The rationale for allocating coal blocks to the end users had perhaps been to expedite evacuation of the precious resource and put it for the nation’s use. However more than two years of policy formulation and allocation of 182 coal blocks after the end result remain as unimpressive as the government policies usually end up as. When in the Energy Coordination Committee chaired by the Prime Minister it was decided in early 2005 that the process of captive coal block allotment would be streamlined and larger number of coal blocks would be identified for allotment to companies which had been setting up power projects, the intention was noble. The country aimed at bridging the gap between the requirement of coal and the supply of the mineral. With increasing generation capacity in coal based thermal plants, the demand for coal has been increasing. In addition the overall increase in the Plant Load Factor of thermal plants across the country necessitated more supply of coal. Also, the diminishing calorific value of coal required additional quantity of coal for the same level of generation. Add the ambitious target of generating 60,000 MW of electricity generation capacity – out of which 40,000 MW is from thermal, the urgent need to increase production and availability of coal will be apparent. No wonder that the Energy Coordination Committee under the chairmanship of Dr. Manmohan Singh voted for speedy allocation of captive coal blocks to the end users.
The decision was to identify coal blocks with approximately 20 billion tonnes of coal reserves. To start with, central public sector power utilities like NTPC were allocated these blocks. A number of state generating utilities did also receive coal blocks. Subsequently a large number of private companies, too, received coal blocks. It is estimated that against 20 billion tonnes allocations of almost 18 billion tonnes of coal reserves have been completed by the coal ministry – no mean achievement.
Under the Coal Mines (Nationalisation) Act, 1973, coal mining was mostly reserved for the public sector. By an amendment to the Act in 1976, two exceptions to the policy were introduced. First captive mining by private companies engaged in production of iron and steel was granted. Second, permission was given for sub-lease of coal mining to private parties in isolated small pockets not amenable to economic development and not requiring rail transport. Further, the Coal Mines (Nationalisation) Act, 1973 was amended in June, 1993 to allow coal mining for captive consumption for generation of power, washing of coal obtained from a mine and other end uses to be notified by Government from time to time. As per the provisions in Section 3 (3) (a) (iii) of the Coal Mines (Nationalisation) Act, 1973, a company engaged in production of iron and steel, generation of power, production of cement, and production of syn-gas obtained through coal gasification (underground and surface) and coal liquefaction only can do coal mining in India for captive consumption. Last year, on 12th July 2007, sub-lease for coal mining to specifying coal gasification and liquefaction as end-uses was published in the Gazette of India.
According to the web-site of the Ministry of Coal, as in May, 2007, altogether 182 coal blocks have been allotted; about 110 cases belong to power companies. In many cases blocks have been allotted to consortium of group of companies as determined by Ministry of Coal, in which case these companies will have to form joint venture for coal mine development. The allocation of coal blocks to private parties is done through the mechanism of an inter-Ministerial and inter-Governmental body called the Screening Committee. The Screening Committee is chaired by the Secretary (Coal) and has representation from Ministry of Steel, Ministry of Power, Ministry of Commerce and Industry, Ministry of Environment and Forest, Ministry of Railways, Coal India Limited, CMPDIL and the concerned State Governments. There are 229 identified coal blocks for allocation to specified end users and Govt. companies on display on the website of Ministry of Coal. Till May 2008, as many as 182 coal blocks have been allocated to eligible companies. So far, production has commenced only in 13 blocks. Production of coal from these 13 coal blocks in 2007-08 (up to Dec., 2007) is around 15.07 million tonnes.
What are the reasons for such inordinate delay in allocation of block and production of coal?
In case of open cast mining, production of coal should not be a very lengthy process. If the equipment needed are mobilised, full scale coal production from the mine is a matter of about six months. However, in case of underground mining the technology requires a much longer gestation. But what makes coal mining operations a very lengthy activity is really the time taken for initial planning, investigation, preparation of mining plan, obtaining environmental clearance, securing forest clearance for mining activity and last but perhaps the most critical one is land acquisition. The entire process takes four to five years and lingers in many cases. During the planning stage Coal India subsidiary CMPDI is the nodal agency and is responsible for the delay in most cases. In fact, this has been the experience of Coal India itself when it had the direct advantage of interactions with and guidance of its own sister company CMPDI.
The private sector allottees allege that the problem is even more acute for them. Interactions with CMPDI and therefore acquiring the necessary inputs from them become very difficult to access. Hence the act of mere commencing the initial task gets inordinately delayed. This often frustrates the macro objective which led to the coal block allocation policy.
