Originally Published 2012-12-27 00:00:00 Published on Dec 27, 2012
Coal companies can achieve a great deal if they strategise action plans to improve mine productivity, capital equipment utilisation, mine recovery ratio etc., to international standards. There is also urgent need for introducing more advanced technologies and modern management systems.
Coal Mining - Challenges and strategies for bridging demand gap
Coal is the India's most important commercial energy resource as it is blessed with abundant reserves. India is the third largest coal producing country in the world. Coal contributing over 70% in electricity generation. Reforms started since 1991, created an unprecedented increase in demand of coal and the coal industry was able to achieve a production of 534.5 million tons against projected demand of 694 million tons during fiscal 2011-12. This gap, unless immediate steps are taken, is likely to increase in coming years with projected demand growth rates of 6.9% per annum during 2012-2025.

The coal sector has been facing a number of external constraints like environment and forest clearances and acquisition of land. These and some other areas need to be revisited by central and state governments for revision and simplification of norms and procedures to the extent possible. However, a great deal can be achieved by coal companies if they strategise action plans to improve mine productivity (which unfortunately is not being focused adequately at present), capital equipment utilization, mine recovery ratio etc., to international standards. There is also urgent need for introducing more advanced technologies and reorienting managements to adopt modern management systems in operations. All this would require a cultural shift in coal companies with greater focus on in-house steps instead of assigning entire blame on external constraints. It would, of course, be incorrect to single out the coal sector because growth and higher efficiency of operations are also restrained in many sectors of economy for the same reasons. For example, under the cover of ongoing blame game between coal and power sectors, poor performance of many thermal power stations is being attributed mainly to coal shortage whereas the ground reality presents a different picture. In the break-up of total loss of generation during 2010-11, coal shortage can be blamed partly for 23.18% only, rest being due to commercial and technical reasons which account for 26.17% and 50.65% respectively.

It may be recalled that the economic reforms in 1991 and consequent cultural changes and global competitive pressures led to tremendous improvements in greater productivity, better quality and internationally competitive prices in many industries. Competition is presently lacking in the coal sector and government needs to take immediate steps for evolution of 4/5 large specialized coal companies both from private and public sectors. A progressive looking approach in management of Coal India Ltd. should, however, initiate immediately the process for organizational reforms perhaps with the assistance from some experienced management and technological consultants.

With the above background, some steps have been identified for the consideration of government and stakeholders for achieving indigenous self sufficiency in what is one of the most vital sectors of national economy in next two decades (Annexure). This exercise should, however, be considered as first small attempt to be refined further through brainstorming with an open mind among all forward looking past and present managers in coal sector.


1.      Accelerating coal exploration and setting up additional bodies or expanding existing agencies for exploration of new blocks.

2.      Restructuring of CIL so that present subsidiaries can operate on their own as listed companies without the umbrella of a holding company. CMPDIL should, however, be made independent immediately to act as a technical arm of the Ministry of Coal on the pattern of CEA under Power Ministry.

3.      Introducing better management culture in coal sector and correspondingly introducing sound management systems and procedures in organizational disciplines including finance, contracting, HRD, Project Management etc. in the coal companies.

4.      Emphasizing the adoption of advanced technologies for coal mining with focus on achieving higher mine productivity and optimum utilization of capital equipment. (The best performance of any CIL subsidiary is about 25 tons against 100 or more by good international companies and 83 tons for Sasan projected by Indian Company's American Consultant). The same applies to optimum utilization of other resources in particular capital equipment.

5.      Creating a monitoring cell either within Ministry of Coal or under the umbrella of CMPDIL to monitor the progress in exploration, allocation and exploitation of new blocks planned with defined milestones.

6. Formulating and implementing transparent procedure for allocating coal blocks.

7.      Redefining the concept of captive block to enable its allocation to a specialized coal company and linking its production to a user entity. It may also be desirable to give an incentive to the coal producer to achieve increased production with permission for free sale up to 25% of linked quantity on the lines of Power Sector for sale of 25% of energy through Merchant Sale. This will result in creating 3 - 4 new large specialized coal companies and generating a spirit of competition in coal sector.

8.      Ensuring development of newly allotted blocks within stipulated time frame and defining roles of the state governments and central ministries in that regard.

9.      Undertaking expeditiously, development of certain good blocks with CIL held up due to absence of rail linkage, it is proposed that construction of railway lines be funded from capital budget of CIL and coal prices be revised taking into account investment on these railway lines.

10.      Expediting reforms based legislation pending with Coal Ministry and also appointing Regulator for Coal Industry.

11.      Expediting the scope of environmental and associated possible, which result in unjustified delays in clearances and approvals necessary to develop new blocks.

12.      Assisting in faster land acquisition and R/R of affected persons by all stake holders including coal companies and state governments. A possible answer in this regard could be a policy for acquiring land on lease for 30 years rather than on outright sale with lease rent being more than loss of likely revenue from farming.

13.      Formulating a sound pricing policy for development of coal blocks outside India by Indian Companies and bringing major part of their output to India.

14.      Formulating a time bound plan for development of logistics/ports facilities and their connectivity for transportation and handling of imported coal bottlenecks.

(The writer is an Advisor to Observer Research Foundation and the Founding Chairman and Managing Director of the NTPC and a former Secretary of the Ministries of Power, Heavy Industries, and Chemicals and Petrochemicals)

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