Coal India’s partners to share social responsibilities3 min read . Updated: 25 Mar 2014, 01:01 AM IST
Partners to share social, land acquisition-related responsibilities, according to Coal India's proposed PPP model
Mumbai: Coal India Ltd’s (CIL) proposed public-private partnership (PPP) projects will see private companies share social and land acquisition-related responsibilities—some of the most challenging aspects of mining—as population rises and rules get tougher.
“The responsibilities of the private companies have been widened. They have also been given a role in R&R (resettlement and rehabilitation), land acquisition and clearances," said S. Narsing Rao, chairman of Coal India. “That adds more value to the plan."
Rao said the company’s board last week approved a generic contract and that the subsidiaries of Coal India will have to identify coal blocks for outsourcing before the tenders can be issued. The new project will be modelled on the company’s existing mine developer-cum-operator (MDO) plan, wherein a few blocks were given to private companies in the past few years along with the above stated new elements. Last year, finance minister P. Chidambaram announced in his budget speech there was a need to reduce dependence on imported coal and therefore a PPP policy was being formulated involving Coal India so that local production could be stepped up fast.
Coal India has already started outsourcing coal blocks in a small way in the past few years through the MDO route, and new private companies have entered the field with the ambition to become big mining firms in the years ahead when the government starts auctioning natural resource blocks.
Prominent among them are Aditya Birla group’s unlisted company Essel Mining and Industries Ltd, which is the MDO for two of Coal India’s mines—the 20 million tonnes per annum Bhubaneshwari mine in Odisha which is about two years old, and Rajmahal in Jharkhand where mining started last year.
Likewise, Adani Mining Pvt. Ltd of the commodities-to-ports Adani group has MDO contracts with Chhattisgarh government for mining coal.
Industry experts said there could be other smaller companies that have a background in coal imports.
A management consultant said outsourcing more coal blocks is good for the sector, but the social and land-related responsibility may deter some companies. “Coal India should be outsourcing the blocks with the main purpose of bringing in more advance and automated equipment," said Girish Shirodkar, partner, infrastructure and resources practices, at Strategic Decisions Group, a consulting firm. “I am not sure such people will have the wherewithal to get R&R and other plans pushed and approved." According to Shirodkar, foreign companies will be bothered by the need to participate in R&R and other plans as these are time consuming, cumbersome and sometimes controversial.
In an interview in March last year, Nik Senapati, managing director-India of global miner Rio Tinto, said the company would be interested in bidding for Coal India’s PPP policy though they would eye a larger role in the mines.
Executives at other companies said they would want part ownership of the mined coal, or of the lease, or at least a preferential linkage for coal supply, as opposed to the MDO model, after Chidambaram’s announcement last year.
Senapati was not available for immediate comments on Monday. Tuhin Mukherjee, managing director of Essel Mining said he could not comment without seeing the PPP documents. A spokesperson for Adani group said the company would not like to comment.
“If it is being called a partnership, companies would expect some kind of equity or economic partnership," one executive in the mining industry said, declining to be named.
Rao said the current mining laws don’t allow private companies any share of the mining proceeds. He added the other aspects of the PPP policy entail a 15-year turnkey contract. He said the party that quotes the lowest fee per tonne of coal mined, would win the project.
Global tenders could be expected soon, he added.
On Monday, shares of Coal India rose 2.81% to ₹ 270.8 on BSE. Coal India’s shares have dropped 8.96% from a year ago.
Coal India, the world’s largest coal miner, is likely to fall short of its targeted 482 million tonnes of coal in the current fiscal year, because of labour unrest and other problems.