Realizing the problem the government has decided that all regionally explored/unexplored coal blocks already allotted can be taken up for detailed exploration by the allottees on their own as per the guidelines issued by the Ministry of Coal. CMPDIL (NLC for Lignite) will provide the coordinated boundary of the block. The block allottees are required to submit to CMPDIL the detailed exploration programme with time schedules before starting the exploration activities. A quarterly report as may be prescribed by CMPDIL on status of exploration is also to be submitted indicating meterage drilled, number of boreholes completed with depth and general seam characteristics that have been encountered.
Due to the enormity of the problem the government wants to use both the carrot and the stick. Using the later on defaulters in the coal mining industry, the government has decided to take the extreme step of forfeiting bank guarantees of companies and deallocating blocks for inordinately delaying production from captive blocks allotted to them for several years now. Bluntly asking companies to deliver results, Minister of State for Coal Santosh Bagrodia have instructed officials to ensure that companies either perform or make way for others. The allottees not only risk deallocation but also may not find favour when future blocks are thrown open. Deduction of bank guarantees for slippage of milestones will also be initiated in a month or so. The government intends to reach its ambitious target of producing 104 million tonnes of coal by 2011-2012, the last year of the Eleventh Plan, from captive coal blocks which would require growth of around 35-40 per cent in the captive-block segment alone.
Officials said 27 private and state-run organizations were allocated blocks — 19 blocks were allocated between 1993 and 2002 and 21 in 2003. Of the 40 blocks, one was later deallocated. That left the total at 39. Of these, only 11 have begun production while three more are expected to go on-stream shortly. Nine blocks were given opening permission in the current fiscal. However while cracking the whip the government needs to identify and solve the problems facing the block allottees. A critical issue is absence of detailed geological investigation. Ideally only such blocks are allotted where the geological investigations had been carried out. Carrying out of geological investigations requires drilling in the coal mines area. Most of the coal mines are in dense forests. As per the present policy and procedure, permission from the Environment and Forest Ministry is required even for limited number of drilling necessary for geological investigations. And any bureaucratic approval takes a lot of time. Block allottees feel that as these investigations are not really extraction of mines for coal production, clearance for initial investigations should be made simpler and faster.
Acquisition of land is another thorny issue which needs simplification. There should be two routes for land acquisition – both by government notification and the other through private negotiations. The country has only couple of government companies viz. CMPDI, Mineral Exploration Corporation of India and Singareni Coal Company which enjoy the sole jurisdiction of preparing geological reports. The government could consider accrediting a number of agencies in the country which could be asked to mobilise resources to undertake geological studies on a war footing. Mining Plan is an important milestone in the entire process. It appears that each of the Mining Plans needs specific approval of Ministry of Coal, which invariably depends upon the expertise and advice of the CMPDI. In the revised context this policy and approach definitely needs to be revisited.
In case where a block has been allotted to a group of companies, if total amount of Bank Guarantee is not deposited by all the companies, work cannot begin. Grouping is the decision of the Ministry of Coal. If one or two companies in a group of five to six are not serious, entire group may not be denied the opportunity to proceed. Joint working by disparate allottees with varied interests is next to impossible. There are disputes over technology use, disposal of excess coal after end-use and cost involved in mining from the allotted blocks.
A case study – North Dhadhu Coal Block
The non-coking deposit in the state of Jharkhand was allotted to four parties on 13th January, 2006. The four allottees were : Electrosteel Castings Ltd (49%), Jharkhand Ispat Pvt Led (20%), Adhunik Alloys & Power Ltd (17.5%0 and Pawanjay Steel & Power Ltd (13.5%). The block was divided almost equally in two parts by a river flowing through the region.
ECL, with consent from the other allottees, requested a division of the allotted block in two parts so that the company could undertake mining exploration in their portion. This was feasible since ECL had 49 per cent share in the block, divided naturally by the river. CMPDI objected to the proposal on the ground that the division would leave the coal deposit under the river-bed unexplored. CMPDI felt that the river could be diverted and the entire block could be economically explored if the same remained in one undivided unit.
The organization overlooked two factors. First the topography did not allow the river to be diverted. Second the state government of Jharkhand did not allow the diversion of the river. The logical solution would have been division of the block so that at least one half of it could immediately be explored and mined. The proposal has been gathering dust with several negative notings on the file in the ministry.
