India sits on the third largest coal reserves in the world. However, in spite of its criticality, the sector continues to be plagued by crises every once in while, when coal stocks with power plants almost run out. What is the reason for this dichotomous situation?
According to experts, it is because of the Indian government’s decision back in 1973 to nationalise the coal sector. With a monopoly over the coal market for 45 long years, public sector units had very little incentive to become efficient and market-oriented to meet the demands of their consumers. This monopoly however ended when the Narendra Modi government decided to open up the coal industry for private sector participation allowing entry of both domestic and foreign players.
That the government has allowed the private sector to mine without any end-use restriction or price caps is a very significant move. This reform measure is expected to boost investments in this sector besides modern technology and global manufacturing. But will allowing private players prove to be the solution for all the ills facing the coal sector? Not really.
Coal output could well rise but challenges with regard to evacuating it from the pithead to the consumers will remain. It is important to note that coal is a freight-sensitive commodity and most of the coal is mined in the country’s hinterland. Lack of rail links to mines and inadequate availability of railway rakes where such links exist, cause enormous disruption in supply of coal. This makes the cost of imports much cheaper for consumers situated close to India’s vast coastline.
Furthermore, private players, especially foreign firms, will hesitate to invest in the country if they are unsure about how to reach the coal they mine to the users. The Indian government needs to address this issue on a war footing. The KCT Coal Sales, having recognised the importance of logistics in any business, and the logistical challenge that coal business face today, has played an important role in this regard. Owned and promoted by the well-known Thapar Group of Industries, KCT Coal Sales is one of the largest coal logistics company in India today.