Coal has to be the primary energy for the country. In the very long term of course fusion and solar could become important options, but that would have to await technological developments over which we have little influence or control. China despite having far richer hydrocarbon reserves gets as much as 64% of its primary energy from coal. That has allowed it to grow at a furious pace with a high energy elasticity of nearly 1.4 in the eighties and higher levels in the decades before, keeping its capital output ratio at a reasonably low level. In the nineties with export led growth of course this elasticity to come down to under 1.0, but then the Chinese per head consumption of energy was already about 4 times higher than in India, and its income about 3 to 4 times; if the right extended World Penn PPP measure was used. Cheap energy has been and continues to an important factor in achieving rapid industrial growth during the transformation phase.

Conservative macro policies have been the prime reason for the moderate growth of India today, and for the hollowing out of its manufacturing – the manufacturing share being barely 20% in India in contrast to 35+% in China. All largish industrial economies particularly those not land rich, have shown a rising manufacturing share, which falls only once very high incomes are reached. India’s premature stagnation of the manufacturing share is a problem and reflects the fact that its growth thus far has not included the entire population. (Not high enough to do so). High manufacturing share require cheap energy as its basis. Korea and Japan accessed global oil before the large price rises of the 1980s, financing the same from exports. For China besides imported and domestic oil, coal has been the principal source.

India’s endowments in coal are enviable. The worlds best iron ores in Talcher, so close to the sea are found next to ample coal deposits. They are not the best but with technology are eminently usable.  India’s large coal deposits are poorly used. Huge public investments since 1971 have gone literally down the drain. The high cost of public sector projects, the in-disciplined working, and the nexus of the untameable coal mafia have for all practical purposes shut out the coal option for India. Coal received at power stations have more stone and mud than coal mined. There is pilferage during transportation. Only recently has some improvement taken place. The coal industry today does not outright reject the notion that they have a responsibility to their customers.   The bane in the sector has been the government itself. Imagine an official of the rank of the cabinet secretary being charged with coordination – he has the job of ensuring that the wagons reach the coal mines and the coal reaches the power plants. Ultimately of course all plants get their coal but the entire movement is administratively determined rake by rake and mound by mound!  The inability of the SEBs to pay on time, and therefore of the tendency for the coal companies to put them at the bottom of their customer list, creates this socially wasteful administrative opportunity. The simple option would be to get rid of these coordination arrangements and allow the markets to function – after all the world has been transporting millions of tons of materials for over a hundred and fifty years.  This can be done by making the public enterprises involved – the coal companies, the Railways and the power plants - accountable to their contracts with punitive measures to ensure discipline. With some initial glitches the matter should soon settle and a real market for coal would undoubtedly emerge.  Policies and measures that go beyond merely stating that coal is open to foreign and domestic investments, are required.  Free imports alone would not be sufficient. The coal companies have to go commercial in the first stage to privatisation.  But this is easier said than done –they would require the autonomy but that cannot come unless they are privatised and that well seems nigh impossible… But the country cannot wait. Good options in gas and coal bed methane, with gas storage in coal mines, and other innovative extraction methods, besides efficient conventional opencast mining are not being pursued with the necessary vigour.   The dependence on imported fuels rises.  Potentially coal in India can be much cheaper than what current prices would indicate –after all on them are loaded all the inefficiencies and the poor technology choice decisions, and high freight rates. And since BHEL already has the technology to use high ash coal, there is no fundamental technology constraint either. Since Indian coal is low sulphur there are no environmental issues here either, especially if pithead options are taken up.  With some nudging and if the central electricity regulators understand the importance of new technology, the BHEL and the NTPC can be persuaded to persist with supercritical boiler technology immediately. Over the longer horizon the fluidised bed route technology needs to be taken up as a national R&D project so that very high ash coal can be handled. Coal fields, if need be even those assigned to existing coal companies, need to be put on the block at attractive terms and all stoppers pulled out to bring in new players with fresh perspectives.  With oil unlikely to go below US$35 is there any other option for the country?