JG
Kumarmangalam Memorial Lecture on the 45th Foundation Day of Coal
India Limited
November 01, 2019
Nirmal Chandra Jha
Former CMD, Coal India Limited.
Respected dignitaries on the dais, my eminent seniors
in the audience, my colleagues and friends I worked with, all the executives
and non-executives of CIL and its subsidiary companies and the friends from
media!
I am honoured today to get a chance to deliver a lecture
before you in the memory of late JG Kumarmangalam, the first Chairman of the nationalised
coal sector. This is special to me as I had the privilege of receiving my
degree in B. Tech. from the then Indian School of mines, now IIT(ISM) Dhanbad
from this great personality in the year 1974.
This occasion reminds me of the period of my B. Tech. course
study. Exactly fifty years ago in 1969, when I was admitted to the Indian
School of mines, the coal sector was running through difficult times. The
industry was largely in private hands with restricted growth & investment with
only one public sector company, NCDC, managing some mines and new projects. Job
opportunities were scarce. Mining education required at least seven years of
rigorous studies and training to qualify for a respectable job. I was dissuaded
by many of my seniors and relatives to shift to some other engineering college
so that on passing out I could get a satisfying job. However, I thought of
continuing at ISM.
During the course of my five years study period, the
coal sector underwent massive reforms. All the private collieries were taken
over by the Government in two phases, coking coal mines in December 1971 and
non-coking coal mines in January 1973. The first government coal company
created after nationalization of coking coal mines was Bharat Coking Coal
Limited (BCCL) in 1972, followed by Coal Mines Authority Limited (CMAL) in
1973. The Government decided to bring all the nationalized coal mines under one
umbrella and Coal India Limited was formed in 1975 encompassing four divisions
of CMAL and BCCL as fully owned subsidiaries.
In the year 1974, when I obtained my degree from ISM,
both BCCL and CMAL continued to have their separate identities and I got the
appointment in BCCL and was posted at Sudamdih Project, inherited from the then
NCDC. It was a boon in disguise for me to have been trained there, as this
project later proved to be a stepping stone for many of my seniors and
colleagues to rise through the hierarchy of management to the posts of
Chairmen, CMDs and Directors of CIL and its different subsidiaries. I received
great learnings from all these seniors and extend my gratitude to all of them.
In the later part of my professional career the contributions of two of my
seniors, Shree Shashi Kumar and Shree S V Chaoji are immense and I extend my
special gratitude to them for being my mentors.
After completing 37 years of service I had my own
freedom at midnight of January 31st 2012 after concluding the IXth
Wage Board Agreement at 11:30 PM. As CMD, CIL I got the privilege of receiving Maharatna
status for CIL in April 2011, which was a continuing effort from the past. CIL
also became the most valued company in India for a brief period in August 2011.
Movement of coal gradation and pricing system from UHV to GCV system from
January 2012 was a long overdue wish of both CIL and the Government, and
conclusion of the IXth Wage Agreement in a record time of 6 months were some
other landmarks in my tenure. I was, however, a continuing link for the
previous 4 years in the process of establishing CIL as a globally aspired
company and the positives that we created during our tenure reflected in the
form of a huge success of the IPO in 2010.
In the 44 years of existence of Coal India Limited it
has grown from strength to strength and has largely served the coal needs of
the country. Yet the word “Reform of Coal Sector” is often talked about. The
fact that the policy of enhancing coal production in the country through other
modes has not been successful, the onus of meeting country’s entire coal demand
was and is being thrust upon Coal India Limited. Ever since the Electricity Act
2003 was promulgated, the domestic demand for coal has been rising, particularly
for the power sector. There is a feeling amongst the stake holders that CIL has
not been able to meet the country’s coal demand and the coal sector needs to be
restructured or reformed. CIL’s monopoly status too is envied and the stake
holders feel that in absence of competition, CIL’s efficiency of operations is
not up to the mark. This issue has been coming up quite frequently both in the
Government and the media and hence I feel my talk today should focus on this subject.
Nationalisation of Coal Sector
We need to analyze in the first place as to why the
coal sector was nationalized in the seventies, when it was already largely
being run by the private sector companies, some of which were of good repute.
