Is Coal India going Solar

Coal India is a gigantic parasite of the Indian economy in my view. The company which has a monopoloy over mining of coal in India, is one of the most inefficient and corrupt enterprises out there. However, its huge scale and manpower makes it impossible for the government to rationalize or reform this company. Instead the power ministry wants to increase the output of this company from around 400 million tons of coal now, to 1000 million tons. Despite its record of sloth and corruption, the government continues to rely on the company to bet the country’s energy future.

It has a horrendous cost structure with a lack of mechanization, resulting in massive manpower costs that make HR costs an inordinate amount of total costs. The only reason that the company is not bankrupt is because of the low cost of its coal deposits. While other coal producers and consumers have to bid in a competitive environment to get access to coal mines, Coal India has happily got massive billions of tons of coal deposits on a free platter.

Also read Coal India’s decision of building floating solar power plants is stupid.

The government also uses this company to achieve its targets, even though it may not have any linkage to mining. Coal India has set a target of building 1000 MW of solar power plants across the country, in order to help the Indian government build 175 GW of renewable energy capacity by 2022. Coal India has zero competence in building, operating or selling power, but still it is going ahead. It is using another Indian government agency SECI to bid out and help build the plants. Coal India will be providing money, as that is the only competence it has in the power sector.

A much better way for the Indian government to increase renewable energy would be to extract the huge cash lying on its balance sheet and give it as a form of subsidies to much more efficient private solar power developers. A target much larger than 1000 MW could be achieved through this mean and much more efficiently as well. Coal India is a dinosaur, which should be broken up into pieces and sold off in the stock market. Private players could make this organization much more efficient and operate the mines in an a much more productive manner.

But the Indian government for all its reform focused policies cannot take on the might of the powerful trade unions. Air India the state run airline is another major disaste which continues to operate on massive losses, but the Indian government has faield to come up with a way to reform this eyesore. While the government has tried to take baby steps at divestment and shutting down of some of the large state run PSUs, it has not made much headway. The huge government workforce called a big strike despite getting a huge unjustified pay hike this year, which has led to a pressure on the finances of the Indian government (estimated cost of around $30 billion a year in additional wage and salary costs).