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Editorial | October 2014

Coal Blocked

The Supreme Court has finally put an end to the uncertainty that shrouded the coal block allocation issue. But I have a few issues with the decision, because I fear that the aftermath may turn out to be a little difficult to handle.

My primary concern is that the verdict could severely erode investor confidence, and this setback comes at a very crucial time when the Indian economy is just about showing some signs of recovery. International investors would surely become wary of investing in an economy where the sanctity of business contracts guaranteed by the government is itself at stake.

And keep in mind that global players are still not happy that the present government has not scrapped outright the retrospective taxes introduced by the previous regime. This issue could snowball into a major crisis on the lines of the 2012 blackout; more than half of India´s thermal plants currently have less than a week´s supply of coal. Further, the banking industry is going to start bleeding from NPAs reports indicate that State Bank of India alone has an exposure to the miners involved to the extent of Rs 4,000 crore.

The only saving grace is that the verdict has thrown up the opportunity to completely clean up the coal sector, repeal the Coal Mines Nationalisation Act, and turn around behemoth Coal India. Will the government bite the bullet? If it has to make its ´Make in India´ campaign a success, and ensure only the red carpet and not red tape for foreign investors, now´s the time for the Centre to get its act together.

Amid all the heat and dust being raised by what is literally a (coal) burning issue, one decision taken by the government to postpone the gas-pricing call seems to have escaped the attention of many. Now we have to wait till November 15th for the government´s final say on the issue. Will the PM (who is travelling to New York as I write this) be successful in tying up a shale gas import package from America? The US is flush with shale gas; natural gas production is at a 28-year high, and fuel prices have been falling steadily.

Coming back to this current issue of Power Today, we take a look at how the whole Distribution Franchise model, once considered to be the power sector´s magic mantra, seems to have crumbled. You will find a few very interesting takes from the article, as sources in the know have come up with the inside story on what actually went wrong, for the very first time. We also examine why, despite all the civil nuclear deals being inked by our nation, there´s much that is still unclear on the nuclear front.

As always, please do keep writing in.
Here´s wishing you and your families a very happy season of festivities!

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