Comptroller and auditor General of India ( CAG ) raps Indian government for deciding on coal block allocations and causing a revenue loss of 1.86 lakh crore rupees. Indian Parliament is in a logjam. Opposition parties are pressing for the resignation of prime minister and minister after minister of UPA II are making brave but unconvincing attempts to justify coal block allocation in place of competitive bidding or auction.Their main line of defence seems to be dwelling upon
a) Doubts raised on the jurisdiction and competence of CAG
b) There has been zero loss of revenue
c) The decision was taken in national interest to achieve high growth and to mitigate the woes of the common man by providing him cheap electricity.
The contention of zero loss of revenue and intention of providing stimulus to growth, somehow do not cut much ice in justifying rationale behind the process of resorting to the route of coal block allocations and were discussed in coal gate , congress gate or flood gate of corruption.
Let us try to understand the impact of allocations on power generation and heavy industry like steel and cement. Recently it was brought out by NPTC that a 25% decrease ( from $100 to $75 a ton ) in international coal prices will bring down the cost of power generation by mere 7 - 10 paise per unit, a meagre decrease of 2-3% in the power generation cost at the plant for a coal cost reduction of Rs 1100/ton. The fuel component of power generation is merely 35-40 paise per unit even when coal is priced at Rs 4000/ton and the cost to consumer multiplies manifolds because of plant capital cost, manpower costs, transmission and distribution costs etc.. Where is the concern for the common man or providing stimulus to growth seen when in one go the governments increase rates to consumers by more than 30%.
In steel production, coal contributes 8 to 12% to the cost of steel whereas in cement industry the contribution of the coal to the cost of cement is about 18-20% and the coal cost includes royalty, mining, coking ( in case of steel production ) and logistics.
The coal block allocation or auction and the loss to revenue relates only to the royalty money. Incidentally the royalty content in coal price of about Rs1500/ton supplied by Coal India is Rs 180/ton. In the light of all this, arguments for coal block allocations are nothing more than a hoax and seem to be governed by everything other than any noble intention. In fact such decisions are bleeding the Indian economy and are putting India's march to prosperity backwards by a couple of years.
The contention of zero loss of revenue and intention of providing stimulus to growth, somehow do not cut much ice in justifying rationale behind the process of resorting to the route of coal block allocations and were discussed in coal gate , congress gate or flood gate of corruption.
Let us try to understand the impact of allocations on power generation and heavy industry like steel and cement. Recently it was brought out by NPTC that a 25% decrease ( from $100 to $75 a ton ) in international coal prices will bring down the cost of power generation by mere 7 - 10 paise per unit, a meagre decrease of 2-3% in the power generation cost at the plant for a coal cost reduction of Rs 1100/ton. The fuel component of power generation is merely 35-40 paise per unit even when coal is priced at Rs 4000/ton and the cost to consumer multiplies manifolds because of plant capital cost, manpower costs, transmission and distribution costs etc.. Where is the concern for the common man or providing stimulus to growth seen when in one go the governments increase rates to consumers by more than 30%.
In steel production, coal contributes 8 to 12% to the cost of steel whereas in cement industry the contribution of the coal to the cost of cement is about 18-20% and the coal cost includes royalty, mining, coking ( in case of steel production ) and logistics.
The coal block allocation or auction and the loss to revenue relates only to the royalty money. Incidentally the royalty content in coal price of about Rs1500/ton supplied by Coal India is Rs 180/ton. In the light of all this, arguments for coal block allocations are nothing more than a hoax and seem to be governed by everything other than any noble intention. In fact such decisions are bleeding the Indian economy and are putting India's march to prosperity backwards by a couple of years.
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