Against the False Propaganda about Coal Privatisation

At a time when workers are organising strikes and other protest actions against the auction of 41 coal mines to private companies for commercial mining, government spokesmen are promoting various so-called justifications. Prime Minister Modi has claimed that his government is “unlocking India’s coal sector from decades of lockdown”.  He has even declared that India would be transformed into a major exporter of coal. Niti Ayog Chief Amitabh Kant has blamed the establishment of state monopoly in 1972-73 as having led to “India becoming the second-largest importer of coal despite having one of the largest coal reserves in the world”.

Currently, the major importers of coal are China, India, Japan and South Korea while the major exporters are Australia, Indonesia, USA and South Africa.  The present international trend is to replace coal with renewable sources of energy. This is in response to the growing concern about the destructive impact of coal mining on the natural environment.  Moreover, Indian coal reserves are considered of poor quality relative to what is available in most other countries.  For these reasons, it is not possible for India to become a major exporter of coal.

In 2003-04, India was importing less than 6.5% of its total coal requirements. By 2018-19, this has increased to 25%. Total coal imports were 235 MT (million metric tonnes) that year, including 52 MT of coking coal and 183 MT of non-coking coal.  Coking coal is used by steel plants, while non-coking coal is used by coal-based thermal power plants and by the cement, fertiliser and aluminium industries.

The rapid growth of coal imports is a result of the program of globalisation through privatisation and liberalisation.  Coal was brought under Open General License in 1993-94, which meant that it could be imported by any private capitalist company without applying for government permission. In periods when the price of coal fell in the world market, private companies found it cheaper to use imported coal from Australia or Indonesia. Many new industrial units were designed specifically to use imported coal.  Coal-based power plants were set up near the coast, far away from the mineral deposits within the country.

A second major reason for the growth of coal imports is that production by Coal India was not allowed to keep pace with the growing demand. The Central Government did not invest in developing railway lines and other infrastructure needed to increase coal production. Further, considerations of violation of pollution norms and getting environmental clearances were factors which prevented new mines from being established. These reasons are admitted by a paper published by the Coal Ministry in 2013.i

Neither the Prime Minister nor the Chief of Niti Ayog have explained why private companies will be able to increase the production of coal better than the state-owned Coal India Limited. The quality of coal reserves in our country is not going to change as a result of privatisation.  Environmental considerations are also not going to disappear.  Private coal-using industries will continue to resort to increased imports whenever the price of coal is low in the world market.

The truth is that ensuring self-reliance in energy has not been the aim driving government policy. What has driven government policy is the aim of fulfilling the greed of capitalist monopolies.

Between 2004 and 2009, the Congress-led government allocated coal mines to various companies for captive use.  Opposition parties alleged that the allotments were arbitrary, involved corruption and had led to massive loss of public funds.  Those allotments were cancelled by the Supreme Court in 2014. Now the BJP-led government has gone further on the road of privatisation, by repealing the laws which stipulated state monopoly over commercial mining, and permitting private companies to produce and sell coal to anyone they please.

Most of the capitalists who were given coal mining licenses during 2004-2009 were found to have no plans whatsoever for production of coal. Their plan was to just sit on the mineral wealth and sell their licenses later for a windfall profit.

There is no reason to expect the auction process to be less corrupt now. Capitalist monopolies bidding for the coal blocks will form cartels to acquire them at the lowest possible cost. They will use their influence over the state officials and ministers to defeat their rivals.  In future, such coal cartels will use their control over the state to systematically weaken Coal India so as to increase their share of the domestic market for coal. The amount of coal produced will be determined by the need to maximise private profits and not by the need to reduce dependence on imports.

A second justification being advanced by the Chief of Niti Ayog is that it will lead to lakhs of new jobs. What is being hidden is that the expansion of coal production by private companies will be at the expense of production by Coal India.  New jobs will be created by destroying existing jobs. And they will be created at lower wages and at terms much worse than those which workers of Coal India have achieved.

A third justification being advanced is that the states in which the mines are located would get increased revenue from coal royalty.  It is argued that this, along with central spending to improve rail infrastructure, would lead to the development of regions in which coal mines are located. An important fact being hidden is that it is the Central Government which sets the rate of royalty on coal, while the revenue from the royalty accrues to the state governments.  The Central Government is not likely to raise the rate since it will increase the sale price of private companies, making them less competitive relative to foreign suppliers.

Under state ownership, there are only two claimants for the value added by coal production.  The workers employed are one claimant and the State is the other.  Under private ownership, there is a third claimant, the private owners who seek to maximise their profits.  Hence privatisation will not increase, but in fact reduce the resources available for developing the mining regions.

The promise to spend more funds from the central budget on infrastructure has nothing to do with the welfare of those living in the mining regions. The real motive is to assist private companies to make huge profits.

Yet another justification being propagated is that opening up coal mining to foreign investors will allegedly bring in the latest global mining technology to our country.  In actual fact, the latest technological developments are aimed at minimising environmental degradation and improving safety for mine workers.  They involve considerable additional investments. Profit hungry private companies are much less likely to adopt such technology than the state-owned Coal India.

If coal mining in our country is to benefit from the latest global technology, the Central Government ought to pursue a technology transfer arrangement for modernising the mines of Coal India. There is no sign of any such plan.

In sum, the arguments being promoted for justifying coal privatisation are nothing but false propaganda, to hide the fact that the real motive is to enable capitalist companies to profit at the expense of Coal India.

iRecent trends in production and import of coal in India. Ministry of Coal, Occasional Working Paper Series No. 1 /13 October 2013)

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