A study of productivity in the Indian coal sector

In this paper, non-parametric index number methods are used to investigate the overall productivity growth and also the disaggregated factor productivity performance in the Indian coal sector. An attempt has been made to do an in-depth analysis of the productivity growth in the Indian coal sector during the period 1980-92. Total factor productivity (TFP) Tornqvist indices are calculated from the output and input indices for Coal India Ltd. (CIL) and its major subsidiary companies. The partial labour and capital productivity indices are decomposed into components to study interactions between labour, capital, output and techniques of mining in the coal sector that might explain their long run trends. Results of the analysis indicate that in spite of the output index indicating a two-fold increase during the period of analysis TFP declined by around 50% due to the sharp increase in the input index by about four times. Partial productivity analyses of capital and labour productivity reflect the massive capital accumulation in the Indian coal sector to the extent where it does not contribute to additions in output. The labour productivity increase of around 37.6% is not to the extent of capital deepening of around 150%. Study of the individual subsidiaries indicate that companies with larger share of underground mines have shown slower growth in productivity. The poor performance can be attributed to the underutilization of capital, surplus labour, power shortages in the underground mines, inability to adapt to modern technologies and a pricing structure of coal, which does not provide incentives to the producers to increase production. (C) 2001 Elsevier Science Ltd. All rights reserved.