Technological strides

Print edition : November 20, 2009

The living standards of miners have improved, says Partha S. Bhattacharyya.-BY SPACIAL ARRANGEMENT

PARTHA S. BHATTACHARYYA has been the Chairman of Coal India Limited (CIL) since October 1, 2006. Before joining the CIL, he was Chairman-cum-Managing Director of Bharat Coking Coal Ltd. The last two decades have witnessed a complete transformation of Coal India Limited, he said. In an interview to Frontline, he spoke of the CILs major achievements, the problems it faces and important projects. Excerpts:

To what extent has nationalisation and the establishment of Coal India achieved its purpose in terms of the countrys industrial development, particularly the modernisation and growth of the coal sector?

The most important achievement of coal sector nationalisation is improvement in the working and living standards of miners. Coal India, which came into being in the mid-1970s to play a lead role in meeting the growing energy demand of industry, fulfilled the expectations of the planners in a responsible manner. Nationalisation yielded positive results in modernising mining methods through technological strides.

Coal India is today the single largest coal producer in the world, producing over 400 million tonnes of coal annually. It produces 82 per cent of the countrys overall coal produce. The CIL alone meets 40 per cent of the countrys primary commercial energy requirements compared with 39 per cent contributed by the oil and gas sectors combined. It insulates Indian coal consumers from price volatility and supplies coal at prices deeply discounted from international prices. Thus, it makes the end-user industry enhance its global competitiveness. The CIL commands 74 per cent of the Indian coal market and feeds 77 coal-based thermal power plants, accounting for 75.5 per cent of the total thermal power generating capacity of the utility sector. It also provides coal to steel, cement, fertilizer and a host of other major Indian industries even while sustaining its own growth.

What do you think are the constraints to the growth of the coal sector and how can they be removed?

Delays in environmental and forest clearances and land acquisition for starting new projects are major impediments. Besides taking up the issues at the inter-ministerial level with the MoEF [Ministry of Environment and Forests] and State governments, the CIL is taking a number of measures to address proactively the issues of environmental and social sustainability of coal mining. The CIL pays a lot of attention to land restoration. In order to promote transparency in environmental sustainability, the Central Mine Planning and Design Institute [CMPDI], an in-house consultancy arm of the CIL, has started satellite surveillance to monitor land reclamation and restoration of all the opencast coal mines of 5 million cubic metres capacity and above. The baseline information based on the satellite images generated by the CMPDI for 35 opencast projects during 2008-09 has been used to update the websites of the respective coal companies and the CIL. Forty-nine projects have been identified for such monitoring during 2009-10.

One of the problems of coal mining in India is that coal mines are situated near peoples habitats and forest areas, and mining affects both. Hence, rehabilitation and resettlement policies are modified and reintroduced to make them more beneficial to project-affected people (PAP). The CIL is pursuing an inclusive model of growth by ensuring that PAPs are included in the decision-making process. This is being done by creating social assets, imparting training and letting PAPs decide what they want to do. Plans are afoot to offer shares to land losers after Coal India gets listed in bourses.

Delay in procurement of equipment, productive assets and spares stood in the way of enhancing production capacity in the past. To overcome this, Coal India adopted an integrity pact that helps redress any grievance within 15 days or the maximum period of a month of the complaint being registered.

What are the major achievements of Coal India in the last two decades of liberalisation?

The last two decades have witnessed a complete transformation of Coal India. Until 1991, it incurred substantial losses for historical reasons. It was wholly dependent on budgetary support from the government for financing investment and growth. The aggregate loss incurred until March 1991 was around Rs.2,500 crore, equivalent to 40 per cent of the paid-up equity. Besides, it had staggering overdue arrears of debt service payment to the government, exceeding Rs.2,200 crore. Since 1991-92, the government has phased out budgetary support. The management initiated a series of measures to make the company financially self-reliant. Since 1991-92, it has showed an uptrend in profit.

It practised default-free debt service payment to the government. The overdue liabilities were restructured in 1996. This enabled the company to access an investment of U.S. $1.06 billion from the World Bank and the Japan Bank for International Cooperation in 1998. As a consequence, 24, high-yielding financially viable opencast projects were implemented with world-class equipment. Capital restructuring coupled with implementation of these projects enabled Coal India to emerge as a highly profitable tax- and dividend-paying PSU in the country. The balance sheet improved considerably, and the company became virtually debt-free by the terminal year of the Tenth Plan, that is, 2006-07.

The need for faster augmentation of coal production coupled with the financial consolidation achieved by the company led the government to consider enhancing the companys powers. The company, along with five of its subsidiaries, became miniratna in 2007 and, in less than two years, was upgraded with a Navratna status in October 2008. Over this period, the role of the company has assumed critical significance in enabling the country to achieve the desired rate of GDP growth and also in making the end users of coal globally competitive.

Do you think that the regulated market price for coal will ultimately have an adverse effect on the modernisation and expansion of the industry?

Coal India has moved away from the normative cost-based coal pricing of the administered price regime through progressive decontrol since 1996. With effect from January 2000, coal prices have been fully deregulated, and Coal India is free to fix the prices of all grades of coal in relation to the market prices. The deregulation has been handled in a responsible manner and in all cases the government has been informally consulted. Indian coal prices, even after the recent economic meltdown, are at a deep discount to international prices, up to 50 to 60 per cent, even after factoring in quality differences. This helps the end-user industry attain global competitiveness. The CIL takes pride in meeting 40 per cent of primary commercial energy requirement of the country at such deeply discounted prices. Coal Indias modernisation and expansion efforts are entirely financed by its internally generated funds and not through external borrowings.

Land subsidence and underground fire continue to be problems, particularly in the Raniganj and Jharia belt. What are you doing to deal with these problems?

In the pre-nationalisation era, under private ownership, scant regard was paid to scientific and safe mining methods, profit being the sole motive. Safety standards, if any, were archaic. This negligence led to the Jharia mine fires where vast reserves of prime coal were ravaged. Land subsidence is another legacy of slaughter mining.

In one of the biggest rehabilitation plans globally, the government recently cleared a Rs.9,773-crore rehabilitation plan, drawn up by the CMPDI, to relocate to safer areas some 120,000 families whose houses face the threat of being sucked in by the underground fires of Jharia Coalfields and land subsidence in Raniganj Coalfields. The plan shall be largely funded by the CIL from its accruals supplemented by an additional duty.

What are the CILs important future projects?

Our country is not endowed with large reserves of coking coal, especially the variety essential for making steel. So, import is necessary to meet the domestic demand. We have formed International Coal Ventures, ICVL, with four other PSUs to acquire predominantly coking coal mines in Mozambique, Canada and Australia. To supplement scarcely available indigenous coking coal and low-ash, high-calorific thermal coal from abroad, Coal Videsh, a department of Coal India, was formed to take up equity stakes in working mines or greenfield projects on a production-sharing basis. Recently, we have been allocated Blocks A-1 and A-2 coalfields at Moatize in Tete Province of Mozambique. The blocks, covering around 224 sq km, are likely to have both coking and non-coking coal, which can be used in our domestic power and steel plants.

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