Also, National Coal Development Corporation, a public sector company
established in 1956, had come up with quite a few good mines across different
coalfields which today add to the strengths of CIL. If, we look back at the
history of nationalization of coal mines, we find that the Government of India,
ever since Independence, had been serious on coal sector, as it provided basic
energy fuel. The Government came up with a National Mineral Policy in 1947 itself
and a working party for the coal industry was set up in 1951. The Estimates
Committee of the Lok Sabha in 1954-56 itself had come to the conclusion that in
the long run nationalization of the coal industry was essential in the interest
of industrial development.
Though, the recommendations of the Estimates Committee
were accepted by the then Government, their implementation was delayed by 15
years. The prevailing conditions of coal mines at the time of nationalization
are found mentioned in the book, “Coal Industry in India”, written by the then
Minister of Steel and Mines, late S Mohan Kumarmangalam, which formed the
objectives of coal mines nationalization that can be broadly summarised as
follows:
- To reorganize small collieries into larger ones with the point of view of increasing the resource of amalgamated mines to augment production.
- To infuse capital in the coal sector for augmenting production commensurate with the industry demand.
- To safeguard the interests of the workers engaged in coal production.
- To deploy modern scientific mining methods with a view to both increasing the volume of production as well as conservation of coal.
- To emphasize on the safety of mine workers and their welfare measures, and
- To keep transparent records of production, safety and payment of wages and taxes & royalties etc.
Have
the objectives of coal mines nationalization been met?
In
the times that have gone by, I feel most of the objectives have been met,
except augmenting production commensurate with the industry demand. More than
1100 mines were taken over in the two phases and later nationalized in May
1973. Many of these were amalgamated to form larger mines and production got
enhanced. Subsequent new projects were opened up in larger areas with larger
production levels. Today the total number of mines with CIL is stated to be
364. The size of mines has been on the increase over the years both in terms of
area and the mine capacity. As on date CIL has 20 mines with annual capacity of
more than 10 MTPA, contributing 380 MTPA, which is more than 50% of CIL’s current
total production. It is also learnt that CIL has plans to increase the number
of high capacity mines to 35 with total capacity of 806 MTPA, ranging from 10
MTPA to 70 MTPA in the near future. Average capacity of these mines would be
around 23MTPA per mine.
Lots
of actions have also been taken in respect of safeguarding the interests of
workers both in terms of their monetary compensation and their safety. Today,
CIL workmen are paid one of the best salaries in the Public Sectors and their
satisfaction in the welfare amenities is also quite high. In the field of
introduction of mining technologies too tremendous growth has taken place both
in the underground and opencast mines. As regards record keeping, there is no
denying the fact that in the present era of auditing no records can be
fudged.
With
regard to infusing capital to open up more projects, both the Government of
India and the Coal India Limited management over the years have done their best
to invest in mines, augment production and meet the demand of coal by the coal
consuming industries. Total coal production of CIL in 1974-75 was 79 MT which
has grown to 607 MT in the previous financial year, registering a CAGR of
4.74%. The production, however, has remained short of the demand, resulting in
increasing import of coal. Domestic supply of coal in the year 2018-19 was 735
MT against the total consumption of 970 MT, the shortfall being met through
imports.
Coal
Imports
Coal
import had started in the year 1985 itself for meeting the coking coal requirement.
The quantity kept on growing thereafter but remained under 25 MT till 2001.
Coal imports, excluding lignite, coke and other coal products, increased to 59
MT in 2008-09 and thereafter steeply rose up registering nearly 235 MT in the
last fiscal. This figure comprises nearly 50 MT of coking coal and about 185 MT
of non-coking coal. Import of coal involves huge foreign exchange outgo. Total
value of imported coal of about 208 MT during 2017-18 was about Rs. 1,38,477
crores.
Whereas,
coking coal imports cannot be avoided due to non-availability of the required quality
indigenously, in the non-coking coal category also about 75 MT is non
substitutable due to their higher quality and economic considerations of the
coastal power plants. The balance 110 MT is of the quality that can be met from
the indigenous sources and every effort needs to be made to supply such quantities
from domestic sources.
