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R B Upadhyay, Head-Coal Business, Bharat Forge

20 Feb 2013

R B Upadhyay, head-coal business at Bharat Forge, the second-largest forging company in the world, shares his concern over the coal blocks allocation process. Speaking to InfralinePlus’ Alok Sharma, he explains how allocation to “non-serious” players has delayed development on flimsy excuses. Upadhyay candidly suggests that government should critically examine the seriousness of the captive owners.

What is the biggest challenge that the coal sector is currently facing in terms of output growth?
The Coal sector is facing many constraints like Forest Go/No Go area, environment clearance from the Ministry of Environment and Forest, land acquisition, law and order problems, evacuation problem that is development of infrastructure like road, railways etc and problems in availability of consistent power supply or availability of fuel oil at reasonable and competitive price. These challenges come into existence, the day the LOI (Letter of Intent) of the mine comes into the hands of the captive owners. The challenges form a vicious circle which cause delay in bringing the mine to the operational stage. The mine owners find them beyond their capacity to solve them and lose patience. The government needs to find out solutions so that the above clearances are obtained in a single window process in a reasonable time frame. It is quite worthy to point out that land acquisition for the mine and the infrastructure development are also equally troublesome and can improve only with the assistance of the government.
How do you see environmental activism in the context of having an adverse impact on production. Do you feel that Coal India’s capacity constraints are equally responsible, if not more, for lower production?
For sustainable growth it is essential that environmental activism exists. But such activism should not be so alarming that causes adverse impact on production. Rather, activism should behave in a complimentary manner to generate better atmosphere in the mine which would add in the production capacity of the employees. But we see that such activists instead of acting in a complementary manner act in a retrograde manner which causes hindrance in the production capacity of the mine. Thus, it definitely lowers the production capacity whether it is Coal India Limited (CIL) or any private organisation.
The 11th Plan had promised a range of coal sector reforms – such as ramping up captive production, commercialising, increasing share of e-auction, setting up a coal regulator...Where do you see these reforms heading?
It will be quite prudent to mention that coal sector reforms have succeeded very little. Captive production has not succeeded because of various constraints and lack of availability of solution with Ministry of Coal. There had been indications that the government will set up a coal regulator, but as yet it has not come into existence. The coal sector is already suffering from tedious control of many statutory agencies like DGMS, RLC, Directorate of Geology and Mining, Coal Board, IBM, etc. Establishment of a coal regulator will be another interfering agency to cause hindrance in the smooth functioning of coal mines, if it behaves in the similar manner like the present statutory bodies.
The idea of commercialisation of coal mining was floated 10 years back to tackle shortages. Do you feel that is it possible to get the Bill passed in the current political environment?
The idea of commercialisation in coal mining industry was no doubt conceived 10 years back to enhance the production of coal and reduce the mismatch between demand and supply. This has of course not succeeded because amendment to Coal Mines Nationalisation Act has not got the parliamentary clearance. The other problems being faced by the industry is allotment of coal blocks to industrialists who own or are going to own power, steel and general industry. In my opinion these captive users too, are not serious players and are delaying development on flimsy excuses. Government should critically examine the seriousness of the captive owners. One of the most important parameters is availability of the right type of manpower for taking ahead the work related to these mines because of the poor determination level among the captive owners.
How viable would it be to fuel power plants with imported coal especially after Australia and Indonesia have increased the export duty on raw materials?
Increase in export duty on raw materials being imported to India such as coal was inevitable. I remember in the 1980’s, it was a fashion to talk about the cheap Indonesian and Australian coal available to be imported and neglected by the Indian coal industry. And therefore, everybody started running to those countries to own coal mines for importing to India. They did not understand the economics of foreign substance. It is quite but natural that no country will allow export of its natural resources without realizing full benefit of it.
As Indian companies grow and penetrate deep into unheard pockets of the country, the requirement of coal for generation of power would increase considerably. Could the demand largely be met with domestic production?
Indiscriminate growth of many shows up establishments like malls, centralised air conditioned offices are increasing the load on power generation. India is a warm country and construction of such establishment should be regulated/ control to save power. If Indian companies take up their establishment in deep pockets of the country, requirement of coal for generation of power would not increase considerably but it will remain within our capacity of production. Most of the time I have found out people talking about per capita consumption capacity in USA, Canada, Russia, etc. and compare with Indian consumption. This consumption is completely unwanted. India is endowed with very comfortable weather pattern, which are totally unlike the treacherous climate condition in those countries. And therefore we should not at all try to compare with consumption pattern at all.
Do you think that the regulatory issues have completely failed to address the country’s strong coal consumption needs? India ranks third among the world’s leading coal-producing countries. Around 70 per cent of its total production is used for power generation, while the remaining is used by the steel, cement, chemicals and heavy industries. What impact do you see on these sectors if their demand is not met?

I do feel that the regulatory issues have failed the attempt of coal producing companies because the statutory clearances for new projects are taking abnormally high time. But in my opinion, the reason behind such delays is in the mind set of those people who are managing regulatory issues. Instead of using those regulatory provisions to better the life of the people of their country, they are using the same for bettering the standard of living of their own and their families. This results into indiscriminate delay in granting regulatory clearances. Such inordinate delay retards both, progress and prosperity. It is quite true that we rank third among the coal producing countries and around 70 per cent of the total coal production is used for generation of power while the rest is being used by other important industries. The third rank among the world’s coal producing countries is not a much glorifying event. We are the world’s largest democracy, having a population, which is four times that of USA (the second-largest coal producing country). We should reorganise our regulatory framework in such a manner that we can enhance our production as early as possible and reduce dependence on imported coal. However, coastal areas may reserve its dependence on imported coal. If this aspect is not sorted out by the government, the cost of production will become very high and put inflationary pressure on the country.

One of the serious concerns for India’s coal industry is strong taxes and duties. Your comments...

Indian coal industry has been heavily taxed and levied with duties but benefit of this is being passed to the people affected by the industry. And therefore, such heavy taxation carries no meaning.

How far do you feel that stiff opposition from local / regional groups, have derailed projects?
Opposition from local and regional groups has definitely derailed the process but it could have been prevented if the benefit of such high taxation would have passed on to the local and regional areas and populace. We still find that all the mineral bearing areas are very backward and under developed. Therefore, the revenue earned from the industries must be used for development of local area and the people first, to prevent any negative action from them. And therefore, the state government should modify their business rules and reserve sufficient fund out of revenue earned.

(InfralineEnergy thanks R B Upadhyay, Head-Coal Business, Bharat Forge for sharing his valuable insights with our readers. The column 'In-Conversation', is a platform to engage experts from various sectors to share their views on the different transformations happening in the Indian energy sector.)