Private companies are using coal shortage to exploit the State power utilities with active support from Central Ministries


Letter to the Cabinet Secretary by Shri E A S Sarma, former Secretary to the Government of India


Shri Rajiv Gauba
Cabinet Secretary


Dear Shri Gauba,

Kindly see my letter dated 4-4-2022 to Coal Secretary on how private companies are openly exploiting the State power utilities with passive and active support from Central Ministries (

While the CIL and the SCCL, the two premier public sector coal companies, are doing their best to ramp up coal production to mitigate the present mismanaged coal-power crisis sweeping across the country, it is several domestic private coal developers, expected to produce coal in line with a predetermined plan, who have let down the country miserably. On the other hand, many of these very same private companies, having overseas coal mines from which coal is exported to Indian power utilities, have unethically exploited the shortage by charging astronomically high prices for coal imported into India. The prices quoted by them bear no relationship whatsoever with the cost of production and, therefore, it amounts to nothing less than outright, anti-national profiteering.

In the past, some of these companies were found prima facie to have over-invoiced coal exported by them to India and the Enforcement Directorate (ED) had undertaken investigations which they tried to hamper. Apparently, they enjoy considerable political patronage.

At the same time, the insistence on the CIL paying high dividends to the government and depriving the CPSE of its own greenfield coal blocks auctioned to private companies, has hindered CIL’s own efforts to enlarge its coal development programme, thereby hurting the public interest. In a way, the present coal crisis could be indirectly attributed to this, as otherwise, the CIL would have had a wider shelf of coal projects from which it could have delivered much larger quantities of coal more efficiently, compared to its private counterparts.

On the other side, having created an artificial coal-power crisis, the Centre has resorted to extraordinary ways to promote the interests of the unethical private companies, those exporting coal to India from their overseas mines, by issuing unduly regressive directions to the State power utilities to import coal at any cost, irrespective of the price charged, to bridge the coal supply-demand gap, created through sheer mismanagement and lack of anticipation and planning. This has imposed a huge cost burden on the State utilities.

For example, according to some estimates (, such expensive coal imports would impose an additional cost burden on Punjab to the extent of Rs 800 crores immediately. In all fairness, instead of Punjab bearing this burden, the Centre should compensate the State in advance, as it is a burden imposed by it. In fact, the Centre should fully compensate each and every State that is forced to import coal in the same way.

The Centre of late has been issuing similar diktats to the State power utilities on several other fronts. For example, the Centre’s direction that the States “must buy” solar energy from large centralised solar plants, mostly belonging to the big business houses, has imposed an undue cost burden on the State utilities whose option to buy from alternate sources has got severely curtailed. Even power purchases from the Solar Energy Corporation of India (SECI) are heavily tilted in favour of corporate solar companies charging high prices and impoverishing the State power utilities.

There seem to be several other fronts on which the Centre is coercing the State utilities. Tying the hands of the utilities to renegotiate the past power purchase contracts, through an egregious provision in the recent Bill introduced by the Centre to amend the 2003 Electricity Act, is one such front. Further accentuating this position, the new electricity Bill also paves the way for private companies “cherry picking” the remunerative loads from the State utilities and adding to their losses.

In all such cases, the Centre should compensate the State utilities fully, well in advance, as it would otherwise compound the precarious financial condition of the utilities.

The Centre should know that it is the State power utilities that have facilitated food security for the country by providing electricity to the farmers for lift irrigation and enabling them to produce food grain surpluses. The nation ought to compensate them for the losses suffered in the process.

In the true spirit of federalism that lies at the core of our Constitution, instead of castigating the State power utilities for no valid reason, the Centre should reach out to them, understand and appreciate their problems adequately and find satisfactory solutions rather than creating new problems.

I hope that you will coordinate the efforts of the concerned Ministries to strengthen the CIL, take stringent action against the unethical private companies who are openly allowed to exploit the State power utilities and strengthen the hands of the States and their utilities urgently.


Yours sincerely,
E A S Sarma
Former Secretary to Govt of India
5 May 2022



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