India's policy panel proposes to break up of Coal India into 7 firms

A new draft of a New Energy Policy (NEP) prepared by Union Government's policy think-tank, NITI Aayog, says that India should split the seven units of state-controlled Coal India Limited (CIL) into independent companies. This action will help the firm to be more competitive.

About 70 percent of India's power generation is fired by coal. The country is the world's third-largest producer and third-biggest importer of coal, which the government wants to change by boosting local coal production.

Draft National Energy Policy by NITI Aayog

Fresh coal production should come from private sector mines, the government think-tank NITI Aayog said, adding that the move called for reforms in allocating coal blocks to independent companies specialised in coal mining.

The previous report of December 2016 by Reuters said that senior Indian government officials, tasked by Prime Minister Narendra Modi with reviewing energy security, were recommending the breakup of the world's largest coal miner within a year.

Attempts to break up the world's biggest coal miner could expect resistance from powerful unions representing the firm's more than 350000 employees. The government backed down from a similar proposal in the face of union protests in 2014.

One of the unions, which is close to Prime Minister Narendra Modi's party, is against the move and says it, has the support of about half of Coal India's workers.

According to reports, Baij Nath Rai, president of Bharatiya Mazdoor Sangh in its conversation with Reuters said, “We are opposing the recommendations made by NITI Aayog".

Coal India, the country's second-biggest employer, is often criticised for being bloated and inefficient. Its output-per-man shift is estimated at one-eighth of Peabody Energy, the world's largest private coal producer.

Highlights of the New Energy Policy in terms of Production for Coal India Limited (CIL)

The policy states that Coal India Ltd (CIL) is expected to remain the principal vehicle of coal production in the country in the immediate future. But it says that it will have to strive hard to achieve the target of 1 billion tonne production by 2019.

However, with subdued demand for coal, we may not require the production level envisaged above. A careful assessment of demand for coal-based power is needed so that the over $1 billion annual investment being made by CIL, in raising its production capacity is not left stranded.

(Source: Reuters)