Coal India Mines Failure

Public sector enterprise escapes public glare in coal scandal

TAGS: CBI teams | Central Coalfields Limited | Coal India Limited | CIL | Dhanbad district | Jharkhand
Workers at the Mahanadi coalfields in Odisha

On May 23, 10 CBI teams swooped on offices and homes of seven senior officials of the Central Coalfields Limited (CCL), one of the eight coal-producing subsidiaries of Coal India Limited (CIL), at different places in Ramgarh and Dhanbad districts of Jharkhand. About 1.3 million tonnes of coal worth Rs.200 crore was siphoned off surreptitiously from the Dhori collieries and sold in the black market in collusion with CCL officials, said the FIR. Two months later, on August 22, a CBI team raided premises of three transporters and contractors in Bokaro who had allegedly transported the coal illegally diverted by CCL officials led by a general manager, U.S. Singh, who was later shifted to the Mahanadi Coalfields Ltd, another CIL subsidiary.

Click here to Enlarge Performance anxiety CIL sits on Rs.65,000 crore cash reserves but fails to meet coal demand As CBI investigation into the official-business-contractortransporter nexus has underscored, CIL and its subsidiaries have become synonymous with corruption. While the CAG report on irregularities in the allocation of coal blocks has turned the spotlight on private players, the role of the public sector enterprise, awarded the Maharatna tag, has escaped public glare. It enjoys a near-monopoly over coal mining, and this has, ironically, become its bane. As of June, CIL's cash reserves stood at Rs.65,000 crore, next only to that of Reliance Industries Limited. It has coal reserves of 65 billion tonnes, which along with captive mines held by private players is more than enough to meet the country's requirements till the end of this century. Yet despite posting an aggregate pre-tax profit of Rs.21,272.66 crore in 2011-12, it has been unable to meet the burgeoning coal demand; 66 per cent of India's power generation is coal-based. CIL produced 435.84 million tonnes of coal in 2011-12, against a demand for 713.24 million tonnes. Captive blocks attached to private plants and some state undertakings mined 86.53 million tonnes. The Government had to import 80 million tonnes to bridge the overall deficit.

The Planning Commission, which is presently in the midst of finalising the 12th Five Year Plan (2012-13 to 2016-17), has set out a modest production target, in view of CIL's failure. It expects the PSU to churn out 556 million tonnes of coal annually by 2016-17. Planning Commission projects the coal demand will shoot up to 980 million tonnes by then. While coal import is projected to jump to 185 million tonnes, the balance is expected to be met by entities such as Singareni Collieries Company Ltd, Steel Authority of India Ltd, Indian Iron and Steel Company, Damodar Valley Corporation, Tata Iron and Steel Company and other private players with captive mines. "The demand-supply gap is widening," says K.A. Sinha, former cil technical director, "While the demand for coal is increasing at a very fast rate (8-9 per cent annually), the psu does not have the capacity to keep pace." CIL's inability to perform to the optimum reignites the debate for allowing private players to tap coal mines for commercial use. What ails CIL?

There is corruption at all levels. Coal is pilfered on its way to power, steel, sponge iron or cement plants. There's no monitoring mechanism. It is manned by professionals who have an interest in landing cushy private sector jobs. Antiquated technology and equipment is used to extract coal. There is practically no competition from private players.

"It's not that CIL does not have the capability to meet the demand. But it will first have to set its house in order, professionalise operations and seek greater cooperation from various agencies at the Centre and in the states," says Sudeip Srivastava, a Chhattisgarh-based social activist.

Central confusion The Centre's lack of clarity hits CIL hard.

