The biggest challenge for the coal regulator will be to handle CIL in the absence of competition
Having a coal regulator is a great idea but will the regulator be able to do what it is supposed to do? In the ideal world, having studied the competing demands of buyers and sellers, a regulator comes to an informed decision and, after this is appealed in court, all parties live by the decision. Where this becomes problematic, however, is in the case of single suppliers or single buyers.
In the case of Coal India Limited (CIL), what is the guarantee the firm will do what the regulator says it should? Even a Presidential Directive to CIL to sign fuel supply agreements with power producers didn’t yield any results and there is enough evidence in other cases to suggest the same applies widely. In the case of telecom, though the presence of several private players made the telecom regulator’s life easier, Trai was unable to get BSNL to open up its networks to private players for either roaming or for using its last-mile networks—so a Vodafone customer going to Varanasi could not roam on a BSNL network there, nor could Vodafone lease BSNL’s copper fibre to provide internet connectivity to a customer. In the opposite case, of monopsonies, electricity regulators have not been able to get state electricity boards pay their dues to power producers on time. So if the government is serious about the coal regulator it needs to bring in private players; breaking up CIL into smaller regional entities sounds like a good interim solution but achieves little since each baby-CIL will be a monopolist in its region. There are some efficiency gains to be had, and the CERC did a good job with the state-owned NTPC, but they are nowhere near enough.