Wednesday, February 5, 2014

The Coal Plight of India

This article was first published in www.garp.org on January 23, 2014; Co-author: Puran Singh

http://www.garp.org/risk-news-and-resources/2014/january/the-coal-plight-of-india.aspx/

India has the fifth largest coal reserves in the world (293.4 billion tons as of April 2012), is the third largest producer of coal (about 580 million tons in 2012-13), and still ranks third in the list of top coal importing countries, with imports of 192 million tons in 2012-13 (see Figure 1).

Coal as a resource assumes critical proportions in India as 74% of coal produced goes into the power sector and 68% of electricity generated comes from coal. However, the power and steel industries, top users of coal, often complain about short supplies. In many instances, power stations stay idle for want of coal, and annual production fails to meet demand. While part of the shortage is attributed to inefficient allocation of coal blocks and lack of the latest production technology, leakage of coal through illegal mining also contributes.

 Figure 1: Key Coal Statistics for India
Source: Ministry of Coal, Government of India
Illegal mining refers to the mining done in contravention of applicable rules: Groups of people burst explosives and use unscientific methods for extraction. Done in a haphazard manner on small patches of land, it deters subsequent legal mining due to security hazard. Coal mines abandoned by state corporations are also used by illegal miners.

According to a study conducted by Xavier Labor Research Institute (XLRI) of Jamshedpur, India in 2008, 447 illegal mines fall under operational areas of three subsidiaries of Coal India Limited, a public sector undertaking of the Government of India. Central Coalfields Limited and Bharat Coking Coal Limited in the state of Jharkhand accounted for 195 and 49 such mines, while Eastern Coalfields Limited in the state of West Bengal accounted for 203 mines. This amounted to illegal production of 63,600 tons of coal each year. According to the study, at least a billion rupees was lost to the companies in Jharkhand alone due to illegal mining.

According to the report of standing committee on Coal and Steel 2011-12, 616 First Information Reports (FIRs) against illegal mining were lodged until September 2009, and only one officer was noted to be suspended by these companies for inaction to curb illegal mining. The recovery of coal, mined illegally, also remains miniscule (see Figure 2).

Figure 2: Recovery of Illegal Coal Mining in India

For decades, mafia groups have controlled the illegal mining, which has been passed on to subsequent generations. The report notes that gangs form cartels for coal contractors and scare the prospective bidders out of the tender process for mining jobs. They control the labor unions and create nuisances such as unnecessary strikes to disrupt daily activities, assaulting or murdering family members of mine officials, etc. In some cases, these mafia groups may be backed by Naxalite militants.

A former member of Parliament and Secretary of the Center of Indian Trade Union (CITU), Jibon Roy, stated in 2010 that around 10,000 coal cartels in India steal 5 to 6 million tons. Based on this estimate, a loss of around Rs 18 billion annually was estimated at the then-prevailing market prices.

Figure 3: Coal Pilferage Cases Reported in India
Over the years, the number of pilferage cases reported has declined (Figure 3). However, the incidences actually taking place may have an altogether different story to tell.

Government has not been able to check the illegal mining of coal. The presence of Naxalite groups in the coal production areas has made the problem even worse. According to the standing committee on Coal and Steel 2011-12, organized crime forms a nexus with officials at some places. Elsewhere, local authorities are terrorized by mafia and are forced to cooperate.

The committee noted that except for XLRI in 2008, no other study had been conducted by other coal producing states to quantify economic impacts of criminal activities in the coal sector. Similarly, a special report by Thomson Reuters noted that a Coal ministry tender for a study had no bidders for fear of potential mafia reprisals. Therefore, only estimates of losses to coal companies and the state exchequer are available.
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