While the Parliamentary Standing Committee on allocations of captive coal blocks has recommended the government cancel those allocations where there has been no development of the mines so far, the real issue is the delays in the process to try and fix the problem. Around a year ago, when the CAG’s draft report on Coalgate was doing the rounds, the government began discussing ways to address the problem—first, to deal with the existing problem of allocations that had already been made and, second, to come up with a policy to ensure such allocations were transparent in the future. And, most importantly, the effort had to be to come out with a policy that dramatically boosted coal supplies—the reason why the captive mines were allocated was precisely because the public sector Coal India Limited was unable to produce anywhere near the amount the country required. Sadly, the progress on all fronts has been woefully inadequate.
Since some private sector companies had already begun work on the mines, the power ministry was working on a policy that would allow them to carry on mining while capping the windfall gains—some of the companies that got captive mines were, for instance, selling power at 100-200% returns. The policy being designed required these companies to, in future, sell power only through competitive bids—the idea was that while the companies would bid on the basis of the tariff to cover their capital costs, the fuel cost (cheaper in captive mines as compared to Coal India’s production) would be charged on an actual basis. Nothing has come of this policy so far. As for bidding for coal mines in the future, though the MMDR Act now allows for this, the Standing Committee report says, there has been no action on this. The larger question, of allowing merchant miners in the coal sector—you have only to see how India’s oil/gas reserves have risen after the entry of merchant developers—remains unresolved. Interestingly, though the BJP is not interested in cooperating with the government on passing Bills at the moment, the NDA had brought in a Bill in 2000 to amend the Coal Nationalisation Bill which allowed commercial mining and, in August 2001, the Standing Committee had also endorsed this. Eventually, this is the only solution to India’s coal problems.