4 Coal Insights, May 2014

COnTEnTs

26 | CovER StoRyMine contractors’ walk-out may snowball into an issue: Rao Now, dependence on outsourcing for OB removal, production backfires on Coal India.

47 | opiNioNHow pSUs can help resolve india’s unemployment issues A lot can be achieved for the country if the government redefines CSR, says T K Lahiry.

6 | AgENDAindia inc. bets on Modi govt, bats for policy overhaulIndustry stalwarts from coal and allied sectors offer a to-do list for the NDA government.

44 | ENviRoNMENtCiL gains ground in land reclamation recordsThere is a steady increase in area of reclamation and plantation at CIL’s large OC mines

54 | FiELD DiARyinside india’s deepest coal mineChinakuri-1 mine of ECL holds high quality steel grade coal, but nobody dares to extract.

10 ‘New govt must push for power capacity addition’

12 ‘Put de-allocated coal blocks to auction-pool’

14 ‘Bring an end to policy paralysis’ 16 ‘Govt should consider coal mines

privatisation, tax rationalisation’ 22 ‘Revisit the land policy’ 36 Spot steam coal prices edge up in May 37 Coking coal prices recover marginally in

May 38 Coal block auction deferred to June 39 GSI sets up Gondwana Research

Centre 40 Which way is the coal scam probe

headed? 41 Cement body wants coal supply beyond

tapering period 42 India’s cement production up 12.94% in

March m-o-m 50 MCL’s mega projects are the way

forward 56 Corporate updates 58 Drager celebrates its 125th anniversary 59 valuejunction e-auctions Usha Martin’s

power unit in record 3 months 60 Saraogi Udyog may diversify if market

improves 61 Winds of change in China 62 US coal consumption to grow 5% in

2014: EIA 63 Coal handling by major ports at 6.37 mt

in April 64 Railways’ coal handling falls 8.59%

m-o-m in April 65 Turkey coal mine explosion fuels debate

India Inc. bets on Modi govt, bats for policy overhaul

AgEnDA

He said though there are adequate resources of iron ore and coal available in the country, ironically, ensuring uninterrupted availability of these two key raw materials for the industry remains a challenge. He called for allocation of coking coal blocks to the steel industry and also setting up washeries on a war footing in the country, with appropriate linkages of coal supplies in order to reduce dependence on imported coking coal. India’s coking coal potential must be unleashed for the steel industry in the national interest, he said. The committee emphasised the need for faster environmental and forest clearances on a single window basis. Members also stressed on the need for a thrust on improving energy efficiency, water harvesting, GST implementation, more avenues for utilisation of waste such as fly ash and slag etc.

Koushik Chatterjee, Group Executive Director (Finance and Corporate), Tata Steel, said, “We welcome the outcome of the 16th Lok Sabha Elections and congratulate

Coal Insights Bureau

A persistent decline in industrial production and a surge in inflation are posing big challenges for the

National Democratic Alliance (NDA) which registered thumping majority in India’s general elections of 2014.

While industrial production shrank for the second month in a row, contracting 0.5 percent in March, retail inflation surged to a three-month high of 8.59 percent in April, according to data from the Central

Statistics Office (CSO). The IIP showed a growth of 3.5 percent in March 2013. The weak industry scenario should propel the new government to send out strong signals of its commitment to spur growth, the Confederation of Indian Industry (CII) said.

After winning the nine-phase Lok Sabha elections, the new government headed by Narendra Modi will thus have a tough task to bring the economy back on track.

“Top priority should be given to reviving investor sentiment by ensuring that cleared projects in the manufacturing and infrastructure sectors take off. Also, getting large projects like the Delhi-Mumbai Industrial Corridor (DMIC) into implementation mode and bringing clarity in the tax policy are important,” said CII Director General Chandrajit Banerjee.

C S Verma, Chairman of the CII National Committee on Steel and Chairman, Steel Authority of India Limited, called for a cohesive and comprehensive agenda for the new government in order to accelerate growth in the steel sector for capacity building of 300 million tons per annum by 2025. The key focus areas discussed included ensuring availability of iron ore and coal mines to existing steel plants, improving viability of the alloy and stainless steel sector, impact of the Comprehensive Economic Partnership Agreements with Japan and Korea on the steel industry and rationalising the railway freight structure so that there is no cross-subsidisation.