Important posts have remained headless for long periods. South Eastern Coalfields Ltd, headquartered at Bilaspur, has functioned without a chairman and managing director (CMD) some two years now, while CIL itself remained without a full-time head for 14 months, until April this year. Public Enterprises Selection Board shortlisted the names of two candidates-

Bharat Coking Coal Ltd Chairman T.K. Lahiri and his Western Coalfields Ltd counterpart D.C. Garg-for the post in November 2010 but they were denied clearance by the Central Vigilance Commission in July last year, necessitating a fresh exercise. There have been delays in granting forestry and environmental go-aheads. According to CIL's annual report for 2011-12, as many as 179 proposals were awaiting forestry clearances for varying periods of time and 57 projects with an incremental capacity of 137 million tonnes were awaiting environmental approvals. Taken together, they would add some 500 million tonnes annually to the existing capacity once operational. The absence of a proper land acquisition policy is also a huge problem. P. Narsing Rao, the CMD of CIL, calls it the biggest handicap and blames state governments for not facilitating land acquisition on time for new projects. The total area covered by the 179 proposed CIL mines is 28,771 hectares and falls mainly in Jharkhand, Chhattisgarh and Odisha; the projects have failed to take off with state governments dragging their feet.

"Since 2007, there has been a big problem in getting environmental and forest clearances and acquiring new land has also become extremely difficult," agrees N.C. Jha, who retired as the acting CMD of CIL in January, adding, "The rate of production was good till 2009-10 (431 million tonnes). It remained the same in 2010-11, and rose only marginally in 2011-12 (435.84 million tonnes). It stalled in the last two years because of these two problems." He blames the environment ministry. "First, they declared some important areas as no-go. Now even though that rule has been modified, they still haven't given clearances," he says. The railway ministry's failure to provide enough wagons to transport coal mined by CIL has also affected its operations. Railways had set aside 177 wagons per day for the PSU in July this year, way below the demand for 190 wagons. There is also no monitoring. "As much as 20 per cent of the output is lost in pilferage," claims Sudeip Srivastava, though the CIL CMD pegs the figure at 7-8 per cent annually. Even if Narsing Rao's lower figure is taken, it shows that the PSU has been unable to check this loot mainly because of the official-transporter-contractor nexus.

Miners at the Singareni collieries in Andhra Pradesh

Parity please Level-playing field for private players must. Most experts believe if coal productivity in the country has to grow, there has to be a level-playing field between the PSUs and private players. The Coal Mines (Nationalisation) Amendment Bill has been stuck in Parliament since 2000 because of stiff resistance from the trade

unions. The bill, moved by the NDA government, seeks to allow private players into all kinds of coal mining, and not just captive operations. "It would have brought in transparency and freed up marketing of coal," says senior BJP leader and former Union minister Yashwant Sinha, whose parliamentary constituency, Hazaribagh, is home to several coal blocks. "The standing committee cleared it, but the trade unions opposed the proposal vehemently," he added. CIL and its subsidiaries have of late seen a massive exodus from their ranks to private companies that have been awarded contracts for captive mining. Former acting CMD of CIL N.C. Jha has, post-retirement in January, joined industrial conglomerate Monnet Group; retiring government officials have to serve a year's cooling-off period before joining a private firm. The coal ministry, however, can waive this rule. M.K. Thapar, who retired as South Eastern Coalfields Ltd (SECL) CMD in 2006, is with Adani Power. Partha S. Bhattacharya, who headed CIL between 2006 and 2011, was with Haldia Petrochemicals after retirement until he left it in June. B.K. Sinha, who retired as CMD of SECL in 2009, made his way to Moser Baer, which has purchased the Sondhia coal mine in Chhattisgarh from Chhattisgarh Mining Development Corporation. H.R. Surana, who bowed out as director (technical) of Central Coalfields Limited in 2009, is now with Prakash Industries. V.K. Singh, who retired as CMD of Northern Coalfieds Ltd in 2008, is currently with Sasan Power and G.C. Mrig, who retired as SECL's CMD in 2004, promoted Aryan Coal Benefication and is also a non-executive director with Monnet Group. Given the Government's experience with private players in the Coalgate scam, the best way forward is to strike a middle path, allowing private companies to supplement CIL's efforts in bridging the widening demand-supply gap. A case in point, says a former coal secretary, is the telecom sector in which state-run entities such as bsnl and mtnl had to corporatise their operations to meet the challenge from new entrants.
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