Coal Regulatory Bill - Will It Help?

After being rocked by the draft CAG report, the Coal Ministry is set to bring in the coal regulatory bill in 2012. Domestic coal production has remained almost stable this year, and the country’s reliance on imported coal been increasing. At this time, the coal regulatory bill is expected to increase transparency in the coal mining sector and also to address pricing issues. The bill has been signed by the Minister for Coal, Sriprakash Jaiswal, and has been sent to the Cabinet for approval.

The bill will provide a level playing field to companies in sectors like Power, Cement and Fertilisers. Besides, there are expectations that this bill will resolve the disputes and issues related to the coal blocks.

After getting the Cabinet nod, this bill will determine the price of coal and streamline the process of getting necessary approvals in coal mining operations. We expect it to curb the scams in the coal mining sector, thus benefitting the entire sector.

Currently, the domestic coal availability is not enough to fulfill the total coal requirement of the country. The revised governmental estimates state that the total coal demand in the country in the terminal year of the 11th Five Year Plan will be around 650 million tonnes (MT). The domestic coal production, including that by Coal India and its associates, is around 545 MT, which leaves a coal deficit of about 105 MT that is met through coal imports. The government estimates also state that this demand will increase to 980.5 MT in the terminal year of the 12th Five Year Plan, in which the domestic availability is expected to be about 715 MT. With the best efforts, the availability may increase to 795 MT, which means that the country needs to import about 185.5 to 265.5 MT of coal.

Table 1 : Coal Stats 

CAGR - Compounded Annual Growth Rate (%)

With the new bill coming in, it is expected to address the production and supply woes of coal. It will also monitor and implement closure of the coal mines, which we believe will help increasing the coal production. The bill may be very effective if implemented soon and properly. However, it must be remembered that there are numerous bills pending with the government. Reforms will always be welcomed by the markets and the investors, but it remains for the government to take affirmative action towards them.