PMO's coal targets might remain on paper

Sudheer Pal Singh / New Delhi Jun 21, 2012
Business Standard
Prime Minister Manmohan Singh has ordered the coal ministry to increase production by about 10 per cent in the current financial year. However, a quick look at the ministry’s performance in recent years suggests achieving the new target of 584 million tonnes (mt) would be a daunting task.

India has, in the past, failed to meet annual production targets time and again. Last financial year’s production target of 554 mt, too, was missed by 10 per cent.

In fact, production has been stuck at 532 mt successively for the past three financial years. To add to woes, the primary reasons for the stagnation in output growth — delayed land acquisition and green clearances — continue to remain unresolved.

India’s monopoly miner, Coal India (CIL), too, has failed to exceed its annual production target since the past eight years. The company’s production has remained stagnant at about 431 mt since 2009-10. In what is a major concern, the majority of new mining projects by the company, which were stuck due to the now defunct ‘no-go’ classification, are yet to be cleared by the environment ministry.

Amid this scenario of gloom, the prime minister has set a target of producing 584 mt coal for coal companies. Of this, CIL has been asked to produce 464 mt, Singareni Collieries Company (SCCL) would produce 55 mt and captive miners, which failed to lift their output beyond 35 mt in the past two years, would produce 42 mt by March 2013.

The prime minister’s infrastructure push is aimed at reviving investor sentiment in the Indian economy, and the coal sector’s performance assumes importance, as it is one of the eight core infrastructure sectors that have a combined weightage of 37.9 per cent in the Index of Industrial Production (IIP). Growth in industrial output, as measured by the IIP, slowed to 0.1 per cent in April, against 5.3 per cent in the corresponding month last year, owing to contraction in capital goods and a drop in manufacturing output.

Experts agree the targets are too ambitious, insisting target setting alone would not resolve the issue of lagging output growth.

“Past record shows meeting the high target would be difficult. The issue would remain unresolved unless the government gets down to solving ground-level execution and implementation problems,” said Amrit Pandurangi, senior director, Deloitte Touche Tohmatsu India. Asked whether the government had succeeded in sending a positive signal to boost investor confidence, he said, “The investor looks at the actual facts of progress, not just the intent.”

However, CIL Chairman S Narsing Rao is hopeful of living up to the new commitment. The company had charted a strategy to ramp up annual production to 615 mt by 2017, he said. It wants to increase production by 40 per cent in five years. This would be achieved by pushing for quicker ecological clearances and land acquisition, seeking intervention of higher authorities, including the Planning Commission and the Prime Minister’s Office (PMO), and strict mine-level monitoring of the performance.

As the only silver lining in the dull output scenario, CIL clocked 5.6 per cent growth in production at 69.3 mt during April and May. Even if this growth is maintained and the PMO’s target of 584 mt is met, the country would still face costly coal imports of a whopping 192 mt this year.