The perversion of centralising coal mining

Questions arise as to why an upcoming process of coal auction is being celebrated as a festival

By Satyam Shrivastava
Published: Tuesday 16 June 2020

On June 11, 2020, Union Minister for Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi announced the first commercial auction for coal in the country in a tweet on June 18, with Prime Minister Narendra Modi attending.

The minister said the auction was a step towards aatmanirbharta (self-reliance) in the coal sector.

Questions arise as to why the process of auction was celebrated as a festival, especially when this is not the first time an auction of coal mines was being done. It was said this auction will be completely different from auctions organised by previous regimes. But how?

The response to this question is also illustrated in a press release from the Press Information Bureau (PIB):

  • Regulations by previous governments on the coal sector, including prices and end-use limited the scope of growth. These regulations will no longer exist.
  • Proposed conditions in the new auction are very flexible, allowing new companies to take part.
  • The deposit for auction was reduced and an advance amount will be adjusted in place of royalties
  • Indicators of working capacity have been liberalised to encourage flexibility in the operation of such coal mines. The process of auction will be transparent
  • 100 per cent foreign direct investment (FDI) will be approved through automatic routes, renewable financial terms and a revenue sharing model based on the National Coal Index
  • Companies bidding in auctions to which coal mines are allocated will be given flexibility in production of coal with provisions to encourage them if they are able to start production and gasification early. This was not the case in previous governments.

How is the auction process a new and renewed hope for realizing the great dream of a self-sustainable India? PIB said the auction process would “lay a strong foundation for energy security in the country by producing additional coal providing large-scale employment and huge opportunities for investment in coal sector.”

The efforts will supplement a billion-tonne production of coal from Coal India in 2023-24 and meet the full requirement of domestic thermal coal, according to PIB.

A cheap advertisement to portray coal as an attractive and exotic product raises a lot of questions the government should answer.

How will a country — by selling its natural resources and wealth — become self-reliant? There is no convincing argument made to this fundamental question. Who will receive revenue from the 100 per cent FDI? How can a sovereign government expect to achieve the goals of self-reliance if everything is financed by foreign investment?

Commercial coal mining

The current Union government, led by the Bharatiya Janata Party (BJP), opened up the commercial use of coal by passing the coal ordinance when it first came to power.

Only government-owned companies were found eligible for this. The taking away of regulations for commercial use and exploitation of coal is now being extended to private entrepreneurs and companies as well. The conservation — extended by the policy of nationalisation and disallowing this — is now completely rejected, leading to coal becoming a commodity for fee exchange in the market.

The meaning of liberalising coal

Coal manufacture was carried out to achieve domestic energy needs and its end uses, thus, were to power up thermal power plants, steel manufacture and energy needs of other industries.

This ensured coal does not become a commodity in itself, but is an essential allied product in production.

If this had not been done — and if coal could have been sold openly in the market — it would be tremendously difficult for our own industries to run and the cost of finished products would have been much higher.

To see coal as a finished product in itself and to free it for commercial use might seem as a good opportunity to some bidders.

In the long term, it will lead to raising the production cost of essential items, which is neither in the interest of the country nor anywhere close to the vision of a self-reliant India.

Proposed flexibilities in auction

To ensure success, the auction has made less competitive: Only two bidders are allowed to take it forward. Three or four bidders were earlier mandatory. The first term of the Narendra Modi-led government organised similar auctions that were largely understood to be failures.

The government organised auctions 72 times to auction 65 coal blocks and allocated only 31.

A five-phase process began from February 2015 to July 2017. The last two auctions had to be cancelled as there were no companies willing to take up mining.

Out of eight phases of auction in 2018, five were cancelled again as there were no buyers.

In auctions organised till 2017, a rule of having at least three bidders was flouted by the same company participating in the bidding through sister concerns, which was noted by the Comptroller and Auditor General in its 2017 report.

In light of these experiences, the proposed auction on June 18 is said to bring in flexibilities, but to what end?

It might seem like the government is attempting these measures to ensure coal production. If there is no demand or consumption in the country, then what will the positive take-aways be from such a process?

Relaxations being brought in the working capacities of mining operators will directly lead to no regulation on when and how mining will be carried out.

The supply of coal — an essential part of domestic industry — could be erratic in the absence of a clear policy.

This auction process will in no way lead to increase in revenue or save the sinking economy.

Attack on the federal structure

A pertinent question is the powers of state and local governments in determining the use of natural resources of the country and rejecting the significance of their roles in the federal structure.

This severely damages the constitutional freedom guaranteed to them. In the past six years, the BJP-led government has taken many decisions that diminish the independence and inherent powers of states.

We have seen the fight against the novel coronavirus disease (COVID-19) has been centralised, with one individual calling the shots. The entire country faces problems as a result of this tendency.

Earlier, state governments had powers to take decisions over mines in their respective geographical areas, something that found an echo in a 2014 Supreme Court order that recognised mines allocation as “essentially performed by state governments”. 

The role of Gram Sabhas here is also a crucial question of constitutionality: The powers of village bodies as owners of natural resources were recognised in fifth schedule areas under the Panchayats (Extension to Scheduled Areas) Act and in the rest of the country under the Forest Rights Act, 2006.

It is noteworthy that Gram Sabhas — in a letter in 2015 to Modi — said coal blocks under their jurisdiction should not be auctioned as they disallow coal mining in-principle.

This is a visible disregard for powers of state governments and will also lead to an overwhelming loss of revenue.

It will also ignore the constitutional rights of Gram Sabhas. It must be noted that a few state governments already oppose the Centre’s attempt to auction coal mines. Jharkhand Chief Minister Hemant Soren already wrote a letter expressing the state’s opposition. It is possible other states may soon follow suit.

Natural resources and centralisation of power

We must remember that a similar attempt at centralisation was done through the imposition of the Goods and Services Tax (GST) regime, the ill-effects of which are still being faced by the country three years later. 

A similar event was organised with pomp and show when GST was implemented: A simple matter of tax reforms were celebrated as if the country attained independence from foreign rule.

A special parliamentary session was called at midnight, for the fourth time in the history of independent India. The first three times this was done on August 15 in 1947, 1972 and 1997, to mark the occasion of independence and its anniversaries.

The causes behind the failure of GST are the same perverted attempt at centralisation. State governments have fallen in line with the Centre — stripped of their powers to collect taxes — leading to a visible impact on essential services provided to citizens of these states.

We must remember that national interest does not mean to take away powers of the state government and reject the authority of local governments.

One can only hope that advertisements to sell off our natural resources will not lead to another coal-related scandal and that we will be able to recognise coal as a national heritage.          

Satyam Shrivastava is the co-director at the Society for Rural, Urban and Tribal Initiative (SRUTI).

This piece, originally written in Hindi, was translated by Saurabh Sinha at SRUTI.

Views expressed are the author's own and don't necessarily reflect those of Down To Earth.

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