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| Dhanbad, the coal mining town of Jharkhand |
Come 4 a.m. and the outer reaches of Dhanbad, the coal mining town of Jharkhand, bustle with an activity that unfolds unfailingly every day. Scores of bicycles pedalled by men, women and children emerge from the darkness only to disappear down village roads.
They hawk no farm produce or trinkets. Instead, they carry coal illegally mined from the mines around Dhanbad and Ranchi. District administration sources put the number of bicycles at close to an astounding 50,000. Some of the coal come from mines that have been declared unsafe and closed down by Bharat Coking Coal, the Dhanbad subsidiary of Coal India (CIL). Some even ferry this coal to Nepal.
While there are no studies that say how much coal is pilfered every year, some estimates put it at about 15-20 per cent of the 430 million tonnes (mt) produced in 2006. At an average price of Rs 700 per tonne, that adds up to Rs 4,500 crore. This becomes more significant when you consider that India imported 20 mt of thermal coal in 2005-06.
Many overstate their coal requirements by misusing a system called ‘linkages’. These are assured supplies from a particular CIL block allotted to sectors such as steel, cement and brick kilns. In certain coal belts such as Ib Valley and Talcher in Orissa, some units with linkages are reported to be charging Rs 2,000 per tonne for a grade of coal that is actually priced at Rs 1,000 per tonne.
The politician-criminal nexus, the traditional bugbear of Indian polity, has turned coal into one of the murkiest sectors. The illegal operations even boast of links with high political offices cutting across party lines.
A 1997 study by the Tata Energy Research Institute found brick kiln owners as one of the protagonists. Technically, brick kiln owners needed about 22 mt of coal for 100 billion tonnes of bricks. Yet, their ‘linkages’ through CIL was only for 2 mt. This led many to surmise that the shortfall was being met through the black market and illegal mining.
To increase transparency, CIL introduced Internet-based auction for coal in 2005. Though the Supreme Court stayed the process last year, the auction netted Rs 1,000 crore. CIL officials feel it is a clear case of black money being converted to white. As an official puts it, “The sector needs unconventional and extraordinary solutions.”
The iron ore sector, too, has been contributing to the black economy. Today, 5-10 per cent of the total ore mined ends up in the black market. It all started with a sudden rise in demand from Chinese steel plants. From as low as $17 (Rs 748 then) per tonne in 2001, spot prices shot up to $80 (Rs 3,280) per tonne for a while before coming down to the current price of $60 (Rs 2,460) per tonne for higher grade ores. Many mines whose leases weren’t renewed by the Centre started working illegally.
The problem is most rampant in Karnataka. Some reports say the exchequer lost close to Rs 3,000 crore since the boom began in 2004 with most of the ore being shipped unrecorded to China. Most stakeholders agree the situation is not insurmountable. What is needed is stronger governance and tighter policy. Most also that agree these two are the most difficult to get in this country.
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