India clamps down on private coal development

By: Ajoy K Das
22nd June 2012
KOLKATA (miningweekly.com) - The Indian government has decided to crack the whip on the tardy development of coal blocks by private companies, by setting up an inter-ministerial group to review and de-allocate blocks awarded to these companies.

“In view of the shortage of coal in the domestic market, the entire focus has been on Coal India Limited (CIL) for its inability to increase production. But the fact is that there has been an even bigger failure from private companies in starting production in mines allocated to them,” a Coal Ministry official said.

“The task of achieving incremental production cannot be that of CIL alone. Owners of captive coal blocks too would have to be accountable and start mining operations or face blocks being taken away,” the official said.

To underline the dismal performance record of developing captive coal blocks by private companies, it was pointed out that since 1992, 213 coal blocks had been allocated to private companies for captive consumption, but only 28 had achieved commenced production.

The Prime Minister’s Office (PMO) has taken up monthly monitoring of CIL’s performance, setting the company a 10% higher production target of 464-million tons during 2012/13.

“As a government-owned mining company, CIL was already accountable for production. Challenges to increasing production too were known to the government,” Ministry official said.

“But it is expected that the inter-ministerial group would also hold private companies accountable for not even starting production. After all, achieving incremental production cannot be the sole burden of CIL,” the official added.

According to CIL chairperson S Narsing Rao, the government had known since 2000 that public sector companies like CIL and Singareni Collieries Company Limited (SCCL) would be able to achieve a production level of not more than 560-million tons a year and coal blocks were allocated to private companies assuming that incremental coal production would come from this sector.

A coal reserve of some 50-billion tons were allocated to various private companies between 1999 and 2009, with output from these blocks forecast at 104-million tons a year by 2012 and 250-million tons a year by 2017. However, production of only 30-million tons a year has been achieved by the private companies from these captive mines.

In March, the Coal Ministry issued notices to all companies allotted captive coal blocks to file a report on progress on the development of these block and end-use projects, along with explanations on delays in implementation of mining plans. The inter-ministerial group would decide on de-allocation of blocks based on the replies.

It was deemed necessary to set up the inter-ministerial committee after earlier de-allocation by the Coal Ministry was criticised by other ministries on the grounds that the move could jeopardize new capacities for electricity generation, ministry official said.

Edited by: Esmarie Swanepoel