India's mountain of coal problems

Women carry baskets of coal back to their village for sale, after having scavenged the coal illegally from an open-cast coal mine in the village of Jina Gora (Getty Images)

Across India, thermal power stations are running below capacity because they can't get enough coal, and factories are running on expensive diesel generators because they can't get enough power.

But here at one of India's largest mines, millions of tons of coal are stockpiled because they can't be transported quickly to the nearest rail yard. Plans to expand production further have been put on hold because a branch line to the mine, already three years behind schedule, is still less than half built. And the sorry state of India's railway network is only part of the story.

At a time when the country's energy needs are growing at a staggering pace, India depends heavily on coal, drawing on the fifth-largest reserves in the world. But mining has consistently fallen below target, imports are rising fast and the problems in the largely state-run industry may have even more far-reaching implications.

"It is essentially a combination of misgovernance, apathy and neglect of the entire sector," Ashok Sreenivas of the Prayas Energy Group, a nonprofit think tank, said of the industry and its troubles. "It has been allowed to deteriorate out of the public eye."

The problems at the Basundhara mine in eastern India offer an example of the difficulties that threaten to undermine the nation's economic ambitions and its plans to create tens of millions of jobs for its fast-growing young workforce through rapid industrialization.

At the mine, 1,400 trucks a day choke the road that wends its way from the mine through forests and villages to the rail yard, belching diesel fumes and coating plants in black dust. But even that is not nearly enough.

Animesh Nandan Sahay, chairman of a subsidiary of the state-run Coal India, said the absence of a railway line stands in the way of a plan to "quickly ramp up'' production at Basundhara to 80 million tons a year, from less than 12 now.

It is a situation that is unimaginable in neighboring China, where coal production has been aggressively expanded in the past two decades to feed the maw of industry, where farmers, the environment and safety standards have been brushed aside in pursuit of economic growth.

Here in India, the world's largest democracy, decision-making is less simple.

Coal India has been tied down by a snarly regulations and political populism, as well as by concerns about the environment and the rights of displaced farmers.

The ministries of environment and coal square off more like adversaries than partners, while the ministry of power is its own independent fiefdom.

The railway network is so inadequate that even power stations that depend on expensive imported coal cannot get it delivered, and plans to build a dedicated national freight network are years behind schedule.

But the biggest challenge, according to the chairman of Coal India, S. Narsingh Rao, is getting villagers to agree to give up land that needs to be acquired for mining, something he says has become "significantly more complex" in the past five years.

Under the watchful eye of India's vibrant media, egged on by activists and vote-hungry politicians, farmers can no longer be bullied or swindled out of their land as easily as in the past.

Many people are reluctant to move, even though Coal India offers resettlement packages that include jobs for families who lose their land. And in a country where land records are hopelessly inadequate, verifying who is entitled to compensation can be a complex and time-consuming task.

Villagers refuse to move

The village of Balinga sits beside an open cast mine, in the shadow of a huge mound of shale and earth. When the area was first earmarked for mining 12 years ago, the land was acquired and compensation paid. But many villagers stayed in their homes. Now that the time has come to actually start excavations, many are refusing to move.

Ashtami Ahinda said her family owned 10 acres of fertile paddy field. Even though she marked it out with flags, Coal India took the lot and paid her only for an acre, she said.

The compensation has long since run out, leaving her with a daughter and a widowed daughter-in-law to support, along with two small grandchildren.

For Coal India, the resettlement policy has left the company with another headache — an army of unskilled and often unmotivated workers. Officials say that four-fifths of the company's 370,000 workers were hired only because they had surrendered their land and that it is difficult to fire even under-performers under India's stringent labor laws.

"We think around 45 percent are dead wood," said one official, who declined to be named so that he could speak frankly about the company's problems.

But dead wood is easier to handle than living trees. Some of the richest coal seams sit under protected forest.

Some areas were declared off-limits to mining, but other applications for environmental permits simply got ensnared for years in endless layers of bureaucracy.

Govinda Rao, director of the National Institute of Public Finance and Policy and a member of the prime minister's Economic Advisory Council, said that Coal India was to blame for failing to come up with a credible environment plan but that the biggest problem was a lack of governmental coordination.

"Why is it," he asked, "that the right hand does not know what the left hand is doing?"

Coal imports quadruple

Coal-fired plants generate roughly 70 percent of India's power needs, but with the public-sector mining industry failing to keep up with demand, coal imports have more than quadrupled since 2001. Imports accounted for 14 percent of total consumption in 2010, up from six percent in 2001.

An attempt to involve the private sector in mining has done little to turn the trends around. When tracts of coal-rich land were allocated to private companies at knock-down prices, allegations of corruption soon surfaced.

The government's independent auditor concluded that the process lacked transparency and objectivity, and said the government had foregone more than $30 billion in revenue by virtually giving the land away.

The scandal became a major political embarrassment, and several allocations have already been canceled as investigations get underway.

Yet the biggest problem, argues Rajendra Pachauri, former chairman of the Nobel-Prize-winning Intergovernmental Panel on Climate Change, is that India is too dependent on coal and has failed to invest in renewable energy.

If the government continues with "business as usual" it will end up needing to import staggering amounts of coal in 20 years' time — numbers that he said "are just not going to be possible."