Happy with the way mines were auctioned, says Coal Secretary Anil Swarup

An interview of Anil Swarup coal Secretary given to The Economics Times……..

Did the logic behind coal mine auctions work on expected lines?

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There is a general perception that Coal India does coal mining inefficiently, so it is costly. In Coal India, the mines that are outsourced cost less than its own mines. So we felt we will seek bids on efficiency. But you plan something and it doesn’t happen. People went haywire. I am still trying to understand why this happened. We auctioned 33 coal blocks, five are in court and 28 have been settled.

What went wrong post auctions?

The problem arose in the context of power sector when some of the companies tried to smuggle the high costs as fixed costs. I came to hear of it, people too spoke to me. I said we have been shouting from the rooftop that the exercise is to bring the tariffs down.

By definition even if you don’t understand economics, fixed costs cannot include coal cost. It is a variable cost. The ministry of power had to issue a clarification. It was not actually required but unnecessary confusion was being created. I don’t know whether consciously or unconsciously or under mistaken belief they made their calculations.

Some of them I know are in serious trouble. I discussed with bankers also and they said the companies did not listen to them.

Was the aggressive bidding by power firms on expected lines?

I tried to ascertain why this aggressive bidding happened because we want to understand for the future. One, of course, they were really desperate for coal. But I think the calculations are perhaps based on cost of the alternative available. The alternative of importing coal is more costly than getting this expensive coal within the country.

Did you ever tried to caution the companies against aggressive bidding?

People ask me why you didn’t stop them. I said if I were to stop them, all will curse a bureaucrat trying to tell businesses how to do business. And what do I tell them?

Five years down the line someone will ask me why did you stop them. There was huge amount of money coming to the government. We used to have intensive dialogues with all stakeholders and the idea was to make the bidding as transparent as possible. Everything was shared on the portal. Despite that they did the way they did. That is one area we may have to re-think why did they did what they did.

I don’t think that is something which makes me very comfortable. Our assumption was that they were doing what they did with their eyes wide open.

Is the government thinking of changing the policy to allow companies recover costs?

We won’t change any policy for them. We issued a clarification and there is no going back on that. Overall there will be pain for some but people have understood that the government does mean business and we will not change policy to benefit any one person.

Was there cartelisation in coal auction?

Everything was not well in certain bids. There is no conclusive proof but there is sufficient suspicion to not accept those bids.

What were the apprehensions before coal auctions?

In hindsight, we can claim that we did a reasonably good job but let me confess it was not an easy journey. We were apprehensive on many fronts. So we decided let’s go step by step. There is no politics in it. When I came here, I hit the ground running and we had to be cautious. People would have lynched us had anything gone wrong.

Will coal auctions improve coal availability scenario?

Within the 6-8 months as the coal becomes available, everyone will see the change. In the next one-and-half years about 130 million tonnes of non-Coal India coal will be available. The problem would be evacuation and that’s where we are engaging with railways very intensively.

Why cannot Coal India subsidiaries be hived off and listed for improving efficiency?

Listing of Coal India subsidiaries is an externality, efficiency has to come from inside. Fortunately there is lot of attrition that is happening in CIL and lot of younger lot is coming in and they are charged. One reason why CIL production has gone up is they have realized they have to compete. Good news is that the company is discovering that the cost of outsourced mine is about 30% less than their mines.

What is the difference between the previous and the present government?

There is lot of decisiveness in this government. In the previous government, decisions were not happening. In my entire stint in the Coal Ministry, I did not receive a single call to favour someone. I have not had this way in my entire career. I was never under pressure. The pressure was on account of the task I was doing. That’s a major change. I perhaps joined the hottest seat in the government.

At that point in time one could have expected pressure because anybody who was somebody had a stake in coal. Even then no pressure on you? Unthinkable! It was this last moment glitch with these 2-3 cases in the court that leaves a bad taste in the mouth.

http://economictimes.indiatimes.com/opinion/interviews/happy-with-the-way-mines-were-auctioned-says-coal-secretary-anil-swarup/articleshow/47423388.cms

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