UPA in the Dock: ‘CAG Pegs Rs 1.81 Lakh Crore Loss in Coal Block Allocation’
Electrical power in India is controlled by one company, the 90-percent state-owned behemoth Coal India Ltd., which also happens to be the largest coal-mining firm on the planet.
Two years ago, when CIL went public, shares jumped 40 percent on the first day of trading; the IPO was one of the biggest Indian markets had ever seen.
CIL controls 80 percent of coal production in the nation, giving it dominance in a country where coal provides for more than half of the electricity.
But India faces a daunting energy crisis, with almost 400 million people (about one-third of the total population) lacking access to electricity. Power outages and blackouts are a common occurrence for tens of millions who do have such access.
CIL has been criticized for failing to sufficiently invest in upgrades. The company has also been pressured by government demands that it sell its products at a huge discount from market prices.
Moreover, a shortage of domestic coal has postponed the construction of new power plants in the energy-starved country.
India cannot produce enough coal on its own to satisfy its huge energy demand. Coal imports have been compromised after Indonesia – India's biggest coal exporter – recently doubled prices for the black gold.
According to a report in the New York Times, coal production in India is expanding at an average rate of 5 percent annually, as power plant capacity is growing between 10 and 15 percent per year.
But that isn't nearly enough, given India's insatiable energy demand.
Development of power projects is also hurt by political corruption, poor management, weak infrastructure, bad government policy and agitation by environmental activists.
The problems associated with power production may also be slowing economic growth in India – GDP is expected to climb by 7 percent this year, a healthy expansion, but significantly lower than the 10 percent growth India enjoyed in 2010 and China consistently delivers.
“There is virtually no new investment by both the government and private sector,” Ashok M. Advani, executive chairman of Blue Star, an air-conditioner manufacturer, told the Times.
“We have such an uncertain environment.”
The situation has become so dire that many factories and businesses are deriving electricity from costly diesel generators.
As an alternative to irregular (and environmentally dirty) coal supplies, India has been developing solar energy enterprises.
Last year, Gujarat in western India said it planned to construct a $2.3-billion solar complex — the biggest photo-voltaic power station in the world, three times bigger than the Golmud Solar Park in China.
The Indian government – which is almost entirely dependent on foreign oil imports – is committed to have 15 percent of its total energy consumption from renewable sources of energy by 2020 (from 6 percent now).
Meanwhile, India must deal with CIL, which is failing its mandate to create enough power.
Siddharth Bhargava, a research analyst at Matthews International Capital Management in San Francisco, said: “India’s over-reliance on a single firm for its fuel is a problem, especially considering this company has missed production targets by about 10 percent each year for the past three years.”
Bhargava added that another problem is that nearly one-third of the power generated in India is lost through technological inefficiencies and from theft.
“Power facilities in every country experience some level of power loss during distribution, but in India this loss is nearly three times higher than the International Energy Agency's acceptable standards,” he said.
Bhargava warned that for the foreseeable future, India will have to keep relying on a single supplier of coal and take steps to institutionalize coal imports.
Meanwhile, India's power needs will only continue to escalate.
Indeed, Power Minister Sushil Kumar Shinde, speaking at the World Energy Leaders Summit in Istanbul, Turkey, said he expects India to become the world's third-largest biggest energy consumer in the world by 2020, behind the U.S. and China.
This article is copyrighted by International Business Times, the business news leader