One
of the major factors responsible for increase in the imported coal quantities
is the cost of coal vis-à-vis its quality. We are all aware that barring a few
coalfields, the quality of Indian coals is much inferior compared to the
internationally traded coals. Even for the same heat value, domestic coals have
the disadvantage of much higher ash content compared to the preferred
destination coals of Australia, Indonesia or South Africa. Thus, if the landed
cost of imported coal in energy terms from any of these sources is the same as
that from an indigenous supply source, the consumer prefers imported coal due
to extra cost of ash handling. Hence, apart from the quantity considerations,
it is equally important to make available the right quality on the basis of
total cost of utilisation. Unless the domestic coal is competitive on total
cost basis, I am afraid the rise in imported coal quantity cannot be arrested.
Coal
scenario till date
Though,
it is a history and known to all, I will like to spend some time in analyzing
why the current situation of non-availability of adequate quantities of
indigenous coal has arisen even after formation of Coal India Limited.
Until
1991, all the coal bearing areas, except those in the command areas of SCCL and
leasehold areas of Tata Steel and IISCO (now SAIL) were with Coal India Limited
and it had the freedom to open up any coal project to increase production as
required, based on long term perspective plans. In fact, that was a period when
the slogan was, “coal at any cost”. Government of India provided the
budgetary support both for capital as well as for the revenue shortage, if any,
and fixed prices for different grades of coal. In the process a number of
coking coal projects, whose financial appraisal indicated loss even at 100%
capacity utilization, were approved by the Government itself.
That
time having passed over, the era of liberalization of economy, gradual
withdrawal of budgetary support from the Government and allowing CIL to fix
prices of its products set in during the years 1991 to 2000. This period also
saw amendment of Coal Mines Nationalisation Act to allow captive mining by
Power and Cement producers and operators of coal washeries in 1993. The Washery
Operators, however, were not given any coal block. It was expected that as the growth in the industry sector was
largely to come from three basic industries – power, steel and cement; captive
mining would provide them opportunity with meeting their own requirements and
the economy would be pushed forward by creation of infrastructure in the
country. CIL
was asked to release all blocks of coal that it did not require for maintaining
a production level of 400 MTPA for the next 20 years. The boundaries of CIL
operations were, thus, limited by this policy and the rest of the coal blocks
were earmarked for allocation under captive mining route for consumers of
Power, Steel and Cement industries or reserve blocks. The allocations continued
till 2009 and about 208 coal blocks were allotted to different allocates, which were found not legal by the Supreme Court, and were
cancelled, barring a few, through its order dated 24th September
2014.
Contribution of coal supply through captive mining
In spite of 26 years of the history of introduction of
captive mining policy by the Government, the contribution of coal production
from this sector has been dismal. While CIL grew from the level of 305.4
million tonnes in 2003-04 to 606.9 million tonnes in 2018-19, SCCL grew from
33.6 million tonnes to 64.4 million tonnes, the captive mining grew from 9.5
million tonnes to about 50 million tonnes only in the same period, against its
planned contribution of around 250 MT. This indicates that in spite of
limitations in the coal resource ownership by CIL, it has shown ample growth in
coal production. In my opinion, if CIL was allowed to retain ownership over the
blocks it was forced to release for allocation in captive route, today’s coal
production scenario of the country would have been different and the country
would not have been subjected to import all the 185 million tonnes of thermal
coal in 2018-19.
I remember, during the year 2006-07, when I was the Director In-charge
of Coal Resource Development at CMPDI, the thrust on captive mining was huge
and CMPDI, through CIL, was asked to identify more coal blocks with a view to
allocating for captive use from out of the subsequently regionally and detailed
explored blocks. These details were prepared and submitted to the Government. Parallelly,
as the production from Captive blocks was not coming up, CIL was asked to meet
country’s total coal requirement, through the New Coal Distribution Policy
(NCDP), issued by the Government in October 2007, in spite of opposition from
CIL. At CMPDI, we had worked out the maximum theoretical production that could
be achieved from the then available CIL blocks, which worked out to a peak of around
700 MT. Based on this a request was made to the Government for allocating
nearly 130 coal blocks to CIL with a resource base of nearly 15 billion tonnes
for projectisation and meeting the directives of NCDP. However, till the year 2011,
this did not come about and CIL had to struggle with its production plans
within the confinements of its limited boundaries and the aggressive problems
of land acquisition, forestry and environment clearances and the new concept of
Comprehensive Environmental Pollution Index (CEPI) brought about in 2010. It is learnt
that some subsidiaries of CIL have been allocated 15 additional coal blocks in
the recent past, which have a potential to produce additional about 225 MTPA or
so. But the contribution from these is not foreseen much till the FY 2025-26.
