India Seeks Review of Mining Policies
Source: Commodity Online (5/19/11)
"Deteriorating supplies have India warming up to coal."
The Indian coal industry is sure to be heading for dire straits if government continues to run the sector with antiquated mining policies that limits commercial participation. Though India has been lagging in this front, the country has started to warm up to the situation owing to deteriorating supplies of coal, leaving thermal plants to function at less than 50% of capacity.
India is a country that relies on coal for more than 50% of its energy requirements, as opposed to 27% of the world average.
Reports show that the 32 power stations are running with just 7 days of coal supplies, and 18 of power stations with just 4 days of supplies, when the ideal stockpile should be supporting 21 days of operations. This has persuaded India to go for costlier imports of coal.
Government estimates point out that India faces a supply shortage of 142 million tonnes this fiscal with domestic production amounting to 554 million and demand estimated at 696 million tonnes. The government panel added that India needs to raise coal production by 7% instead of the current growth rate of 5% to ensure that power generation is not affected.
Even though India limits commercial participation, it has taken steps to redefine the captive mining blocks to boost production. However, environmental regulations and land compensation issues dogs the industry, resulting in production shortfalls.
Apart from these issues, the industry also faces structural problems, making investments in infrastructure imperative. A transparent and reasonable pricing system should also be created to turn the cogs of industry without hiccups.