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 productiv ity performance in the Indian coal sector. An attempt has been made to do a n in-depth analysis of the productivity growth in the Indian coal sector du ring 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 producti vity indices are decomposed into components to study interactions between l abour, capital, output and techniques of mining in the coal sector that mig ht 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 inp ut 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 outp ut. The labour productivity increase of around 37.6% is not to the extent o f capital deepening of around 150%. Study of the individual subsidiaries in dicate that companies with larger share of underground mines have shown slo wer growth in productivity. The poor performance can be attributed to the u nderutilization of capital, surplus labour, power shortages in the undergro und mines, inability to adapt to modern technologies and a pricing structur e of coal, which does not provide incentives to the producers to increase p roduction. (C) 2001 Elsevier Science Ltd. All rights reserved.