Future
Coal Demand Scenario
Looking
forward, the overall coal demand for the country is estimated to be 900 – 1000
MT by 2020 and 1300 – 1900 MT by 2030, as per the Coal Vision 2030 document,
prepared by M/s KPMG for the Ministry of Coal. The demand scenario is
influenced by economic growth, energy efficiency and emergence of alternate
coal uses. By 2030, out of the overall coal demand, thermal coal demand is
estimated to be 1150 – 1750 MT. While this appears to be a very wide range, the
nature of uncertainties in the ecosystem are also quite wide.
Against
these demands, CIL has proposed to produce and supply 1002 MTPA by the FY
2025-26. With the base of 660 MT at 2019-20, this will require a CAGR of 7.2%.
Sustaining this type of growth consistently over next 6 years is a daunting
task for CIL and it needs to gear up for the same on all fronts.
Challenges before Coal
India and the need for strategizing its plans
In the past
4 years several statutory changes have been brought in by the Government with a
view to augmenting domestic coal production. Coal Mines (Special Provisions) Act, 2015 provides for mining
by both Government and private companies. This has paved way for commercial
mining in the country. Mines and Mineral (Development & Regulation) Act
1957 has been amended accordingly in 2015 and processes for granting mining
lease have been defined through auction route. However, even after introduction
of these Acts, the concept of captive mining is continuing, which does not find
place in the new Coal Mines Act. It is also learnt that the provision of prior
approval of the Central Government for grant of mining lease is being done away
with. The Government has already approved 100% FDI in the coal mining sector.
These are some of the steps in the right direction to bring in more players in
the field of coal mining for increasing domestic coal.
The average PLF of power plants is sliding down and has
reached the level of 52% in August 2019, which used to be above 80% in the year
2009-10. Many new capacities in power generation have been created but neither
there is enough coal to produce the same nor at times there is enough power market
for utilizing these created capacities. In one of the conferences last month I attended,
the Central Power Secretary asked the participants that due to such great
famine of coal there was a need to develop technologies that could produce coal
within two years from the date of allotment. His wish list also included
opening of coal mines of 100 MTPA capacity.
While his wish might have been driven by the problems, he is
faced with in Power Ministry, getting domestic coal production from new blocks
or enhancing even existing projects so quickly or in such quantities in the
present environment is a difficult dream. The problems of land acquisition,
statutory clearances for forest land and environmental clearances continue to
hinder the path of timely operationalisation of coal blocks. Added to this are the problems
created by the local habitants every now and then and at times they have the
free ways to bring even highly producing mines to a grinding halt. Also, being
an industry under the sky, the severity of the seasons adversely impacts coal
production. Thus, whether mining is done by Coal India or Commercial Miner or
the Captive Miners, these problems are common to all. The Government, therefore,
has to tackle these issues effectively and help increase domestic coal
production.
Commercial
Mining
Introduction
of commercial mining is hoped to solve the problems of coal availability in the
country. The stakeholders have the feeling that in absence of any competition
Coal India’s efficiency is poor and hence commercial mining is required at the
earliest to improve CIL’s efficiency. I have a different view point. Though, statutory
provisions for this was made four years ago, the first auction for allotment of
coal blocks under this policy is yet to be made. If, it takes so much time just
for allotment of a block, how much would be required for bringing such blocks
to production. Other issues that need to be considered are - who is going to
finance such mines in view of the uncertainties that the mining sector is faced
with? Also, what is most important is the quality of coal in such blocks.
Almost all the new blocks have very inferior quality of coal with high ash
content. The size of blocks is another issue for planning large production to
make them profitable. An investor looks for a return on investment of not less
than 20%. I do not think any player will get such high return from commercial
mining in India. Thus, in my opinion, meeting entire demand and making coal
availability surplus through commercial mining is a difficult task and the
failure, if any, of this concept of mining, is likely to put Coal India on
continuing pressure of producing more coal. It is, therefore, imperative that
Coal India prepares itself to provide quality coal at the least price and
continue to remain a competitive player in the market.
Diversification
Coal
India also needs to plan for diversification of its business with an eye on
future. We should not forget that in the fast-changing technological scenario
in the world, no existing technology has a long-term life, be it in any sector.
