Strategy for increased production from captive Blocks- Roundatble Conference on Coal , Hotel Le Meridien,New Delhi 1 Strategy for increased production from Captive Blocks U Kumar Advisor (Coal Essel Mining & Industries Ltd Aditya Birla Group

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 2 For a developing economy like India, availability of affordable Energy and Security there of are main pre-requisites for achieving the desired economic development. In India Coal provide these. It accounts for almost 55% of country’s Commercial Energy needs and 66% of total Power Generation. Even going forward, Coal will maintain this dominant position That the available Coal resources in the country will support this arrangement can be seen from the resource position as on given below:

Strategy for increased production from captive Blocks- Roundatble Conference on Coal , Hotel Meridien,New Delhi 3 Coal Resource in India as on Source G.S.I Type of CoalProvedIndicatedInferredTotal% Prime Coking Medium Coking Semi Coking Sub-Total - Coking Non-Coking Tertiary Coal Total all types:

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 4 Depthwise distribution of Coal resources given below. Fortunately, 60% of the resources are available within a depth range of mtrs and are therefore amenable to Opencast Mining. Fast growth in production therefore possible

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 5 Depth-wise Distribution of Indian coal Resources as on Source-G.S.I. Depth Range (M)ProvedIndicatedInferredTotal% – (Jharia coalfield only) 600 – Total

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 6 And yet : The country’s economy is faltering on account of acute Coal shortage. The Nation’s ambitious programme of “Power for all by 2012” has not materialised. Coal import going up year on year adding to Current Account Deficit by an estimated 18 billion dollars in Power being generated with imported Coal becoming unaffordable resulting in idling of generation capacity.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 7 As per projections gap between Coal Demand and Indigenous Coal supply likely to be 185 mill tons by Reasons for Indian Coal Industry failing to meet country’s demand have been analysed on a continuous basis. Road Blocks duly identified. How to remove these Road Blocks is well known and yet problems persist. In fact they are becoming more and more severe by the day Way back in early 90s, the Demand Supply gap was foreseen and Captive Mining concept was brought in. About 220 Coal Blocks accounting for Coal Reserves of 50 bill. Tons were allotted Even after de-allocation, 195 Blocks still remain allotted Rated capacity of mines to be developed in these Blocks assessed at about 600 mtpa. based on the prescribed construction schedule as under:

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 8 Opencast Mines:  Blocks without Forest Cover= 36 months  Blocks with Forest Cover = 42 months Underground Mines:  Blocks without Forest Cover= 48 months  Blocks with Forest Cover = 54 months As per this schedule more than 80 Blocks should have become operational by now and production level of 104 mill tons should have been achieved in ie the terminal year of 11 th plan. In reality, only 35 Blocks are operational and production has remained stagnant at about mill tons for last 3 years.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 9 Road Blocks: Reasons for this sad state of affairs. For Blocks where operations have not started: Problems in getting Clearances: a)Prospecting License for un-explored/partially explored Blocks b)Forestry Clearance and consequently Environmental Clearance c)Problems of Land Acquisition d)Grant of Lease Constraints arising out of lack of Infrastructural Facilities Availability of Investible funds Lack of Mining expertise.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 10 For Operational Blocks On the other hand some of the Blocks where operations have started cannot produce to their capacity on account of: a)Legal Stipulation restricting the production to the requirement of End Use Plant b)Production capacity not being fully realised on account of Infrastructural constraints particularly Rail Connectively. c)Paucity of investible funds and mining expertise

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 11 Suggestions: A. Operational Blocks: Blocks which have become operational should be permitted to produce more than their captive requirement and surplus Coal should be handed over to Coal India for a reasonable price. This price must provide for an attractive rate of return for the Block Allottee. No one should grudge this advantage to the Block Allottee since otherwise the country is paying much more to foreign mining companies at the cost of scarce and valuable foreign exchange & denial of employment opportunities in the country. Freedom to produce more will no doubt give some profit to Captive Block Allottees but this money will remain in the country.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 12 Gratifying to see that this issue being actively considered by Committee headed by Shri BK Chaturvedi, Member, Planning Commission. Coal Bank concept currently being talked about can also deliver in as much as production in excess of their captive requirement will become attractive even to such Block Allottees whose Coal Reserves are not substantially higher than their own requirement. Problem of Infrastructural constraints investible funds and Mining Expertise will be addressed in subsequent paragraphs. B. Blocks where Operations are yet to start: Opening of Blocks where operations have not been started can be expedited by: 1.Blanket Issue of Prospecting License against all pending Applications with such safeguards as deemed necessary. Forestry Clearance for Prospecting License should be given freely with stipulation that no trees will be cut in course of prospecting operations

