The week has opened with big ticket reform announcements from the Modi Government. First, it was the energy sector where diesel was deregulated and gas prices were hiked after months of dilly dallying. And now, it is the coal sector where rules are being rewritten.
Some time back, the mining sector had received a huge blow as Supreme Court nullified the allocation of coal blocks. The entire sector has been in a state of limbo since then. The recent ordinance to facilitate e-auction of the blocks for private companies for captive use and allot mines directly to state and central PSUs will bring some relief. However, as an article in Firstpost suggests, this can best be called as the half hearted measure, unlikely to make much difference as far as coal demand supply gap is concerned.
This is because the new ordinance does nothing to break the monopoly of Coal India to ensure more participation from the private sector. It is only with the latter that one can expect an efficient utilization of coal resources in the country. The Government has suggested that the sector may be deregulated later and that the full commercial mining will be allowed. However, when that will happen is anybody's guess. Until then, the associated sectors, mainly power, are likely to suffer. The decision serves Government's short term interests well, Coal India being one of the candidates for divestment. However, it can hardly be called a reform in the true sense.
Even the much cheered diesel deregulation reform needs to pass the test when crude prices go up. Since the pricing system for end user industries of diesel and gas is not market based. In short, we have still a long way to go in becoming a free market that allows efficient uses of resources and win- win situation for all. And the sooner the Government covers this distance, the better it will be for the Indian economy.