177 mines of Coal India downgraded on quality concerns

Kolkata: The national coal quality watchdog has downgraded 177 of Coal India Ltd’s 413 mines, potentially impairing the monopoly miner’s profitability, starting from the current year. The downgrades took effect 1 April.

A total of 2,636 samples from the miner’s seven subsidiaries were examined and that led to the downgrading of 177 mines, said a key official at Coal Controller’s Organization (CCO)—the watchdog.

A few mines were upgraded too, added this person, asking not to be identified.

Admitting the downgrade, key Coal India officials said the miner’s focus in the current year will be on quality of coal, and that in most cases downgrading was by 1-2 grades only. The company’s profitability will surely be impacted by the move, but it is too early to assess to what extent, the Coal India officials said, asking not to be named.

There will be a negative impact in the short run, said Goutam Chakraborty, an analyst (metals and mining) with Emkay Global Financial Services Ltd. “However, at the same time, the impact may not be too significant going forward,” he added.

Because of the downgrade, Coal India’s realization from the 177 coal mines will decline whereas the cost of mining will remain unchanged or inch up due to inflation.

Coal grades are determined by the gross calorific value of the fuel. Earlier, Coal India used to determine the grade on its own.

After years of bickering between power producers and Coal India over grades and quality slippages, the union government agreed to start a process of independent inspection of coal for quality.

Since the Central Institute of Mining and Fuel Research started monitoring quality, the slippages have declined, said Ashok Khurana, the secretary general of lobby group Association of Power Producers.

Cases of recurrent slippages were referred to the Coal Controller’s Organization and that led to the downgrading of 177 mines, according to Khurana.

“The results of the past year have been encouraging and several power producers have benefited,” he added.