Coal news and updates

Let's develop our own resources that are lying to be discovered and mined. We have wasted enough time in getting fuel supply agreements -FSAs signed without backing up and increasing domestic coal production

 

Addressing the joint session of Parliament, President Pranab Mukherjee stated that the union government will pursue reforms in the coal sector "with urgency of attracting private investments in a transparent manner".

 

State-run Coal India Ltd, the world's largest coal miner, sits on the world's third largest estimated reserves of coal, in the region of some 250 billion tonnes and yet fell 20 million tonnes (mts) short of its mining target of 482 mt in 2013-14!

 

Coal India directly controls, as a holding company, seven collieries and produces 85% of the fuel mined in the country.

 

As a general practice, most of the Government controlled companies are headed by IAS officers, many of them may not have the technical expertise needed for the job or the experience required in the industry which they administer. Only the other day, Narasing Rao, chairman and managing director (CMD) of Coal India resigned to move on to be the Secretary to the Chief Minister in Telengana, as reported in the media.

 

So all the experience that he gained as CMD of Coal India has gone down the drain (or shall we say, down the mine-shaft?) and the new incumbent has to start all over again unless he is from the mining industry, preferably with years of experience that is needed to oversee such a huge operation.

 

In the past, the idea of privatization of the coal industry has often been tossed about. After all, we may as well remember that years ago the privately owned coal mines were nationalized with great fanfare and now, we are back to square one, reconsidering what is to be done in the context of increasing demand for the fuel and falling production from government owned mines!

 

Let's look at the industry dispassionately and start with seven mines which are independent (apparently) but under the CIL control, which is a government owned company with huge cash reserves. The second set of coal mines have been given away to end users as "captive" units to secure fuel supply so that their work goes uninterrupted. The third set of coal blocks that are available, some of which have been allocated, but are lying unexploited because of the clearances and approvals needed before they are able to commence mining operations. Many of them have been taken back by the government for a variety of reasons, and they need to be distributed again considering the urgency of securing more coal supplies.

 

For the time being, we leave aside the rest, and try to deal with the above.

 

According to the press, over 60,000 mining clearances are pending with various State Governments. In a circular issued by the Ministry of Mines, Karnataka has the highest number at 19,497, followed by Rajasthan at 13.893, erstwhile Andhra Pradesh 7,691, Madhya Pradesh 4,680, Gujarat at 4,517, and Jharkhand at 4,409.

 

Narendra Singh Tomar, Minister of Mines, Steel and Labour therefore faces the enormous task of clearing all these 63,395 mineral concession applications which are pending with various State Governments. In sorting out the mess, several minstries are involved. How can the Government go about doing this huge task?

 

We must start somewhere, so let's look at Coal India and its subsidiaries. But, before we go any further, let us also take a look at who are the affected parties? To our mind, these are:

 

- Localized labour force

- Railways who transport the coal

- Wagons/locos/signalling equipment makers

- Main consumers of coal like power generators/industries

- Any others whom we may have missed out

 

First, we need to prepare a Master Plan and establish the principle of government reducing its stake in Coal India at the very outset. Though the Unions have objected to the very idea of the Government giving up even 50%, it is better to take a bitter pill now than be forced into a painful operation later.

 

The Government needs to make these subsidiaries separate independent companies answerable directly to one supreme body. The government holding needs to be brought down to around 26% and rest of the shareholding be distributed, in a suitable manner, to all those who are "interested" parties. At this juncture we may also bear in mind that, sooner or later, Foreign Direct Investment in this industry would be beneficial to the country and it is in our interest to bring in the most sophisticated technology and equipment that is available and used by leading miners in various countries such as UK, USA, Australia, Poland, Russia, and others.

 

The public shareholding by investors needs to be rewarded by this CIL spin-off when these companies become independent entities. That said, investing public (20%), employees (10%), Railways (10%), Wagons, Loco/signal equpment makers (10%), Power generators (12%) and Industry (12%) may be ball-park figure to work on. The only major change would be, when FDI is permitted, the government holding would correspondingly come down to the extent to which they are allowed to participate!

 

The Ministry must invite FDI by a global tender, to come and participate in the Coal Industry's development in the country, offering to them both, the existing magnificent seven of the Coal India holdings and the virgin mines available for development. FDIs participation may be wholly in the form of technology and equipment and the Indian management team would have to be provided incentives to achieve set targets and goals. We should concede our outdated equipments need replacement and any modernization would have to be planned and done in a span of 6 to 8 months' time.

 

In the meantime, while the restructuring of Coal India proceeds, they must put on the back burner their grand idea of venturing into production of fertilizer and chemicals using coal gas. Yes, this can be done, provided we obtain an overseas partner who has the experience and technology to introduce it to our country.

 

Acquisition of overseas assets just because we have enough in the kitty and are unable to excavate more coal from our own known resources is also not a good move. We do not have technically experienced manpower to control overseas operations at the moment. We need to have young technocrats and mine engineers specially selected and trained for taking over such huge responsibilities in the years ahead.

 

Let's discover India first and let's develop our own resources that are lying to be discovered and mined. We have wasted enough time in getting FSA (fuel supply agreements) signed without backing up and increasing our production.

 

It's time to act. We must respond to the clarion call of the President and support the move made by the Prime Minister in this direction.

 

 

Source: http://www.moneylife.in/