Grey gold

With crude oil around $50 per barrel and analysts like Marc Faber discussing the possibility of it touching $200 in the next few years—if China’s per capita consumption rises to Mexico’s levels, it would use up 30 per cent of global production—it’s time for the government to start seriously looking at alternative fuels.

Since choices like solar and wind energy seem marginal solutions at today’s levels of technology, the only realistic solutions lie in hydro, nuclear and coal-powered stations.

However, the nuclear option gets pretty much get ruled out because of the possibility of protests/pressure and the poor track record of the atomic energy establishment, and hydel power will face concerted attacks from NGOs, leaving only coal. Indeed, when pressed, this is the solution most politicians come up with. Black gold, however, is increasingly going grey and may not be able to bail out India.

For one, the country’s reserves are not the popular 240 billion tonnes usually talked of (enough for 400 years or more based on current production levels). About half this figure, for instance, is at depths of more than 300 metres, the maximum depth at which open cast mining is feasible.

And if you develop underground mines, the costs go up considerably (15 times in the case of the Eastern Coalfields). The Planning Commission estimates, in the 10th plan document, that India’s extractable reserves are 18 billion tonnes, enough for the next 40–50 years only.

Even these reserves, it must be added, do not square up with acceptable international definitions and the previous government had planned to do a more realistic assessment of reserves—around 15 years ago, for instance, the thickness of a coal seam was reduced by a fourth for qualifying as a reserve, and this boosted estimates considerably. The plan, by the way, estimates there will be a 55 million tonne shortage by 2006-07.

Getting the private sector in is a partial solution, though even this waits for a parliamentary nod that Coal India has managed to beat back for several years now—private mining is allowed only for captive purposes today.

Even if the nod comes through, it is unlikely that major global firms will bid since the best blocks are with Coal India and only those of peripheral importance or those without any infrastructure are being talked of as far as the potential private players are concerned.

Based on current production trends, it is unlikely that more than 25,000 MW of fresh power supplies can be based on coal, a fraction of what’s it’s something worth pursuing. For one, it will dramatically lower costs being projected as demand.

While private sector entry won ‘t help augment supplies for a long time, given how Coal India’s costs are contested as being too high by users like the National Thermal Power Corporation.