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Jan 13, 2015 - Comments

Coal mining and reforms

The recent strike by coal miners which was called off within a couple of days brought into focus key issues facing Indian economy and its energy sector.

India is energy deficient, with rampant power cuts for domestic as well as industrial consumers. In fact this is something unusual, even by the standards of the third world. Thailand, Cambodia, Sri Lanka and many other countries do not face such debilitating and image destroying power cut that Indians have been living with for decades.

This affects production, economic growth, employment and contributes to poverty. We are not even talking about vast areas that don’t even have electricity connection, let alone supply!

But it also presents a huge opportunity. While other countries have to desperately look for new economic models and sectors to drive economic growth, like Malaysia or Taiwan, India can find growth simply by meeting the scarcity for energy, transport and so many other products and services. The demand is there, just produce it and it will sell! It will have obvious multiplier effect on overall economy as well. An employee working for power producer will buy TVs and fridges and so on.

Coal is destined to be the most widely used energy source for power generation for years to come, whether we like it or not. Even China has not been able to get away from this reality. Nor Germany for that matter although they can bear much higher costs imposed by renewable energy. Over time, solar can replace coal for peak consumption in particular, but base load has to be carried by coal or similarly polluting or ‘dangerous’ technology such as nuclear or hydro.

That makes coal sector highly critical to India’s economic growth as well as the basic needs of its people.

Every player in this sector – Government, private players, labor unions have a key role to play to ensure its growth, survival, viability and success. It is obviously the government’s responsibility to lead the way but that doesn’t mean other players can be irresponsible or careless.

Unions have the most critical role because they have the capacity in their hands to wreck the sector and their own futures, on top of damage done to the Indian economy, if they allow politicians to sell them dubious ideological goals and use them as canon fodder to pursue them.

There is more than enough scope for private coal miners, be they captive or not, to replace the huge amount of coal we are importing from overseas while it is practically lying under our very feet untapped. To wait for CIL to mine them is unrealistic given its pathetic track record. Even if by some magic wand, CIL were to be turned into an efficient producer, the sheer magnitude of the task and the urgent needs of the power hungry economy and the future of jobless youth calls for increased involvement of private players.

If the unions have apprehensions about CIL going ‘private’ or their jobs threatened that is a valid concern. As citizens and workers, they have rights to demand good working conditions, safety standards, decent wages for private coal miners. They can of course, insist that mines should be auctioned at proper prices set through transparent method and not allotted using dubious and corrupt UPA style tactics. These and other such legitimate demands can be pursued and discussed.

With good cooperation and right investment CIL can become a jewel in the Indian state’s crown, mining a lot more coal a lot more efficiently, paying its workers a lot better if only it is run well. Nothing should stop it from doing so even if other private players mine coal elsewhere.

But the ideological direction for the economy should not be forced through strikes and sabotage. That battle should be left for the democratic battleground through elections that take place every five years. If the Indian voter is convinced that the CPM with Stalinist policies of 1930s represents the best bet for India, so be it, they can be elected. And re-nationalize all mines like Hugo Chavez did. Until then it is better to allow elected government to set policy.

It would be ridiculous to argue that Gautam Adani can invest tens of billions of dollars in Australia to mine coal there and import, paying foreign exchange, but not be allowed to do that in Bihar or Jharkhand! This is the same dubious argument used to stall domestic defense production. That only benefited corrupt middlemen.

And those that argue that Mr. Modi is beholden to the Adanis because they funded his election campaign should stop to ponder – the easiest option for the Government is to kill CIL through benign neglect, turn it into another BSNL or Air India, let Adani import coal from Australia for huge profits. He can even turn down the SBI loan because global banks would be happy to fund him, knowing India’s coal needs can never be met by domestic mining through CIL!

It is time to shed ideological blinkers and work for the larger needs of the economy. Miners’ children are not going to be all miners. They have to find jobs in the real economy, in businesses that require power at reasonable cost to survive competition from China and elsewhere.

Coal workers should think carefully about the sort of economy they want their kids to seek jobs in, before destroying it though reckless strikes. They should look at sectors that have benefited hugely from competition such as Airlines, Telecoms, Automobiles, the list is endless.