Reap the Captive Mines

Amidst the clamour for green energy, which though necessary; the truth is, there’s no respite from the old horse, coal. The reasons are obvious. For decades, the country’s primary energy resource has been coal. The contribution of coal to India’s primary energy supply pool is over 50 percent. Its share in the country’s electricity generation is about 70 percent. The fulcrum of the economy is so much intertwined with coal that switching to other forms of energy overnight is implausible.

But the state of the availability of coal is far from comfortable. The shortage of coal is rising. The power plants, which are dependent on coal, are in a grim situation. So are the industries like cement. Sadly, more than the resources, the cause is the inept policies of the government. The situation that exists today could have been avoided had the government not resorted to an opaque policy while awarding captive mines. As a result, out of the 215 blocks allocated during 1993-2011, only 26 have started production.

“Altogether the allocated captive blocks hold a reserve of about 50 BT, which being more than the total extractable coal reserves of Indonesia. Together, they hold an enormous potential for fuel security in India,” says InfralineEnergy’s report ‘Captive Coal Blocks in India-2011, Unveiling the Opportunities Beneath’. The advantage with captive coal mining is that it will help in producing low cost power and thereby, would induce tariff competitiveness in the market. 

Why then, the other coal blocks were not developed? The allegation is rife in the air that the majority of these blocks were awarded almost for free. “The free allocation might be the single big reason for that many privately owned captive blocks not being developed,” says the report. The Ministry of Coal in a bid to save its face has de-allocated 24 coal blocks from the laggard developers.

Apart from environment clearance, the biggest hurdle that captive coal mining faces is the lack of mining expertise. The private participation could accelerate the need for advanced technologies to spot the large coal reserves and extract coal with minimum damage to the surrounding environment. Acquisition of land for mine will be easier, if the profit from mining is shared with the affected population. Equipment financing and leasing which is now confined to construction equipment industry would be available like the developed countries as the sector gains momentum. It would reduce the financial burden on the developer.  To develop the captive blocks linked with the capacities coming up during XII Five-Year Plan, the total investment requirements have been projected to be INR 32000 crore.

With the increase in the price of imported coal, the hope lies in captive mines. The policy makers should pick up few cues from the success of natural gas in Gujarat.