Dear Reader: I'd like to extend to you my warmest wishes on behalf of the entire Equitymaster family. May the special occasion of Deepawali fill you with happiness and prosperity! And May you have A Wonderful New Year too! - Rahul
Scarce resources have been the key concern for growing economies in recent times. One, the prices of commodities have been going through the roof. Two, supply constraints for some key industrial inputs are threatening to impact production and growth rates.
For India, power is one of the key sectors that can drive the economy's growth rates. However, the abysmal track record in commissioning of power plants makes the future of the economy very blurred.
The key reason for the same seems to be shortage of coal. Although hydel power is an important source of energy, most of the large power generators in the country depend on coal.
India aims to generate at least 4,00,000 MW power by 2030 through coal-fired power plants. Hence the necessity of the mineral cannot be emphasized enough.
As per a leading daily, Prime Minister Manmohan Singh has called an urgent meeting to take stock of the issue of coal shortage in the country and try and do something about it. Even the environment ministry will be coaxed perhaps to get a little more accommodative on environmental considerations during the time of granting of coal mining licences.
It should be noted that despite being home to one of the world's largest coal reserves, the Government has revised upwards its estimated coal shortage for FY12. The same will now stand at 112 m tonnes, up from 83 m tonnes forecasted in December 2010. The entire shortfall is likely to be met by imports.
The main reason things have come to such a pass is because of a policy implementation by the Ministry of Environment last year. It classified coal-mining projects within forest areas into 'go' and 'no go' areas. The estimated loss of production due to this classification has been pegged at 613 m tonnes a year!
Interestingly, the management of the country's top power producer NTPC denied any shortage of coal supplies. During a conference call for analyzing financial year 2011 results, the company remained sanguine about the prospects of coal linkages. This is despite failing miserably on its capacity addition targets.
Probably, it is high time the government and PSU entities get over the denial mode. This would help arrest the destruction of shareholder wealth in the companies and put the economic growth on a firmer footing.