Independent Coal Regulatory Authority Bill, 2012

Introduction

India has the fourth-largest coal reserves in the world. There are huge power expansions plans which need to be fuelled by coal. However, there has been no coal regulator. The idea of a Coal Regulatory Authority was mooted in 2008, but it could be established for unknown reasons.

Background:

• Setting up a regulator for monitoring coal resource development was first recommended by the Integrated Energy Policy (IEP) framed by former Planning Commission member Kirit Parikh and the T L Shankar Committee on coal sector reforms.
  
• The Energy Coordination Committee, headed by Prime Minister Manmohan Singh, had then asked the Planning Commission to prepare a paper on the issue. However, so far, the Coal Regulatory Authority could not see the light of the day.
  

Introduction to Bill

After the recent Comptroller and Auditor General’s (CAG) observations on the coal sector and the Coalgate controversy, the Government has now come up with a draft Independent Coal Regulatory Authority Bill, 2012 to establish an independent regulator for the coal sector that will have a firm say in allocation of blocks and ensure strict enforcement of mining regulations.

The Government says that the independent regulator was needed considering the near-monopoly the producers in the coal industry enjoy and the fact that regulation was currently done by agencies closely associated with the government as well as the same producers.

Salient Features

1. The proposed Bill seeks providing a level-playing field to all stakeholders and promoting investment in the sector.
   
2. Coal Regulatory Authority would comprise a chairperson and four members, one each for the legal, technical, finance and administration wings. The chairperson and the members would be appointed by a selection committee headed by the cabinet secretary.
   
3. The bill seeks to empower the proposed regulator to decide the fuel’s prices and to suspend or cancel authorisations of errant coal producers.
   
4. The authority would also specify standards of performance and operational norms for coal companies and monitor the same.
   
5. The proposed authority would determine the price of raw coal, washed coal and by-products.
   
6. The authority would advise the Centre on formulation of the policies.
   
7. coal ministry’s role would be largely defined by the regulator and it would try and adhere to the advice extended by the regulatory mechanism
   
8. Centre’s role would be restricted to policy-making while the regulator would ensure implementation of the policy.
   
9. The regulator’s functions would include specifying the quality and performance parameters, ensuring adherence to the mining plan, recovering penalties, monitoring the utilisation of funds for coal conservation and promoting clean coal technologies.
   
10. To ensure independent functioning of the regulator, a Coal Regulatory Authority Fund has also been proposed. All grants, fees and charges received by the Authority under this Act and all sums received by the Authority shall be credited to this fund.
    

Major Issue: Pricing Power of the Regulator

In India, the prices of coal currently being realised at e-auctions, the majority of which is supplied by CIL, are about 80 per cent higher than the notified price. However, as per the bill, the proposed authority will have pricing power. In a recent GoM meeting it was said that there is no commercial mining in India by companies other than (state-run) Coal India Ltd. Coal India decides price of the fuel without any formal directive from the coal ministry, but the government has a say because it holds majority equity. Some ministries have said that the bill would take the country back to the pre-1991 era of licence raj and there must be a difference between regulation and licensing.