Even if one can overcome the bureaucratic delays the issue of law and order in the forest land has been assuming an alarming shape. Most of the coal blocks fall in the regions where the Naxalites are operating. Here the Maobadi insurgents have near equal reach as the state law keepers. This increases the cost of operation for the miners. Not only that they have to buy peace from the insurgents they are not certain if such insurance is good enough in the long run especially when clearly the sympathy of the locals are with the insurgents. While voluminous reports get produced in the national capital and also state headquarters the solution remains as elusive as ever.
The coal production target meanwhile remains on paper with the rate of progress ridiculing the production goal set for the plan period. How the nation gets out of the imbroglio will be an interesting case study.
The decision was to identify coal blocks with approximately 20 billion tonnes of coal reserves. To start with, central public sector power utilities like NTPC were allocated these blocks. A number of state generating utilities did also receive coal blocks. Subsequently a large number of private companies, too, received coal blocks. It is estimated that against 20 billion tonnes allocations of almost 18 billion tonnes of coal reserves have been completed by the coal ministry – no mean achievement.
Under the Coal Mines (Nationalisation) Act, 1973, coal mining was mostly reserved for the public sector. By an amendment to the Act in 1976, two exceptions to the policy were introduced. First captive mining by private companies engaged in production of iron and steel was granted. Second, permission was given for sub-lease of coal mining to private parties in isolated small pockets not amenable to economic development and not requiring rail transport. Further, the Coal Mines (Nationalisation) Act, 1973 was amended in June, 1993 to allow coal mining for captive consumption for generation of power, washing of coal obtained from a mine and other end uses to be notified by Government from time to time. As per the provisions in Section 3 (3) (a) (iii) of the Coal Mines (Nationalisation) Act, 1973, a company engaged in production of iron and steel, generation of power, production of cement, and production of syn-gas obtained through coal gasification (underground and surface) and coal liquefaction only can do coal mining in India for captive consumption. Last year, on 12th July 2007, sub-lease for coal mining to specifying coal gasification and liquefaction as end-uses was published in the Gazette of India.
According to the web-site of the Ministry of Coal, as in May, 2007, altogether 182 coal blocks have been allotted; about 110 cases belong to power companies. In many cases blocks have been allotted to consortium of group of companies as determined by Ministry of Coal, in which case these companies will have to form joint venture for coal mine development. The allocation of coal blocks to private parties is done through the mechanism of an inter-Ministerial and inter-Governmental body called the Screening Committee. The Screening Committee is chaired by the Secretary (Coal) and has representation from Ministry of Steel, Ministry of Power, Ministry of Commerce and Industry, Ministry of Environment and Forest, Ministry of Railways, Coal India Limited, CMPDIL and the concerned State Governments. There are 229 identified coal blocks for allocation to specified end users and Govt. companies on display on the website of Ministry of Coal. Till May 2008, as many as 182 coal blocks have been allocated to eligible companies. So far, production has commenced only in 13 blocks. Production of coal from these 13 coal blocks in 2007-08 (up to Dec., 2007) is around 15.07 million tonnes.
What are the reasons for such inordinate delay in allocation of block and production of coal?
In case of open cast mining, production of coal should not be a very lengthy process. If the equipment needed are mobilised, full scale coal production from the mine is a matter of about six months. However, in case of underground mining the technology requires a much longer gestation. But what makes coal mining operations a very lengthy activity is really the time taken for initial planning, investigation, preparation of mining plan, obtaining environmental clearance, securing forest clearance for mining activity and last but perhaps the most critical one is land acquisition. The entire process takes four to five years and lingers in many cases. During the planning stage Coal India subsidiary CMPDI is the nodal agency and is responsible for the delay in most cases. In fact, this has been the experience of Coal India itself when it had the direct advantage of interactions with and guidance of its own sister company CMPDI.
The private sector allottees allege that the problem is even more acute for them. Interactions with CMPDI and therefore acquiring the necessary inputs from them become very difficult to access. Hence the act of mere commencing the initial task gets inordinately delayed. This often frustrates the macro objective which led to the coal block allocation policy.
Realizing the problem the government has decided that all regionally explored/unexplored coal blocks already allotted can be taken up for detailed exploration by the allottees on their own as per the guidelines issued by the Ministry of Coal. CMPDIL (NLC for Lignite) will provide the coordinated boundary of the block. The block allottees are required to submit to CMPDIL the detailed exploration programme with time schedules before starting the exploration activities. A quarterly report as may be prescribed by CMPDIL on status of exploration is also to be submitted indicating meterage drilled, number of boreholes completed with depth and general seam characteristics that have been encountered.
