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Business News/ Politics / Policy/  Coal benefits should be for the people
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Coal benefits should be for the people

CIL chairman S. Narsing Rao, in an interview, talks about coal reserves and role of the private sector in mining

Coal India chairman S. Narsing Rao. Photo: Indranil Bhoumik/Mint (Indranil Bhoumik/Mint )Premium
Coal India chairman S. Narsing Rao. Photo: Indranil Bhoumik/Mint
(Indranil Bhoumik/Mint )

Kolkata: Amid controversy over the allocation of coal blocks for captive use by power, steel and cement companies, S. Narsing Rao, chairman of state-owned Coal India Ltd (CIL), said in an interview that the Union government’s policy should be such that the benefits of India’s 290 billion tonne coal reserves—a “sovereign property"—should be enjoyed only by the nation and its people, and not by “speculators, investors, early birds or the lucky ones with deep pockets".

At the same time, the private sector should be given a bigger role in expediting the development of mines and in coal extraction, but every tonne of coal extracted “should rest squarely with the nation", Rao said. “The private sector should benefit from its efficiency in management, deployment of capital and technology… The benefit of coal should not be added with that," he said.

These, he clarified, were his personal views and not that of the mining behemoth he heads. Edited excerpts:

CIL is under attack for its inability to raise coal output at a satisfactory pace. What in your view is the best solution to the problem—private participation in coal mining?

India needs to step up power generation, and there is no alternative to using coal as fuel for at least 20 more years—I don’t see any viable alternative until, say, 2030. Coal is affordable and dependable. That apart, both coal and technology to generate power from coal are readily available.

Other sources are extremely deficient: nuclear power is neither dependable nor affordable; hydropower is affordable, but not dependable, and so on.

The Union government thought, keeping in mind CIL’s limitations, that it should not depend on CIL alone for mining coal and that it should allow supplementary efforts to shore up coal production.

That’s why coal blocks were allotted for captive purposes both to public and private sector companies. Some of the blocks were taken from CIL as well—those from which CIL didn’t propose to produce any coal until the end of the 11th Five-Year Plan (2007-12)

For the 11th Five-Year Plan, the government set for CIL a production target of 520 million tonnes (mt). The government probably thought that CIL could not produce more than 520 mt and that incremental production has to come from other sources.

Whatever may be the background or the reality, CIL is a responsible corporation—it was created to fulfil India’s coal needs. So, one should not expect a responsible public sector company such as CIL to only achieve its production target—CIL is committed to increase coal production.

Our production targets for the 12th Five-Year Plan (2012-17) are very challenging—we have been asked to achieve a compounded annual growth in production of more than 7% as against 3.85% achieved during the last five-year Plan.

We are only in the sixth month of the 12th Five-Year Plan, but we are optimistic about achieving the target. For one or two years, the growth may not be as much as targeted, but we will certainly achieve the target for the full five-year period. CIL has already started taking various initiatives to step up production in the years ahead—say, in 2015-17.

The question of nationalization or denationalization (of coal mining) is not the major issue. The issue is that coal being a national endowment is a sovereign property—all benefits derived from it should go to the nation and its people, and not to speculators, investors, early birds or the lucky ones with deep pockets.

The policy should be such that the benefits of coal should be enjoyed by the nation, while the benefits of efficiency should be enjoyed by the people who are efficient. The private sector should benefit from its efficiency in management, deployment of capital and technology, and so on. The benefit of coal should not be added with that for the private sector.

Could private firms help in any manner to raise coal production?

CIL has been engaging with the private sector, but in a limited way—mostly for overburden removal, so far. The private sector was roped in for its efficiency. Now we are looking to expand the scope of partnership with the private sector. The private sector is more efficient than us in many ways. For instance, private companies are more efficient in coal transportation and overburden removal, etc. (Oveburden is a layer of soil and rock covering coal seams.)

Possibly they can also do a better job (than us) in facilitating land acquisition for mines, rehabilitation and resettlement of the displaced. And that’s because unlike the public sector, they can be more flexible in negotiations with landowners. So, ideally, we should engage private companies to implement projects for CIL on a turnkey basis.

