India’s most power plants are said to be sitting on adequate coal stocks, indirectly compelling Coal India, the country’s No.1 coal producer, to go slow on production during the first two months of this fiscal. Power plants are reportedly requisitioning less coal as their stockyards are full to the brim. In the last two months, Coal India’s sales growth was just around one per cent compared to 7.4 per cent achieved during the same period, last year. The public sector company’s production during the two months was up by only 0.5 per cent as against 11.8 per cent in the corresponding period, last year. Three of Coal India subsidiaries – Eastern Coalfields (ECL), Bharat Coking Coal and Central Coalfields (CCL) – witnessed negative sales growth ranging from five per cent to 14 per cent. Both ECL and CCL had to cut down production. Western Coalfields’ output was down by over 25 per cent.

The coal production stats are sending wrong signals to India’s economic growth and economic priorities, especially with regard to the important brick-and-mortar sector. Coal is directly linked with the output of other important sectors of economic growth such as power, steel, cement and fertilizer. Unfortunately, the growth is languishing in all the four areas, making the economy look rather vulnerable in the long term. Neither Niti Aayog nor the union cabinet seems to be quite concerned about the uneasy development. Steel and fertilizer continue to be imported in large quantities. Capital goods and components are also being vastly imported.

The schemes like ‘Make-in-India’, ‘Start-Up India’, ‘Stand-Up India’ and ‘Skill India’ are not cutting much ice towards making a visible improvement in the real economy. They sound more like a mouthful political slogans than creating a strong tangible impact on economy in terms of production of goods for consumption of millions of India’s population living in urban fringes and rural areas without proper housing, electricity, roads, sanitation, schools and hospitals. Instead, the virtual economy, riding on internet, cell-phones, smart-phones, e-commerce, e-wallet, digital network, etc., is showing an unsustainably high growth rate. Few realize that the trend can’t continue if the basic economy chokes or stays weak. A sudden downturn of Chinese basic economy has already impacted its virtual economy. China's virtual economy is struggling to sustain itself by making quick investments outside China. In fact, India is one of its most preferred destinations.

If the fall in coal and power consumption in China was strong enough an indicator of a sustained slowdown of the world’s second largest economy, India can’t comfort itself for long with its present seven-per cent-plus economic growth riding mainly on cell-phones production and consumption, e-commerce and imports – from toys to motor cars and what-have-you. China is now busy working on a number of initiatives to strengthen its real economy and push highly subsidized export production as also foreign direct investment (FDI) to combat domestic demand slowdown.

In fact, China’s coal story is quite revealing. It has emerged as the biggest barometer of China’s economic growth. For almost two decades of China’s economic boom, the phenomenal surge of its coal production was probably the single largest contributing factor. The world’s largest coal and energy producer became the world’s second largest economy. However, its coal industry is currently struggling with a huge supply glut that has sapped prices and forced many mines to shut. Key coal-consuming industries like steel and power also experienced declines in 2015, with crude steel output dropping 2.3 percent over the year and power generation dipping 0.2 percent.

Incidentally, China is also the world’s largest producer of steel, cement and fertilizers. It is also No. 1 in the construction sector. Its cement production, a very important coal consumer, also fell 4.9 percent in 2015, following a slowdown in construction activity. Lately, Beijing urged the country’s coal companies to control output while it temporarily banned approvals of new coal projects. However, the country thinks that the situation will improve soon. The China National Coal Association feels that the current phase of economic slowdown will not last long and overall coal demand will gradually increase in the coming years before peaking in the middle of the next decade.

India will make a mistake if it takes the current domestic coal glut lightly. After years, the country’s coal industry is poised for a good growth. While the government must control the unnecessary coal import and offer support to local coal producers, including Coal India, against dumping since international coal prices are dropping fast as a China-effect, the central and state administration should take the opportunity to invest big in urban and rural infrastructure, especially in roads, rails, highways and bridges, low-cost housing, water supply and sanitation, and fertilizers. It is rather sad that at a time when Coal India and associates were talking about raising production to one billion tonnes per annum, the country should face a sudden coal glut shock. (IPA Service)