General Awareness

April 04, 2017 @ 01:15 PM

April 04, 2017 @ 01:15 PM

K. J. Somaiya Institute of Management Studies and Research, Mumbai

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General Awareness Topic : Coal Blocs Imbroglio

Published : Friday, 19 September, 2014 05:10 PM  
 
MBA aspirants must be updated with General Awareness on current topics. General awareness topics with analytically drawn conclusions will benefit you in Essay writing / GD & PI. Today, you will read General Awareness Topic: 
 
Coal Blocs Imbroglio
 
Backgrounder 
 
The coal allotment scam also referred to as Coalgate scam is the largest scam so far reported in India amounting to the tune of approximately INR10 lakhs crore. The disclosure of scam by Comptroller and Auditor General (CAG) caused huge uproar in parliament, media as well as in the public and is supposed to be one of the major reasons behind the decimation of Congress Party in the latest general election.
 
The initial CAG report suggested that instead of allocating coal blocks by competitive bidding, they are allocated arbitrarily causing losses to the exchequer and windfall gains to the parties. Coal blocks could have been allocated more efficiently, resulting in more revenue to the government; at no point did it suggest that corruption was involved in the allocation of coal.
 
However, the Supreme Court of India recently ruled that all coal block allocations post 1992 were illegal as they were based on non-compliance of the mandatory legal procedure under the Mines and Minerals Act. The Supreme Court ruling made the fate of around 218 block allocations and consequential investments to the tune of around Rs 2 lakh crore uncertain and the court has reserved its order over these coal blocks. The government had asked the court to exempt 40 of them which are functional and ready for the end use power plants.
 
Already, India is facing coal shortage seriously affecting the power generation across the country. More than 50 plants across the country are left with less than seven day’s stock of coal.  As more than two-third of power in India is generated by coal based thermal power plants, if the shortage continues, country may reach the brink of blackout. The power sector has not been able to obtain sufficient domestic coal and has become reliant on costlier imports. If the Supreme Court cancels the blocks after a further hearing, India may have to import even more coal to generate electricity.
 
Despite India having about 10 per cent of the world’s coal reserves, the country struggled to supply sufficient fuel to the power sector due to hurdles in land acquisition and environmental clearances for mining. These policy and red tape hurdles become the breeding ground for corruption. 
 
Looking Forward 
 
The ministry of power has indicated that the country would face a shortfall of 238 million tonnes (MT) of coal in the 12th five year plan period (2012-2017) and power woes are likely to continue in coming days. According to the Power Ministry’s working group for the 12th plan, coal availability will be 604 million tonnes against the required 842 MT for the country’s power utilities. To meet the shortage, the power producing companies will have to import 159 MT immediately.
 
The costly import makes power generation more expensive ultimately affecting the overall economy. On one hand, the costly commercial power hinders the economic growth increase the production cost of manufacturing sector while on the other side subsidization of household power deteriorates the finances of power companies and government.
 
The current coal crisis in India is the outcome of corruption, policy paralysis and the cumbersome laws. The Supreme Court had already declared all coal blocks since 1992 illegal and if goes ahead with the cancellation of all the blocks including the 40 blocks currently functional, power and metal companies would certainly be affected.
 
But the truth of the matter is that all these blocks were allocated in illegal matter. In India, red tape and absence of transparency have become routine. As a silver lining, the latest Supreme Court ruling regarding coal blocks could be good learning lesson for the policy makers.     
 
 
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