6 Coal Insights, May 2014

COvER sTORy

Coal India Limited (CIL), the largest coal producer in the

world, is struggling to meet its production and offtake targets and the government’s diesel pricing policy seems to be having a direct fallout on the yield of this public sector behemoth. Contractors are walking out because CIL, being contractually bound, is being unable to make good the losses they are accruing from the differential between bulk and retail diesel pricing. Consequently, overburden removal is falling, which would translate into lower coal production as well, S Narsing Rao, Chairman, Coal India Limited, tells Rakesh Dubey of Coal Insights.

Moreover, many power generators, felled by

low demand from the discoms, have

not been lifting their contracted

quantum, adding to CIL’s worries.

Mine contractors’ walk-out may snowball into an issue in 2014-15: Rao

Dependence on outsourcing backfires on CIL

26 Coal Insights, May 2014

Coal Insights, May 2014 27

Let’s start with the good news. Eastern Coalfields Limited (ECL) is likely to stage a turnaround in 2013-14. How do you feel that two subsidiaries of Coal India Ltd (CIL) have been able to achieve this feat in close succession?

Only two subsidiaries – ECL and Bharat Coking Coal Ltd (BCCL) – were under the Board for Industrial & Financial Reconstruction (BIFR) and we hope this year (2014-15) ECL can come out of its purview. Anyway…we have started a new year and have huge targets to achieve now. So, let us see if we can meet these. We have a target of 507 million tons (mt) for production and 520 mt in off-take.

What went wrong in 2013-14 so far as missing the production and off-take targets were concerned?

Of course, these were difficult targets. About 30 mt of incremental increase was no mean task. I was expecting a growth of 20-25 mt, but we ended up with a growth of only 10 mt.

We could not achieve the targets due to two major issues. One was the loading problem at Mahanadi Coalfields Limited (MCL) which was created by a particular Member of the Legislative Assembly (MLA) of that area. The problem is persisting. We lost 2-3 mt of production at Talcher on account of this alone. The problems are continuing but have been confined only to two sidings because of bandh and other issues.

Then again, unfortunately, there were some procedural problems like the environmental clearance at Lakhanpur, which was 3.75 mt and Barakpur about 2-3 mt. So, about 6 mt of production was lost due to issues related to environmental and forestry clearances (around 4 mt because of environmental approvals and about 2 mt because of forestry clearances).

We initially hoped these clearances would come through but there were some hitches at the last moment.

Besides MCL, production was also affected at NCL to some extent, where we lost around 3.75 mt because of EC (environmental clearance) issues.

While these two were avoidable,

there were general problems as well. Our production had suffered by around 5 mt in October 2013 due to Cyclone Phailin. Almost the entire production was gone in Odisha and other subsidiaries. In fact, except for NCL, all other subsidiaries were affected by Phailin.

In addition, there were problems related to quality and demand from the power sector. These are of course operational issues but, overall, production was hit to the extent of 20 mt because of which we could achieve only 10 mt incremental production in 2013-14 as against the targeted 30 mt.

Let’s see how we progress this year.

What steps are being taken to achieve the target in 2014-15?

We will definitely work towards achieving them, based on our experience last year. We took a lesson in one aspect, that pending clearances should not be allowed to hang fire till the last moment. We should get the approvals in the first half itself so that the required capacity clearances are in place in the first half of a fiscal. This, unfortunately, did not happen last year and we had to practically stop mining after January 2014 in some of the mines because of non-availability of environmental clearances.

We had anticipated the clearances to come in but which did not happen. Hence,

no mining took place from end-January! In fact, we had to cut down around 19,000 tons of production every day at NCL because of the lack of ECs.

We already held a meeting with the Ministry of Environment & Forests (MoEF) on April 16 and have set some targets on the clearances this year.

Then, of course, there were operational issues like contracts.

It is also said that issues related to outsourcing also affected production and that such contracts are heavily biased in favour of CIL?

