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Editorial | January 2015

The canary in the coal mine

As many of our readers would know, in days of yore, miners used to release a canary into new coal seams to judge if the air supply was free from any poisonous gas emissions. If the canary continued to sing, the coal mine was considered to be safe for mining.

This is a strategy often used by companies cutting across industries to judge a potential market before embarking on a major project. Now with the government poised to kick off coal auctions, the question that arises is whether private players in the Indian coal mining sector have adequately tested the waters before taking the plunge.

Why do I say this? Our private sector is simply not prepared to expand its coal mining activities. Almost every commentator worth his salt has been going on and on about the need to rationalise the operations of Coal India. But the fact that the private sector, which had been shut out from coal mining activities due to the sector´s nationalisation, has some way to go before it comes up to speed on the coal mining front. This fact seems to have escaped almost every industry watcher. Highly placed sources in the know have confirmed to me that a few existing players, who had possession of the (now cancelled) coal blocks, had actually not seriously looked at developing their allotments, but profited from the enhanced stock market valuations which their companies enjoyed due to their coal block assets. A few ´non-serious´ players even gained by selling their mines!

My argument is not that Coal India does not need urgent reform. This publication has time and again over the past few years highlighted the urgent steps needed to be taken to turn around the public sector behemoth. (See our September Cover Story). Just throwing open coal mining to private players is not going to be a magical mantra. But there is some light at the end of this long and dark tunnel.

For example, the Coal Mines (Special Provisions) Ordinance, 2014 has freed up commercial mining, and prospective players in this sector can now look at tying up with international players for attracting global talent and expertise.

In fact, the talent issue is going to be another big hurdle, though. Coal India doles out attractive compensation packages even to its blue-collared workers, many of whom have extensive experience in underground mining, and senior executives also command a decent salary package. And of course, job security at these positions is backed by the deep pockets of the Centre. Can the private sector wean away staff from CIL? That´s going to be a tricky issue.

So here we are at the beginning of a year, which will separate the wheat from the chaff in the power sector. I´ll sign off by wishing you and your corporate and personal families a very happy New Year. There´s much to look forward to and I am personally optimistic that once the din dies down, the ´acche din´ will be here!

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