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CIL - A classic case of public monopoly
Fri, 9 Jan Pre-Open

Coal India workers going on strike have recently hit the headlines of most of the leading financial dailies. The move from the workers has come after the government has initiated the process to denationalise coal with its recent Bill. The said strike is believed to have impacted production at over 75% of the coal mines. With so much of dependence for sourcing coal, the biggest concern has been impact on electric supply.

Though the strike was called off in a day's time, the problem remains intact. With a monopoly in coal mining for decades, the state owned miner, Coal India has had no incentive to bring in efficiency. Corruption, mining bans, maoist attacks, labour unrest, poor efficiency, incompetent governance and political interference have been haunting the prospects of coal mining sector in India.

Mining has faced multiple problems since many years now. Private mining of coal for industrial consumption has been banned for over 42 years now. This is despite the fact that India has amongst the world's largest reserves of coal. Not surprisingly, the country's power plants have been deprived of the mineral thanks to dependence on high cost imports. As per an article in Mint, India's coal imports have almost doubled this year as compared to 2011-12 at 100 million tonnes. Further, these imports are expected to increase for the upcoming period too since Coal India's production is still at unsatisfactory levels. The coal imports continue to rise at anything over 20% each year.

The government policies have so far have not utilized the strengths of the resourceful companies' like that of Coal India in an efficient manner. However, the government has now realized the potential of optimizing the use of natural resources to stoke GDP growth. The recent ordinance passed seems to be a positive development. However the task will not be an easy one and more tumbling blocks will hinder the way as seen recently.

With a solid balance sheet, plenty of reserves at its disposal and growing demand for its produce, all Coal India needs to do is to improve its efficiency level. Thus if government is able to come up with good policies, make it professionalized and inject good technologies this resource rich company can be an important contributor to GDP and growth driver for other projects.

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