PARIKALP ARTICLE

02nd September, 2013

Compiled by: Kumar Deo

MBA (2012-14) – Power Management

The Crippled Indian economy and role of Energy/Power sector to heal it The GDP growth rate of Indian economy has declined to 4.4%, the lowest ever after 2008

financial meltdown. Our economy is in real doldrums with rupee falling to its lowest ever mark

of 68 per dollar. And the pace at which the free fall is continued, sooner or later it seems to

attain the figure of 70 or ever more with many economist and great think tanks adopting the

practice of wait and watch; excuse being given that the crisis is not similar to that of 1991.

When being asked to write some article(s) for PARIKALP, I thought to write something in

perspective with the present plight of our economy and the way energy/power industry can

play to combat the crisis up to a certain extent. Being a management student and that too in

Power, the selected theme is highly justifiable.

India is losing its foreign reserve continuously by importing huge Gold in order to decorate

ourselves with the yellow metal. The outgoing RBI Governor D. Subbarao also once spoke that

the way around to control Current Account Deficit (CAD) is to reduce usage of the yellow metal.

Our third biggest imported item is COAL – the black diamond, which also contribute majorly in

CAD. Therefore, the glittering of Gold and the never ending demand of the black diamond are

enough to make our economy crippled. Our Finance Guru Mr. Chidambaram had proposed five

year fiscal consolidation plan which aspire to cut fiscal deficit to 3% by 2016-17 from current

figure of over 5%. But the vision of better future alone will not solve the purpose; rather need

to take numerous initiatives. Every single measure which has a glorifying impact on economy

down the line will highly be appreciable.

During my two months of internship in TERI, I got an opportunity to hear Mr. S.K. Chand in a

Conference “Open Government Data and Resource” organized by world wide web. He has over

30 years of experience in production, planning, MIS, HRD and Marketing in the coal industry

and later worked with TERI as senior fellow for 16 years. He strongly contradicted a speaker

who was saying that after china and USA, we are 3rd largest coal producer in the world with coal

resource of 114 billion tones (bt). Mr. Chand justified by saying that we have numerous

challenges associated with coal production and therefore we can’t say that we have coal

resource base of 114bt; rather have RESERVE of 114bt. I fully agree with Mr. Chand as until or

unless coal is not evacuated from the mine, it can’t be termed as “Resource”. In spite of such

huge reserve of coal available with us, we are importing it in large quantity; Isn’t it a complete

failure on our part and raise finger on our coal production technology, transportation system,

management system, policy formulator and several others agencies involved in coal business….

? The government can easily generate $20 billion or 1% of GDP by allowing higher coal and iron

ore production from its large reserve. And thereby the economy can be brought back on the

right track up to certain extent if the government/CIL pay a bit heed towards coal aspects and

take up some initiatives. Hence the biggest question here is how production of the coal can be

enhanced significantly.

MDO approach: The Indian power sector is facing issue of fuel supply due to under production of coal from the

mines. CIL is proved to be complete inefficient in its mining work due to application of outdated

technology and perhaps it’s been said as the worst PSU or BIMARU PSU. The coal production

can be enhanced significantly by employing private participation, equipped by most recent

technology in coal mining. The Mine-Developer-cum-Operators (MDO) seems to be better

alternative in this regard. The MDO’s work includes – Mine design and planning, coal mining,

processing & delivery, mine O&M etc.

Example: Theiss (Australian company) entered the mining sector and won an MDO contract

from NTPC for developing Pakri – Barwadih coal block in Jharkhand in December,2010. The

contract is for 27 years. The coal production of 15 mtpa is expected to mined out and more

than 400 mtpa to be mined out during contract period of 27 years.

Infrastructure development: Once the coal is mined out, it need to be dispatched to the generating stations. However,

Power plants are facing delay in fuel delivery due to inadequate rail infrastructure, and hence

CIL is unable to dispatch the required coal.

Example: In 2011-12, CIL demanded 175 rakes per day from the Indian Railway. However, actual

wagon being provided were 169 only. Therefore, non-availability of 6 rakes led to less dispatch

of 22,800 tonnes of coal per day.

The government has recognized this hurdle and trying to wipe it out as much as can. The Coal

ministry proposed to finance railway racks to speed up dispatch of coal. But still a lot need to be

done in this regards.

Independent Coal Regulator: An independent coal regulator, which is expected to come in picture very soon is a positive

indication. It will regulate the work of CIL in coal quality and supply. However, they do not have

to play any role towards the pricing of coal as of now. But who knows the diversification of

scope of their work happens sooner or later.

I hear much often people talking that the Indian Power Sector is gripped by numerous issues

and challenges at all levels, and very uphill task to remove all the bottlenecks. But this is not

optimistic way of looking the problem. The existence of various loopholes paves the way for

further development providing enormous opportunities of growth. The growth of the sector is

tuned with the growth of the economy as a whole.