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'Our whole concept of coal mine allocations is wrong'
'Our whole concept of coal mine allocations is wrong' - Rediff.com Business
I've been questioning the Coal allocation from the time they started giving spectacular numbers like 700 lakh crores and so on. Like calling IMF wrong on economy, not Bhakt will jump in and say coal 'exoert' is wrong on coal too. So 3, 2, 1.......
I have fundamental problems with mines being allocated to end-users. Mining is a commercial operation. It needs expertise and technology.’
‘If someone has a power plant, how does he become an expert in mining coal? Someone has a steel plant, his expertise is in making steel and not making coal or the mining of coal.’
‘There are 3 million people without electricity and it is not that power capacities are not there. Power capacities exist but they do not have the coal to produce electricity.’
Coal industry expert Sunjoy Joshi tells Sheela Bhatt/Rediff.com that the NDA's e-auction of coal blocks will not solve the fundamental problems that dog the industry.
Sunjoy Joshi, (below, left) a former bureaucrat, is director of the Observer Research Foundation, and is known for his expertise on issues related to energy, climate change and development studies. Joshi, who has also worked abroad, took premature retirement in 2009 and has since contributed to making the ORF think-tank hyperactive. His experience in government service puts him in a unique situation to understand the working of policies. At ORF, Joshi is presently working on a programme on ‘India and China: Energy imperatives for a changing world’.
The auction of 33 coal mines by the coal ministry has given mine-owning states a potential revenue of around Rs 2 lakh crore.
With the new National Democratic Alliance government trying to put the coal sector in order, Joshi discusses the status of the coal sector in India with Sheela Bhatt/Rediff.com. (The interview was conducted before the coal mines online auction took place).
Find out why Joshi thinks the online auction of India’s coal mines is wrong. The first of a two-part interview.
Recently industrialist Gautam Adani was in the news for buying a coal mine in Australia. Why is the import of coal so important? Can you explain the current scene in the industry? Why does India have to import coal when it has so much of reserves?
In the present situation India should not be importing coal as we have the fourth largest coal reserves in the world. But there are two fundamental problems. One, that our coal is of a very poor quality, its ash content is very high. In fact, the ash content is so high that when we talk to power plant operators, they say that Coal India Ltd (the government-owned coal company) sends us stones rather than coal. Also, we are transporting stones over great distances, across the length and breadth of the country, and wasting fuel and energy.
Australian coal has a much higher calorific content. That is one problem but the bigger problem is that the coal production in our country just doesn’t scale up and coal-based power companies have not been able to take off in India because of the inability of coal producers to get coal across to them.
It has a lot to do with the domestic policy environment in coal production that is forcing companies to go out and search for coal assets abroad. There was a time when coal abroad was very expensive. While national prices have become high today, international prices are low.
So if you are looking for new acquisitions, ie, green field acquisitions, this is the time to go and buy assets abroad because the prices in the international market have fallen. But unfortunately, most of the acquisitions that Indian companies have made, we have the tendency of often entering the market at the wrong time.
We entered the market and acquired coal access in a period of high prices and then we faced certain regulatory dilemmas with countries like Indonesia and even Australia where the government stepped in with interventions as to what price the coal could be exported to India, which then affected the viability of power plants set up on the basis of that coal. It’s a complex industry and the sector is actually complicated by the kind of regulatory interventions which keep coming in from time to time.
But from the producer’s point of view -- like from Adani’s point of view -- who are in the coal import-export business, when the market is low his margin will be low.
But the point is if you’re acquiring an asset, this is not a new asset, it makes sense always to acquire a resource when prices are low because valuations are low. So you’re going to get it cheap. And these being energy assets and with energy prices being very volatile, you will always make money on the upside, when the prices again rise up. So it is a matter of fluctuating supply and demand.
'Our whole concept of coal mine allocations is wrong' - Rediff.com Business
I've been questioning the Coal allocation from the time they started giving spectacular numbers like 700 lakh crores and so on. Like calling IMF wrong on economy, not Bhakt will jump in and say coal 'exoert' is wrong on coal too. So 3, 2, 1.......
I have fundamental problems with mines being allocated to end-users. Mining is a commercial operation. It needs expertise and technology.’
‘If someone has a power plant, how does he become an expert in mining coal? Someone has a steel plant, his expertise is in making steel and not making coal or the mining of coal.’
‘There are 3 million people without electricity and it is not that power capacities are not there. Power capacities exist but they do not have the coal to produce electricity.’
Coal industry expert Sunjoy Joshi tells Sheela Bhatt/Rediff.com that the NDA's e-auction of coal blocks will not solve the fundamental problems that dog the industry.
Sunjoy Joshi, (below, left) a former bureaucrat, is director of the Observer Research Foundation, and is known for his expertise on issues related to energy, climate change and development studies. Joshi, who has also worked abroad, took premature retirement in 2009 and has since contributed to making the ORF think-tank hyperactive. His experience in government service puts him in a unique situation to understand the working of policies. At ORF, Joshi is presently working on a programme on ‘India and China: Energy imperatives for a changing world’.
The auction of 33 coal mines by the coal ministry has given mine-owning states a potential revenue of around Rs 2 lakh crore.
With the new National Democratic Alliance government trying to put the coal sector in order, Joshi discusses the status of the coal sector in India with Sheela Bhatt/Rediff.com. (The interview was conducted before the coal mines online auction took place).
Find out why Joshi thinks the online auction of India’s coal mines is wrong. The first of a two-part interview.
Recently industrialist Gautam Adani was in the news for buying a coal mine in Australia. Why is the import of coal so important? Can you explain the current scene in the industry? Why does India have to import coal when it has so much of reserves?
In the present situation India should not be importing coal as we have the fourth largest coal reserves in the world. But there are two fundamental problems. One, that our coal is of a very poor quality, its ash content is very high. In fact, the ash content is so high that when we talk to power plant operators, they say that Coal India Ltd (the government-owned coal company) sends us stones rather than coal. Also, we are transporting stones over great distances, across the length and breadth of the country, and wasting fuel and energy.
Australian coal has a much higher calorific content. That is one problem but the bigger problem is that the coal production in our country just doesn’t scale up and coal-based power companies have not been able to take off in India because of the inability of coal producers to get coal across to them.
It has a lot to do with the domestic policy environment in coal production that is forcing companies to go out and search for coal assets abroad. There was a time when coal abroad was very expensive. While national prices have become high today, international prices are low.
So if you are looking for new acquisitions, ie, green field acquisitions, this is the time to go and buy assets abroad because the prices in the international market have fallen. But unfortunately, most of the acquisitions that Indian companies have made, we have the tendency of often entering the market at the wrong time.
We entered the market and acquired coal access in a period of high prices and then we faced certain regulatory dilemmas with countries like Indonesia and even Australia where the government stepped in with interventions as to what price the coal could be exported to India, which then affected the viability of power plants set up on the basis of that coal. It’s a complex industry and the sector is actually complicated by the kind of regulatory interventions which keep coming in from time to time.
But from the producer’s point of view -- like from Adani’s point of view -- who are in the coal import-export business, when the market is low his margin will be low.
But the point is if you’re acquiring an asset, this is not a new asset, it makes sense always to acquire a resource when prices are low because valuations are low. So you’re going to get it cheap. And these being energy assets and with energy prices being very volatile, you will always make money on the upside, when the prices again rise up. So it is a matter of fluctuating supply and demand.