Hence, the challenges from the renewables should be taken seriously and Coal
India needs to strategize its actions in demonstrating power generation through
renewables, particularly solar power, by utilizing the land available from its
mined-out areas. Diversion in the areas of producing syngas, transportation
fuel and chemicals from coal is also a necessity now for sustenance of Coal
India as a business entity.
Introduction
of latest technologies
In
the past, several new technologies were introduced both in underground mining
and opencast mining through the bi-lateral agreements with the advanced mining
countries and new technologies were introduced. Bi-lateral agreement system
between two Governments was later abolished for the mining sector and this
route for new technologies got closed. I agree that the scope of high capacity
Longwalls in our underground mines is limited, but Continuous miners and
Short-wall in Underground mines and mechanized cutting of OB and Steep angle
conveyors for coal haulage as well as in pit crushing and conveying system both
for coal and OB in Opencast mines need to be tried to prove their cost
effectiveness. On quality front too, setting up of Washeries on a large-scale
basis would be a necessity for future. The proposal of loading all coal through
silo loading system has to be expedited so that fast loading is established at
all rail loading points. Road transport needs to be completely eliminated for
improving environmental set up in coalfields. These are some of the focal areas
that CIL has to put thrust on in order to remain a global best practices coal
mining company. I would also suggest that CIL needs to reverse its declining
trend of departmental production by adopting best mining technologies, else it may
have a threat to remain a coal mining company.
Suggested policy interventions by the Government for
enhancing indigenous coal production
In the light of the foregoing discussions some policy
interventions are suggested to the Government also for consideration:
- Coal India should
be allocated more coal blocks in the vicinity of their operations and should be
facilitated in getting the various clearances for starting coal production at
the earliest. In the long run Government can only depend on its own company and
not on private companies which will have the option of shutting down its
business in the case of adversities.
-
Coal blocks for
auction should be formed with larger resource base, preferably with extractable
coal reserve of 200 MT and more to enable the successful bidder to plan for
high capacity mines of not less than 10 MTPA by opencast and 2-3 MTPA by
underground.
-
There should be
only two types of coal producers – a Government company and other company, as
is mentioned in the Coal Mines (Special Provisions) Act, 2015. Distinction
between captive miner and commercial miner should be removed.
-
With the
introduction of commercial mining, pricing of coal would become a bigger issue
and there would be a lack of level playing field between the existing producers
of coal and the new entrants. CIL has inherited the past legacies and is losing
heavily on underground mines. The new entrants will have their operations in
the Greenfield areas and will have the liberty of choosing manpower and
technology to make the mine more profit oriented. A regulatory authority would
be required to be set up for fixation of price of coal based on cost of mining by
the different companies.
-
Ministry of Coal
should put a coal block in the allocation list only after written consent from
the Ministry of Forest & Environment that the block shall be granted
forestry clearance following the due process in a defined timeframe.
-
Land acquisition
& Resettlement and Rehabilitation (LARR) Act, 2013 should be amended to
exclude the provision of obtaining consent from the villagers. Once the block
has been selected for mining, all hindrances for further clearances from the
public should be removed from the law for its timely projectisation and
production.
-
The criterion of
environmental clearance based on coal production capacity of a project should
be changed to total excavation capacity, including that of the over burden in
the case of an opencast mine, as only coal production does not create
environmental degradation but the OB too has a role in it. This will provide an
opportunity for the producers to increase the coal production in any year if
the required OB removal is less, without any violation of environmental norms.
- Even after
simplification of the processes for environmental and forestry clearances the
time taken for clearance has not reduced considerably. The concept of single
window clearances for all approvals, starting from approval of mining plan to
mine opening permission should be introduced. Accountability should be fixed
for delays in clearances as a deterrent for delays. Introduction of time bound
e-clearance would be quite helpful in this respect.
To conclude, I would like to
reemphasise that Coal India Limited has been and will continue to remain the
mainstay of the country in respect of coal supply. I congratulate the present
management team under the leadership of Shree Anil Kumar Jha in registering a
growth of plus 7% in coal production and supplies last year. The growth this
year so far has not been as desired but I hope with the competent team that
Coal India has today, it would be achieved by the end of the year. I do hope
the stakeholders will take enough steps to restore the value of Coal India that
the market had recognised in the past.
Thank you very much for giving me a
patient listening.
