Coal India goes on a production overdrive to fuel economy

“Recover the coal sector for me, the entire economy will rebound.”

This was Prime minister Narendra Modi's first message to union coal secretary Anil Swarup last October after appointing him as a Of?cer on Special Duty (OSD) in the coal ministry. Recalling the conversation, Swarup now believes, with the successful auctioning coal blocks to captive miners and state-owned Coal India Ltd (CIL) recording double digit production growth, he and the CIL mangement are on course to deliver on the PM's mission.

The Core IIP (index of industrial production data) data for the month of May shows the coal sector was one of the best performing sectors with 7.8% growth on a year-on-year basis. And the growth engine for the sector is Coal India Ltd, which accounts for India's 80% output. CIL's production data shows that its production is growing for quite some time (see chart) and since April this year, it has been recording double digit production growth.

In the month of May 2015, CIL produced 40.97 million tonnes(MT), registering a growth of 11.8% and in June, it registered 12% output growth.

Although the Modi-government's ambitious target for CIL to achieve a one-billion-tonne production by 2019-20 may be a long way off, both the coal ministry and CIL management say the company is on the right track. While operational success has contributed to the recent growth, CIL is banking on easing of land acquisition and environmental hurdles to meet the target in the long term.

Consider this: Coal India's output from 2010-11 to 2013-14 grew from 431 MT to 462 MT, adding only 31 MT in the last four years. On the other hand, CIL output in 2014-15 reached 494 MT, recording a growth 33 MT in a single year. Coal India has begun 2015-16 on a strong note registering a 12% ouput growth at 121.33 million tonnes (MT) in the first quarter and meeting 99% of the target.

No wonder Union Coal minister Piyush Goyal is ecstatic. “It is the same Coal India, same executives, same workmen. We have just ensured a better management of operational affairs, showed the right intention and always believed in our potential,” said he.

The fact that coal ministry is keeping close tabs on the daily operational details of CIL, was evident when Goyal speaking on the subject on July 3 in Kolkata, checked the message on his phone to tell the audience that the CIL loaded 206 rakes on July 2. “I get daily updates on my phone,” he noted.

On ground, CIL officials say, minor operational bottlenecks in terms of labour issues, law and order issues, have eased in the last one year because of better coordination with the state governments and local administration in major mining states.

On its turnaround strategy, Anil Swarup said he and the CIL chairman Sutirtha Bhattacharya have divided the job between then. "I have told him to take care of digging the mines, and I am there to co-ordinate with the state governments and negotiate with them if there are any issues. And almost every week, I meet the chief secretaries of some mining state or the other,” he said.

Also, according to him, recent auctioning of coal blocks, which were de-allocated by Supreme Court, has indirectly helped in a way. As the enitre proceeds of coal block auction woud go to the respective states where the blocks are situated, it has brought the states and the Centre closer easing out the operational bottlenecks for Coal India in the mining states.

But better mangement of affairs and better co-ordination of states in operational matters, will certainly not make CIL to fulfill the dream of producing one billion tonne by 2019. “One billion tonne is not a target enforced from the top. Rather, it's a bottom-to-top calculation. We asked all subsidiaries what it could produce by 2019-20, we have chalked out a plan for 925 MT by 2019-20. I think, we can reach one billion too,” Swarup said.

The man to deliver on the promise is CIL's chairman and managing director Sutirtha Bhattacharya. "The key issues that the coal miner is basically relying on are timely completion of three critical railway lines and timely land acquisition and green clearances,” said he. There has been a significant progress as Coal India has already acquired 2,000 hectares of land and has received 41 environmental and forest clearances in the last eight months.

Coal India has chalked out mine-wise plans to meet the 925 Mt production target by 2019-20. Chhattisgarh-based South Eastern Coalfields and Odisha-based Mahanadi Coalfields will account for half the targeted output. Both the subsidiaries have received green clearances for five blocks each in 2014-15 and many more are expecting the clearances during this year.

Also, there are technological challenges especially for underground mines. CIL is banking on a PPP model. Engaging private contractors for mining is already operational in CIL under a Mine Developers and Operators (MDOs) model but the state-owned miner is now looking to expand this. “Awarding contracts to operators in the past few years under an MDO model were on a piecemeal basis and not on turnkey. Here, the miner would be handed over the mines for a much longer period and it would be awarded on a turnkey basis, from production to transport till loading point,” an official explained.

And even if the target is achieved, coal evacuation would be a major issue for CIL. The government is working on three major new railway lines in Jharkhand, Chattishgarh and Odisha that have the potential to evacuate 200-300 million tonnes of coal once ready by July 2018.