Due to the enormity of the problem the government wants to use both the carrot and the stick. Using the later on defaulters in the coal mining industry, the government has decided to take the extreme step of forfeiting bank guarantees of companies and deallocating blocks for inordinately delaying production from captive blocks allotted to them for several years now. Bluntly asking companies to deliver results, Minister of State for Coal Santosh Bagrodia have instructed officials to ensure that companies either perform or make way for others. The allottees not only risk deallocation but also may not find favour when future blocks are thrown open. Deduction of bank guarantees for slippage of milestones will also be initiated in a month or so. The government intends to reach its ambitious target of producing 104 million tonnes of coal by 2011-2012, the last year of the Eleventh Plan, from captive coal blocks which would require growth of around 35-40 per cent in the captive-block segment alone.
Officials said 27 private and state-run organizations were allocated blocks — 19 blocks were allocated between 1993 and 2002 and 21 in 2003. Of the 40 blocks, one was later deallocated. That left the total at 39. Of these, only 11 have begun production while three more are expected to go on-stream shortly. Nine blocks were given opening permission in the current fiscal. However while cracking the whip the government needs to identify and solve the problems facing the block allottees. A critical issue is absence of detailed geological investigation. Ideally only such blocks are allotted where the geological investigations had been carried out. Carrying out of geological investigations requires drilling in the coal mines area. Most of the coal mines are in dense forests. As per the present policy and procedure, permission from the Environment and Forest Ministry is required even for limited number of drilling necessary for geological investigations. And any bureaucratic approval takes a lot of time. Block allottees feel that as these investigations are not really extraction of mines for coal production, clearance for initial investigations should be made simpler and faster.
Acquisition of land is another thorny issue which needs simplification. There should be two routes for land acquisition – both by government notification and the other through private negotiations. The country has only couple of government companies viz. CMPDI, Mineral Exploration Corporation of India and Singareni Coal Company which enjoy the sole jurisdiction of preparing geological reports. The government could consider accrediting a number of agencies in the country which could be asked to mobilise resources to undertake geological studies on a war footing. Mining Plan is an important milestone in the entire process. It appears that each of the Mining Plans needs specific approval of Ministry of Coal, which invariably depends upon the expertise and advice of the CMPDI. In the revised context this policy and approach definitely needs to be revisited.
In case where a block has been allotted to a group of companies, if total amount of Bank Guarantee is not deposited by all the companies, work cannot begin. Grouping is the decision of the Ministry of Coal. If one or two companies in a group of five to six are not serious, entire group may not be denied the opportunity to proceed. Joint working by disparate allottees with varied interests is next to impossible. There are disputes over technology use, disposal of excess coal after end-use and cost involved in mining from the allotted blocks.
A case study – North Dhadhu Coal Block
The non-coking deposit in the state of Jharkhand was allotted to four parties on 13th January, 2006. The four allottees were : Electrosteel Castings Ltd (49%), Jharkhand Ispat Pvt Led (20%), Adhunik Alloys & Power Ltd (17.5%0 and Pawanjay Steel & Power Ltd (13.5%). The block was divided almost equally in two parts by a river flowing through the region.
ECL, with consent from the other allottees, requested a division of the allotted block in two parts so that the company could undertake mining exploration in their portion. This was feasible since ECL had 49 per cent share in the block, divided naturally by the river. CMPDI objected to the proposal on the ground that the division would leave the coal deposit under the river-bed unexplored. CMPDI felt that the river could be diverted and the entire block could be economically explored if the same remained in one undivided unit.
The organization overlooked two factors. First the topography did not allow the river to be diverted. Second the state government of Jharkhand did not allow the diversion of the river. The logical solution would have been division of the block so that at least one half of it could immediately be explored and mined. The proposal has been gathering dust with several negative notings on the file in the ministry.
Even if one can overcome the bureaucratic delays the issue of law and order in the forest land has been assuming an alarming shape. Most of the coal blocks fall in the regions where the Naxalites are operating. Here the Maobadi insurgents have near equal reach as the state law keepers. This increases the cost of operation for the miners. Not only that they have to buy peace from the insurgents they are not certain if such insurance is good enough in the long run especially when clearly the sympathy of the locals are with the insurgents. While voluminous reports get produced in the national capital and also state headquarters the solution remains as elusive as ever.
The coal production target meanwhile remains on paper with the rate of progress ridiculing the production goal set for the plan period. How the nation gets out of the imbroglio will be an interesting case study.
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