Week gone by saw a desperate government unshackle some key reforms in coal sector. In a belated move the government allowed CIL to import coal on cost plus basis and imminent executive order setting up Coal Regulator to ease the precarious situation in India.

Wriggling out the morass set in by sticky allotment scam and non-development of captive mines with the public as well as private sector the government went in hyper mode with the Empowered Group of Ministers (EGOM) spearheaded by Finance Minister. Passage of draft bill notwithstanding government is likely to promulgate an executive order.

Concurrently at an operational level CIL and NTPC suddenly cleared the decks for signing of FSA within no time.

Coal Regulator has been a long standing demand by industry beset with multiplicity of problems ranging from development of new mines, getting environmental clearance, obsolete technology and inadequate infrastructure.

Setting up of an apex body will go a long way in cleaning the muck that has cropped up in this crucial and controlled sector as it can help making the sector more competitive, where private participation is growing. The move will help in transitioning the sector to a more competitive structure.

Last evening, the Cabinet had decided to set up an independent regulator for the much-criticised coal sector with a view to plug the loopholes in the sector, apart from help conserve the resource and help chart a methodology for fixing prices.

The decision to set up the watchdog, much on the lines of the telecom, electricity and finance sectors, through an executive order is not unprecedented. The government hopes the Coal Regulatory Authority Bill, 2013 would be passed in the ensuing Monsoon Session.

CRA would be primarily handling the following:
1. Specify methods of testing for declaration of grades or quality
2. Monitor and enforce closure of mines
3. Specify principles and methodologies for price determination of raw coal and washed coal.
4. Adjudicating on disputes between parties and discharge other functions as the government may intend.

The regulator, however, would neither have the authority to allocate blocks nor determine the prices of the dry fuel.

Benefits of having CRA will be to avoid legacy issues, and focus on long-term requirements of pricing principles, grading and sampling, incentives for efficiency and conservation, etc and therefore this absence of pricing powers does not undermine its powers significantly.

The haste with which CRA is being set up signifies its need , However the real test lies in its effectiveness in ameliorating the shortage and obviating structural bottlenecks in getting clearance and development of new mines with private partnership to ease the tight supply on profitable and cleanliness.

Courtesy: Strategic Research Institute