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi Forestry and Environmental Clearances: That Environment has got to be protected so that an inhabitable earth is handed over to the future generations is beyond debate. But then as our Late Prime Minister Mrs Gandhi put it “Poverty is the biggest Pollutant” & this has to be kept in view. Environment can be improved only if poverty is effectively addressed and this will be possible only by ensuring adequate and economically viable supply of Energy. Balance therefore, requires to be struck between Environmental considerations and urgent need for economic progress of the country. Forestry clearance norms should therefore be liberalised with more emphasis on compensatory Affore-station and fast reclamation of forest land dug-up for mining.

3. Land Acquisition: The primary reason for difficulties in Land Acquisition is the intense emotional attachment of people in our country to land. Right now, mining industry acquires land on permanent basis and the acquired land is not put to use once the mining operations are over. Instead land could be taken on lease with clear cut assurance to the land owners that the land will be reclaimed and handed over back to them after the mining operations are over. Naturally reclamation has to be done such that reclaimed land is useful for economic activities like Agriculture and Horticulture etc. This will no doubt cost some money but will go a long way in giving confidence to the land owners that loss of land is only temporary. During the period that the land is used for mining operations including the time required for reclamation, the land owners should be paid generous lease rent, which should be 2-3 times the value of their current income from the land. In all likelihood, this will go a long way in softening the resistance of the land owners. Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 14

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi Grant of Lease: Even after all the Legal requirements are met and necessary formalities completed, this takes as much as 2-3 years. It appears that State governments which have the authority to grant the lease do not consider themselves to be stake holders in matters pertaining to Coal Mining. They have to be convinced that increase in Coal production will not only help the country’s economic progress but would also: a)Bring about development in the state and add to the state’s coffers in the form of Royalty, Sales Tax etc. b)Cheaper availability of Power arising out of improved availability of Coal will have a cascading effect on the progress of the state. c)Coal companies’ contribution towards development of Education, Medical and Communication facilities will reduce the burden on the stake exchequer. d)Open-up huge employment opportunities in Rural Areas

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 16 e) Will prove to be the most effective deterrent against spread of Nexalite activities Based on a consultative process, a time limit for grant of lease should be fixed. 5. Infrastructural Problems: Provision of Infrastructural facilities like Rail and Road connectivity, Power Supply arrangements, water supply arrangements and Residential facilities are highly Capital Intensive. Individual Coal Blocks which have limited production potential are not in a position to make this investment. Problem can be dealt with by planning Master Rail and Road & Power & Water- Supply arrangements Systems for different Coalfields. Master Rail system already being tried for Talcher Coalfield. This can be replicated even for Road, Power Supply and Water supply arrangements. Funding can come from all beneficiary Allottees proportionate to their respective planned production levels.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi Investible Funds and Mining Expertise: These problems could be resolved very effectively by engaging specialised mining agencies as contractors. In fact in most countries abroad Mining operations are being carried out in this manner. In India, Contract Mining still remains prohibited under Contract Labour (Regulation & Abolition) Act. It is time that OB Removal and Coal Production should be deleted from the prohibited list of this Act. No amendment of Act is required and this can be done by issuing an Executive Order. The Mining Contractor will bring finances and expertise to prdouce Coal and hand it over to the Block Allottee.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi Operational Efficiency: Owing to the restrictions imposed by Contract Labour (Regulation and Abolition) Act, some of the Operational Blocks are being operated departmentally. Level of Operational efficiency is low on account of poor availability of equipment. Equipment manufacturers are now willing to take up Maintenance and Repair Contracts for the life of the Equipment. This has been tried at some contractually operated projects like Bhubaneswari in MCL very successfully. This can be replicated in captive mines for improving efficiency levels.

Strategy for increased production from captive Blocks-Roundatble Conference on Coal , Hotel Meridien,New Delhi 19 Conclusion: It is a pity that the country’s economic progress is suffering for shortage of coal of which the country has huge resources. It can be hoped that Adoption of a pragmatic approach directed at balancing the Environmental considerations with the need for economic development which will naturally contribute to Environmental improvement would surely go a long way in bridging the gap between Coal Demand and Domestic production.