To meet the growing power demand of the developing country like India and looking at the position it holds

in Coal fields. Its highly conspicuous to say India has to tap its coal mines to balance its demand. India is fourth largest coal reserve in world with reserve of 285,863 million tone. Projected demand for the year 2011 was estimated to be 731 million tonne where as the expected supply was 680 million tonne. It means country with fourth largest coal reserves has to import coal and which in turn will put pressure on its foreign reserves. Consistently India has been importing coal recent figures are: Year 2007-08 2008-09 2009-10 2010-11 Import(million tone) 49.80 59.00 67.75 68.92

The impact which this is causing to the economic is multi dimensional. Here we will discuss the causes of inefficiencies and their impact on the economy. Low drilling capacity Current drilling capacity is 3.44 lakh meter it should be increased to 15 lakh meter as recommended by expert committee under Shri. T L Shankar. Infrastructural Issues The low production is due to inadequate backlog in overburden removal, mismatch between excavation and transportation, low availability and underutilization of heavy earth moving machinery etc. Improper and non transparent distribution Though new distribution policy was adopted in 2007 for distribution of coal to small and medium consumers .However, lack of proper monitoring results into no major improvement.
Presence of Coal Mafia in mining region It is alleged that the coal industry's trade union leadership forms an axis with the mafia present there and employs caste politics to maintain its power. Pilferage and sale of coal on the black market, inflated or fictitious supply expenses, falsified worker contracts and the expropriation and leasing-out of government land have allegedly become routine under this mafia raj.

Inconsistency between guidelines suggested and execution Guidelines clearly suggest keeping blocks offered to private players at reasonable distance from existing blocks in order to avoid operational difficulties. But instances were found where this was not taken care.

Example Moher Amlohri extension from NCL and Sasan UMPP are sharing boundaries as a result of which NCL is not able to access his 48 million tonne. This has also resulted in reduction in life of project. Allotment of Coal fields Allocation of coal blocks was done through minutes of meeting and there was is no document to support the proper allocation of coal blocks. In general, allocation should be don on the basis if competitive bidding process with transparent system as discussed in meeting under chairmanship of Secretary Coal in June 2004. Still proper framework is lacking which can provide transparent and more robust system to allocate coal fields. Since 2004 more than 200 coal blocks have been allocated but still these allocation lack transparency and some of the blocks are re-allocated due non transparent measures adopted. CAG said private firms are likely to gain Rs 1.86 lakh crore from coal blocks that were allocated to them on nomination basis instead of competitive bidding, which amounted to the loss to national exchequer. Implication on Indian Economy Direct Implications Current Account Deficit Increase in the import of coal is resulting into heavy import bill pressure on economy. When country is struggling to keep its Current Account Deficit in control, this is one sector which can be tapped. Transportation Prices Message to International Business communities Failure to meet the political commitments

Recommendations: Increase the drilling capacity from current 3.44 lakh meter to 15 lakh meter.

As more Indians enjoy the trappings of middle-class life and the country industrialises, demand for coal-fired electricity will continue to rise smartly, roughly in line with economic growth.

Possessing coal and capital is no guarantee that India's energy boiler will work properly, however. It also involves multiple states, government ministries, regulators, mandarins, politicians, tycoons, environmentalists, villagers, activists, crooks and bandits. There are the usual gripes of an emerging economy: blackouts (during peak hours the system delivers 10% less electricity than customers want) and an inadequate grid that does not reach some 300m people (although it has improved a lot in recent years).

That seems unlikely to changeIndia is too chaotic and free a place to manage the feats of national machismo that allowed China to build the Three Gorges dam. Although new projects are planned in places such as Kashmir and neighbouring Bhutan, harnessing Himalayan rivers to power all of India is for now a dream, not a policy.

The growth of India's power industryassuming it is built and largely fired by fossil fuels would contribute about a tenth of the total global rise in emissions over the period

After privatisation in 2010, a tenth of its shares are listed (the rest are owned by the state) making it India's third-most-valuable firm, worth $44 billion. It makes a huge return on equity of over 35%, has $11 billion of unused net cash and reinvests only a fifth of its gross cashflow. It even has a financial gnat on its hide in the form of TCI, a London-based activist hedge fund famed for its stagy belligerence.

That would swell India's overall annual energy-import bill. Include coal used for purposes other than power, liquefied natural gas and oil and it could rise by $65 billion or so by 2017,

compared with the year to March 2011, according to Sanjeev Prasad of Kotak, a broker. That would put a huge strain on the balance of payments. Even if India can afford to import all this coal, the next question is whether it can persuade its population to fork out for the electricity it produces.

Companies which need reliable power supplies, including India's technology giants, will carry on building their own generators just to be sure.

But if it is delivering the infrastructure that can allow the economy to grow at close to a double-digit pace and industrialise rapidly, India is failing

Rephrase:

Up to $200 billion of capital investment is required upgrading the network and this much capital will not be available with already cash strapped government. And also, as the cost of the power rises because of the expense of imported coal, government is neither having economic strength to subsidize it nor capable of easily passing it through by raising prices to customers. That means it is their suppliers, the generating companies that get squashed. Those states that can guarantee power supply, such as Gujarat, will attract the majority of energy-intensive investment, such as car factories. This potentially holds a greater risk of disturbing the balance in economic growth of the country. Analysts reckons that by the year to March 2017 domestic coal production will meet only 73% of demand, leaving a gap of some 230m tonnes, almost five times the level of 2012. Include other industries that use coal, such as steel, and some analysts calculate that India's total imports by 2017 could reach some 300m tonnes. That is on a par with the current exports of Australia, or those of Indonesia, South Africa and Canada combined. This never goes in favor of a healthy economy to have such a huge, one sided dependency on its fuel related exports. Coal mining inefficiency is paving way to reverse FDI which is going to againg negatively affect the Balance of Payments. Private generating have assumed that the state will not deliver

enough coal supplies they need and are prepared to import vast amounts of coal to fire their plants, either by acquiring it from wholesalers or by buying foreign coal mines. Some $7 billion has been spent in the past six years on pits in Australia, Indonesia and Africa. To mention, Gautam Adani, a Gujarat-based tycoon, is building a private network of mines abroad that feeds ports and power stations in India. Power is distributed to homes and firms by publicly owned grid companies that are often bankrupt, their tariffs kept too low under political pressures. Trapped in the middle are the firms that run power stations. Left without a choice, they are importing pricier foreign coal, but the grid companies cannot afford the power it produces. With too little coal and complaining customers, the private firms that have built new power stations are in financial trouble. This is strongly going to discourage the further private investment in this field. This is again going to put pressure on Government if these firms reach state of bankruptcy and ask for bail out in the name of national interest. CIL raising its coal prices to international rates, would affect electricity prices rise drastically and affect everything from the steel industry, cement industry to pharmaceuticals etc directly. The higher electricity prices would make ALL goods and service extremely costly in India and essentially lead to massive price rises across the board.