Saturday, October 14, 2006

Paradoxes of coal mining policies

The pricing of coal was fully deregulated after the Colliery Control Order 2000 was notified with effect from January 2000. But this has led to a monopolistic market. Coal India controls almost 90% of the domestic production and maintains a supply which is only sufficient to meet the projected demand, thereby limiting the scope of competition.

There are also high entry barriers for competing producers to enter coal mining and they cannot freely sell the coal they mine under current law. Therefore, it is believed, coal prices may not be fair and competitive.

The cost of energy per unit at pit head for domestic coal and at port for imported coal comes out approximately at Rs. 0.66 for domestic coal and Rs. 1.57 for imported coal. Therefore, domestic coal prices may appear fairly competitive.