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E A S Sarma: How sustainable is coal mining in India?

Greenpeace, the environment non-governmental organisation (NGO), recently released its study, "Coal India: Running on Empty?", suggesting that the "extractable" coal reserves disclosed by the company in its 2010 initial public offering were overstated by 19 per cent. And, if a more realistic estimate as provided by Coal India Ltd (CIL)'s own subsidiary Central Mine Planning & Design Institute Limited (CMPDIL) were considered, the reserves would not last more than 17 yearsat the projected increase in domestic demand for coal.

CIL's response to this was one of righteous anger. Questioning its misleading analysis, CIL called Greenpeace's study a "sinister design" aimed at increasing India's dependence on imports. It was somewhat akin to the charge made by M Veerappa Moily recently, when several people questioned his move to double the price of natural gas, primarily to the benefit of Reliance. He alleged that his critics belonged to the "import lobby". In such heated debates, logic becomes the victim and important issues get obfuscated.
 
To appreciate the real issues of this debate, one should understand the way coal is explored and recovered. The "inferred", "indicated" and "proved" resources are determined by the density of the exploratory boreholes. Not all the proved reserves are economical to develop since they are available at different depths. The cost of coal extraction increases with the depth. Apart from this, a portion of the proved reserves may lie under dense and valuable forests or might have come under urban cover. Portions of coal mines lie under tribal belts where the tribals have Constitutional rights and safeguards. Therefore, a decision to extract the coal will depend not only on the geology of the terrain but also on the social and economic costs of extraction.
 
To cite a specific example, the ministry of environment and forests (MOEF) evaluated the density of forest growth in the case of 602 coal blocks in nine major coal fields over an area of 6,487 sq km and categorised 35 per cent of the area as "no go" for coal mining. This raised a virtual battle between the MOEF and the other ministries. MOEF's approach in this case was justified not only for the reason that forest resources provide a valuable renewable natural resource but also in view of the stringent regime of forest conservation laws that exist in our case.
 
The feasibility and the viability of coal mining in India, therefore, depend not only on the geology and the technology of mining but also on the value we assign to ecology and livelihood and the respect we show to the Constitution and the forest conservation laws.
 
CIL's traditional Indian Standard Procedure (ISP) is a purely geological classification that hides more than it reveals. The UN Framework Classification (UNFC) goes one step further to factor in the feasibility and the economic viability criteria for estimating reserves. It is a more rational and practical way of assessing the reserves. Since it is a global classification methodology, it has the additional advantage of being understood globally.
 
Coal mining degrades the local environment and, in populated areas, involves serious human rights violations. Any classification that fails to capture this aspect would be insufficient and unrealistic. Even the UNFC is probably deficient to that extent and it needs to be improved upon.
 
While the issue between CIL and Greenpeace in the instant case has remained somewhat confined to the accuracy of the coal reserves disclosed, there are larger issues that need to be addressed.
 
In recent years, CIL, like the other public sector undertakings (PSUs), has witnessed two paradigm changes in the environment in which it functions.
 
First, 10 per cent of CIL's equity has shifted from the government to domestic and overseas shareholders who demand more stringent disclosures on the way CIL functions. As more and more of CIL's equity is disinvested, the company should be prepared for greater and greater transparency in disclosing its assets, costs, pricing policies and profitability, both short and long term.
 
Second, as a PSU, CIL has come under the purview of the Right to Information Act of 2005. Under Section 4, the company should, on its own, make accurate disclosures to the public. Citizens have the fundamental right to demand information on all aspects of CIL. The company can no longer take undue advantage of being an arm of the government under Article 12.
 
In other words, like never before, CIL has come under the scrutiny of not only its minority shareholders but also the public at large. To some extent, CIL's heated response to the Greenpeace study reflects the difficulty it is facing in adjusting to these changes.
 
There is the much larger issue of the sustainability of coal mining in India. Whether the extractable reserves are 21.7 billion tonnes as disclosed by CIL according to ISP or 18.2 billion tonnes as estimated by CMPDIL according to UNFC, the fact remains that the reserves are not unlimited. If the scarce forest resources that lie above the coal mines were to be accurately valued and if the social cost of displacing tribals and the legal implications of such displacement were also to be fully reckoned, the viability and the justification for extracting the coal would significantly diminish and the net reserves would be much lower than what either CIL or CMPDIL has estimated.
 
On the other hand, a study by a Pune-based NGO, Prayas, in August, 2011 indicated that during 2004-11 alone, the MOEF had cleared coal-based power projects of 580,000 Mw to be executed within 5 to 10 years, a figure that was twice the capacity projected by the Planning Commission as the capacity needed by 2032. Many of these projects are based on a mix of domestic and imported coal. Apparently, an indiscriminate coal rush is already on and if it ever materialises as planned, CIL would find it difficult to cater to the requirements fully. India is, therefore, deliberately moving towards becoming a large importer of coal, unmindful of the havoc that coal burning is going to cause, in terms of the toxic pollution it will unleash, the traumatic human displacement it will cause and the damage it will impose on the local environment as well as the global climate.
 
As a public sector company, CIL cannot and should not keep its eyes closed to these disturbing concerns that will have a long-term impact on the country's energy security and on the lives of the people.

Source: Business Standard