Reuters | Fri Jul 23, 2010 | 9:07pm IST
India should allow private firms to mine coal to plug supply shortages and boost power generation key to propelling Asia’s third-largest economy to double-digit growth rates, a top government advisory body said. The government should also speed up environmental clearances for coal mines and build more roads and rail tracks around "promising" coalfields, to make up a coal shortfall predicted to double to around 242 million tonnes in the five years to 2017. "The rising demand-supply gap for coal points to the urgency of removing constraints on domestic coal production, and also taking steps to facilitate imports," the Planning Commission said in a note seen by Reuters. State-run miner Coal India, which is slated for an initial public offering, "can remain a public sector company, but private investment in coal mining should be permitted", it said.
India currently does not permit commercial mining of coal by private firms, but allows power producers to access "captive blocks" for their fuel needs. The country has 267 billion tonnes of coal reserves, 40 percent of which have been proven, but social and environmental issues have kept the pace of production growth low. Prime Minister Manmohan Singh’s government is pushing to overhaul India’s crumbling infrastructure to support double-digit growth rates as in China and lift hundreds of millions of out poverty. The economy is currently seen growing at 8.5 percent. But India will probably trip on its investment targets to build up power plants, ports, railways and roads between 2012 and 2017, as it has repeatedly done in the past.
The likely capacity addition of 62,000 megawatts (MW) in the five years to 2012 falls short of the 78,000 MW target and is "barely sufficient to achieve the 8.1 percent growth" rate aimed for the period, the Planning Commission note said. "If the economy is to move to a higher growth path of 9-10 percent in (2012-2017), we have to aim at even faster expansion in power generation in the years ahead," it said. The note was prepared ahead of Saturday’s meeting of the National Development Council, which comprises the prime minister, federal cabinet ministers and state chief ministers. It also said state-run power distributors should cut losses from low electricity tariffs and thefts if they were to be financially viable and support the sector’s growth. "We are very worried about the state of the distribution system," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters on Friday, urging states to give "high priority attention" on power.