Cleaning the black gold

The supreme court has cancelled the coal mining licences of all but four out of 218 in its decisive judgement. The coal block allotment since 1993 has been through first-come first serve basis; which the court pointed out as unfair,  non-transparent and misappropriate use of natural resources. The allocation process has been critcised  for being influenced by crony capitalism where vested interests were prioritised than national growth. In addition, the court has also levied a fine of Rs.295/ton on the mining companies, which have unduly benefited. On one hand it has taken preventive measures to halt the further misuse of national resources, on the other it has asked the union government to set new guidelines for coal allocation at the greater interest of the nation.

Although the decision brings hope for new, transparent, non-discriminatory and competitive process, this pill targeting long term positive results will come with its own bitterness. The government has assured of being capable to deal with the situation which in turn have to rely on the capabilities of Coal India Limited (CIL). Around 60% of power generated in India comes from coal. At a time, when the Prime Minister Mr. narendra Modi has been trying to attract FDI in the manufacturing sector, the non-availability of power infrastructure in the coming days will be a big hurdle. In the 'MAKE IN INDIA' programme, the government plans to add 88000 MW of thermal power to its existing capacity in next five years. Unless quick steps are taken to meet the energy sectors coal demand, the target will be far from achievable. The bankers who have provided loan to mining companies will look for a government bailout else the amount invested would add up to the already high non-performing assets (NPAs). Eventually, people employed in the minig sector will be the worst sufferer.

Nevertheless, the judgement with government backing it has ushered a new hope of- (a) clean and transparent processes, (b) build trust amongst foreign investors and (c) increase the competition amongst domestic players. Similar to any developing economy, our processes can be improved and can be made more efficient. It took 21 years to get rid of the inappropriate practice, it is up to the government to introduce the reforming measures.