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Affidavits by 40 operational captive blocks show irregularities

Earlier this month, companies with operating captive coal blocks submitted affidavits in the Supreme Court. Attempting to ensure their blocks, 40 in all, are not deallocated along with those where mining has not started, these affidavits listed investments made, the quantum of coal produced and the production from the End Use Plant (EUP) paired with the block. A closer look at these submissions reveals a set of irregularities.

Take Pachwara Central. This block with coal reserves of 562 million tonnes was allotted to Punjab State Electricity Board (PSEB) in December, 2001. But against its peak rated capacity — its targeted coal production - of 7 MTPA, the PSEB affidavit shows that, between FY09 and FY12, over 8 MTPA of coal was extracted each year. PSEB had entered into a controversial 74:26 MDO arrangement where Kolkata-headquartered EMTA Coal would mine coal. The state board did not respond to ET's questions.

A second set of companies did not cross the peak production limits, but seem to have taken out more coal than required for the eventual output. Take Prakash Industries. The company was allotted Chotia, a small coal block with reserves of 34.48 million tonnes, in 2003. As per ministry of coal norms, 1.6 tonnes of coal is needed to produce one tonne of sponge iron. However, Prakash Industries mined 9.9 lakh tonnes of coal in 2009-10 for sponge iron production of 3.35 lakh tonnes. AK Chaturvedi, director (corporate affairs) at Prakash Industries, attributed the greater coal extraction to lower grade coal in Chotia. According to him, "While a third of the coal reserves in the block were D grade coal, the rest was E, F, G and H." This, he told ET, "cannot be used as such in the sponge iron plant. To get 1.6 lakh tonnes of usable coal, we need to extract as much as 4 lakh tonnes of coal."

Or take Jayaswal Neco. The company set up a far smaller sponge iron plant than it had initially proposed (0.255 MTPA instead of 1 MTPA), but has stayed close to its peak rated capacity of 0.48 MTPA. In 2013-14, for instance, the company produced 2.18 lakh tonnes of sponge iron, but excavated 4.45 lakh tonnes of coal — a 1:2 ratio. According to PK Bhardwaj, executive director of Jayaswal Neco, "One tonne of sponge iron needs 1.6 tonnes of B/C grade coal. The coal being mined by us is much inferior to the above." This is challenged by the minutes of a coal ministry meeting in October, 2008, to discuss coal consumption norms. Here, while the steel ministry recommended 1.6 tonnes of B/C grade coal for a tonne of sponge iron, the coal ministry decided that "1.6 tonne coal for one tonne of sponge iron would be applied in case of F grade coal."

Explains a former CAG official who audited government projects in power and coal, "Assuming average F grade calorific value of 2880 kCAL/Kg, even if this were to be substituted 100 per cent by G grade with average calorific value of 1,850 kCAL/ kg, the requirement of coal would go up only by 55.6 per cent — not by a factor of 100 per cent. In fact, if we assume 33 per cent as D grade (higher calorific value) and the remaining equally distributed amongst E, F, G grades, the increased requirement would be marginal."

A third set of companies are yet to reach their production targets. According to the minutes of a coal ministry meeting held on June 20, 2014 to review progress on coal production from captive coal blocks, 21 coal block allocatees' blocks "have come under production, but have not achieved peak rated capacity". A fourth set of companies got far more coal than they needed. CESC indicated an annual requirement of 0.322 MTPA, but got a block with 140 million tonnes — enough for 326 years if one assumes a very conservative 75 per cent coal extraction.

Similarly, Electrosteel Castings, which asked for 0.58 MTPA, got a block with geological reserves of 231.22 million tonnes. What happened to the surplus coal extracted? In some cases, illegally mined coal has found its way to places like the coal mandi near Varanasi. In other instances, companies have sold "unusable" coal by products after getting the government's nod. On May 16, 2012, responding to a question on whether the UPA had allowed private and government companies to sell coal rejects and middlings — coal is washed to arrive at the grade one needs, the byproducts of marginally lower calorific value is called middlings, rejects, etc — after washing, then-MoS Coal, Pratik Patil, answered that Tata Steel, Jindal Steel & Power (JSPL) and Integrated Coal Mining (A subsidiary of CESC) had been allowed to do so in 2009-10 and 2010-11.

Source: The Economic Times