal and led to unfair distribution of national wealth. Swarup said that the ministry had worked hard at the time to scale up production of coal to comfortable levels after stocks had dwindled to critically low levels at power plants. Detailed plans were made to boost production further and everything seemed to be coming together but then the proverbial ball was dropped. He spoke to Moneycontrol’s Rachita Prasad on the reasons that led to the stagnation in coal production that has escalated into a crisis situation yet again and what can be done to ease the situation. Edited excerpts:
The coal shortage and subsequent power crisis is a recurring issue. What according to you is the core issue?
No one has control over demand for coal, it is determined by many factors that are beyond our control. What we can control is the supply, so it is important to understand what the problem here is. Fundamentally, there is no dearth of coal in India. So why is there a shortage of coal despite the potential? In that context, it's important to first divide the existing requirements of coal in two parts. One is the quality of coal that is available in India, and the other is the quality of coal that is not available in India. Only 20 percent of the coal is of quality that is not produced in India and will continue to be imported. Eighty percent of the demand is for the quality of coal that is available in India and should not be imported.
How did the government push coal production when you were the secretary at the ministry of coal?
At the time what we tried to do was to understand was if so much coal exists, why we were unable to produce coal and came up with a lot of causes. The three most important related to land acquisition, environment and forest clearance, and evacuation of that coal because it exists in areas which are inaccessible. We tried to address these issues and what was important is that we worked on it not while sitting in Delhi. Land acquisition happens in states and state governments are engaged with it. Forest and environment clearance groundwork also primarily happens at the state level, then it comes to the government of India. The third issue of evacuation required engagement with the railways. So the strategy that we adopted then, which perhaps should be adopted now too, was that irrespective of which party rules a state, at the bureaucratic level, we would engage with them and convey a value proposition to them. It’s important to work along with the states and to make them understand that by mining coal they stand to benefit. For the two years as coal secretary, I did not convene a single meeting in Delhi. I used to travel to each state where coal exists once in two months to engage with the chief secretary, senior officers and with all the district magistrates on video conference, and discuss the big issues relating to land acquisition and forest and environment clearance. For instance, West Bengal, which was going hammer and tongs against the central government, had seven important coal blocks in the state, work on which was not moving. We engaged with the chief secretary of the state and conveyed to him what the per-day loss of royalty would be to the state for each day of delay. He understood and managed to convince the state chief minister, who despite her problems with the central government, agreed to hand over the land. Something like this will not happen by firing salvos from Delhi. Just writing letters to the state government or to Coal India to expedite things is not enough, the Centre should engage with them.
As a consequence of all the intensive engagement with the state governments in 2014-15, there was an incremental growth of 34 million tonnes (mt). This was more than the cumulative increase in production of coal during the previous four years. During 2015-16 there was a further increase of 44 mt. Consequently, by 2016 there was not a single power plant that was critical for want of coal. We were even toying with the idea of exporting coal to Bangladesh. The strategy was very simple. We acquired more than 5,000 hectares of land in these two years, environment and forest clearances were done for more than 3,000 hectares, almost every month one of the subsidiaries of Coal India was opening a mine. Coal production increased.
Then what went wrong? Why did the growth in production not continue?
Some unusual things happened. At the time, Coal India was sitting on reserves of Rs 35,000 crore. We had made a plan for scaling up production to 1 billion tonnes for which we required this money. We had made a mine-wise plan. These were very detailed plans for expansion of existing mines and for new mines.
The role of mine managers for these projects was also worked out. However, this was the time when the Swachh Bharat Abhiyan started, and mine managers who were to execute Coal India expansion plans were diverted to Swachh Bharat projects. I had no problem with Coal India providing funds for this laudable programme. However, I was against deployment of mine managers for this. I had raised the issue with the cabinet secretariat that these mine managers cannot be engaged in monitoring Swachh Bharat projects. I was told that there is surplus coal right now, which we are unable to use. But the issue is, if coal mining doesn't start today, there would not be enough coal tomorrow; these projects take time. But these concerns were overruled. The mine managers, instead of implementing these coal plans that were prepared, were engaged in managing construction of toilets.
Coal India did not have a regular chairman and managing director for a year after Sutirtha Bhattacharya retired in 2017. An organisation like Coal India cannot be headless and manage with temporary heads for one year. The other issue was that Coal India paid hefty dividends to the government from the cash reserves. So there was no money or human resource for increasing production. If you look at the data of Coal India, production was stagnant at around 600 mt during 2018-19, 2019-20 and 2020-21. Now, if the production had grown at 11 percent, as it was growing in 2015-16, Coal India would be producing anywhere between 750 and 800 mt. Irrespective of the Ukraine war, India would have been virtually surplus in coal. We have no control over international supplies, but we have control over what we have in India.
What can be done now to avert the crisis?
When we had a crisis last year, I had said that the crisis would be over in some time because it was a matter of management of coal. But production cannot happen on its own. This is the coal supply problem and coal production can and should be increased if such a crisis is to be averted in future. However, the coal-related issues cannot be seen in isolation. They have to be considered in the context of the overall power sector, which we tend to ignore. The real problem is the power sector. While the coal problem is a supply problem, the power problem is a financial problem. What is the financial problem? It starts with discoms (distribution companies) who owe more than Rs 1 lakh crore to power generating companies (gencos). UDAY (Ujwal DISCOM Assurance Yojana) didn’t really take off. Both UDAY and the coal production plan were launched under the same minister, but the former failed. The coal production plan was launched and it worked because of constant engagement with states.
The failure of UDAY means that though there was a temporary solution to the problem on account of postponement of the debt liabilities or transfer of debt liabilities to the state government, the basic performance of discoms in terms of issues like the AT&C (aggregate technical and commercial) losses, feeder separation etc., was not addressed. As a consequence of the failure of discoms, they owe more than Rs 1 lakh crores to gencos who owe over Rs 20,000 crore to Coal India. Coal India shows profit, but doesn't have cash. Some of its subsidiaries are actually borrowing from banks to pay salaries, though they are showing profits, because they are cash-strapped. So, the real problem is not coal, the real problem is the power sector.
And we keep postponing this crisis. Until that is sorted out, the power crisis will not only impact gencos and Coal India, it will also impact the entire banking sector. Because these entities apparently owe more than Rs 2 lakh crore to the banking sector.
The government has announced steps to deal with the looming crisis in the power sector. What is your assessment of them?
If you wake up when there is a crisis, you are trying to manage that crisis. At the time of crisis you are managing that crisis—whether rakes are available, whether you can import, and other such measures. The long-term detailed planning cannot happen at the time of crisis. There was a crisis last year, which was managed. But what did we do after that?
Shooting letters to Coal India does not solve the problem. There is a need to divide the responsibilities between Coal India and the government. Issues like land acquisition and clearances should be taken up on a government-to-government basis between the Centre and states. The government needs to sit with Coal India and plan; instead of complaining, ask them in what way the government can support them in increasing their production.