But CIL’s partnership with private companies will always be of such nature that the ownership of the coal—whether good coal or bad coal—would lie with the nation. This, in my personal view, is the most equitable way of enjoying the national resource.

I won’t comment on what policies the Union government should be adopting. But the underlying principle has to be that every tonne of coal extracted from India’s proven reserve of 290 billion tonnes should squarely rest with the nation.

But, at the same time, we should engage with private companies, and use their efficiency to expedite and shore up coal production.

What would be the role of CIL’s partners from the private sector?

Currently, half of the overburden removal is done by the private sector—the target for overburden removal this year is 840 mt. In coal excavation, too, out of the 400 mt of open-cast mining, half is done by the private sector (working as CIL’s contractors).

Whether we should scale up the private sector’s participation in overburden removal and coal extraction is a matter of judgement—we will review it from time to time. As of now, the private sector’s contribution is 50%, and in my view, it’s going to remain at that level for some time.

But for new mines, we are looking to expand the role of private sector contractors beyond overburden removal. We are in the process of identifying some 15-16 coal blocks and will be developing them in partnership with private contractors so that production could start faster at these mines.

We are hopeful of producing some 60-70 mt from these new mines by the end of this five-year Plan. This is also like to result in lower cost of production.

We also intend to use private contractors in a bigger way in our underground mines—a blueprint for expanding their role in extracting coal from underground mines will be ready in a couple of months. We are also looking to increase the participation of the private sector in exploration because CMPDI’s (Central Mine Planning and Design Institute Ltd’s) capacity is limited.

But at all times, the responsibility of all statutory compliances will be ours.

Clearance from the environment and forest authorities takes time and has hobbled mining. Is there a solution?

I don’t see obtaining clearance from the environment authorities as a major challenge, though, nevertheless, it takes time. But obtaining clearance from the forest authorities isn’t that easy, because with forests, there are subjective issues—whether the forest is dense or not, and so on.

However, the clearance process should be expedited when dealing with forests that are degraded. We are anyhow replanting double the area we deforest. The problem, this way, can be reduced to only thick forests. For now, let us confine the restrictions only to thick forests and review the situation 5-10 years later.

Some experts have suggested that CIL should be broken up to expedite coal output. It would release, as it were, its animal spirits to expand mining. What is your view?

Personally, I don’t think that will make much of a difference. I don’t think the public sector is ever driven by an animal instinct. In the public sector, you are given a target and you work towards achieving it—the public sector does not work to maximize profits.

I don’t think breaking up CIL will result in an increase in production.

In coal, there is no competition, and breaking up CIL will not create competition among its units. So why fritter away the advantages of staying together—there are distinct benefits of having one large pool of human resources, centralized procurement, and so on.

However, that does not mean that the key constraints of the public sector—and specifically those of CIL—should not be dealt with. To address the need of shoring up coal production, one should analyse and work towards finding solutions for our constraints.

State governments can resolve a lot of our problems, particularly at the project implementation stage. There are several issues such as land acquisition, rehabilitation and resettlement of the displaced, law and order, environmental clearance, forest clearance, and so on. We are heavily dependent on state administrations for these things.

CIL is sitting on a cash pile of 60,000 crore. Your company is being criticized for not deploying it meaningfully…

Our capital expenditure budget for the current five-year Plan is 26,000 crore. We propose to spend that amount only to expand coal mining. This is double the amount CIL spent under the last five-year Plan period— 13,000 crore.

At the same time, we are looking to expand our partnership with private contractors, and this will mean we will have lesser deployment of CIL’s own cash—a part of the required investments will come from our private contractors.

The thumb rule is you need to invest 2,000 per tonne of capacity, which means to develop an open cast of 1 mt, you need to invest about 200 crore. For underground mines, it’s double that amount.

When we outsource, the need for CIL’s investments in mining infrastructure will go down. The idea, though, is not to avoid capital expenditure—the aim is to expedite coal extraction and at a cheaper cost.

So, we are looking to invest elsewhere. For instance, we are working with the railways to expedite creation of railway infrastructure. We propose to invest around 7,500 crore on railway infrastructure alone over the next five years.

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Published: 11 Sep 2012, 05:56 PM IST
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