Yes. I agree that contract agreements are heavily biased in favour of CIL or the subsidiary companies. It has been like this from the beginning. I am not saying this should be the case, but that is how it is, historically. And we need to bring in changes to make the contracts more balanced. May be, one or two conditions have been changed here and there but we need to change the clauses further.

A major problem, which affected us marginally last year, but has taken on severe proportions at present, is diesel pricing. The central government has created a major problem for us. Because of the diesel pricing policy, the retail and bulk differential is `10-12 per litre. Till September 2012, there was

COvER sTORy

44 Coal Insights, May 2014

CIL gains ground in land reclamation records

Coal Insights Bureau

Amidst increasing pressure from the environmental lobby, Coal India Ltd (CIL) is showing a steady

improvement in its land reclamation and plantation records for select mined areas. Although the improvement measured on a year-on-year basis remains small, the miner claims the progress would bring double benefits. It would curb environmental degradation and facilitate future land acquisitions.

A recent study by the Central Mine Planning & Design Institute (CMPDI) shows that six out of seven major mining subsidiaries of CIL, barring Northern Coalfields Ltd (NCL), have displayed increased reclamation records over the period of 2011-13.

This, however, is based on a sample study of 50 large opencast (OC) projects in various coalfields such as Talcher, Singrauli, Rajrappa, Sonepur Bazari, Ghughus and Korba. The selection of the projects was based on a production criterion, ie, the selected projects must produce more than 5 million cubic metres of coal plus overburden (OB) per year (based on satellite data on an annual basis).

The study shows that the total land area reclaimed by CIL subsidiaries has increased to 272.73 sq km in 2013-14 from 268.20 sq km in 2012-13.

“On comparing the status of the land reclamation carried out in 2013-14 with respect to 2012-13 in the 50 opencast

projects of different coal companies, it is evident from the analysis that the area under land reclamation has increased from 268.20 sq km to 272 sq km, which includes both plantation and areas under backfilling,” the study says.

A detailed break-up of land use by these projects shows that out of the total mine leasehold area of 617.34 sq km of the 50 OC projects considered for monitoring during 2013-14, total excavated area was 345.74 sq km or 56 percent. Out of this, 163.19 sq km area (47.20 percent) has been planted or biologically reclaimed, while 109.54 sq km area (31.68 percent) is under

backfilling (technically reclaimed) and 73.02 sq km area (21.12 percent) is under active mining.

Despite the marginal increase in the area of reclamation, the

study notes that in some projects, overall vegetation cover has

been reduced in the leasehold area. This was so because of

cutting of vegetation due to mine advancement.

EnvIROnmEnT

54 Coal Insights, May 2014

inside india’s deepest coal mine

Down but not out?If you stand facing the old coal handling plant of Chinakuri-1 mine on

the east and the Damodar river to your back, and stretch your eyes to the horizon, you get to see nothing! So, where is the mine anyway? “Well, the mine is under the river,” assures mine manager N Prasad as

he asks the on-setter to make arrangements for a trip down by the lift. Now again, a lift is not a lift. The locals call it the “cage”. Once inside it, there’s no escaping the nervousness that accompanies first-timers taking the plunge in a shaft to an underground mine. As the cage starts rolling down, much like a well bucket fastened at the loose end of a rope attached to a pulley, it gathers momentum as it trundles deeper into the steep, dark tunnel.

On the way, there comes a bout of strong wind and sprinkles of water followed by a sudden change in air pressure (and hence, blocked ears). If you sustain these early jolts, you land at a chamber filled with methane gas!

Don’t worry, there is cross-ventilation inside the mine, says the manager. Large fans, all as old as the mine itself, pour fresh air from outside. The fresh air, however, must be kept separated by the four lock-gates. Prasad explains the reason of this air-separation. “If this air-stream is allowed to come into contact with methane, there will be short circuit and then, you know what…!”

Beyond the lock-gates lies the main tunnel. A rail track is laid at the centre and a cart, which again bears the memories of British India, takes the visitors westwards. “Be careful,” the driver warns, “at places, the tunnel is just as broad as the cart is. Be a little careless and you lose your limbs!”

Thus, an exciting ride along the bumpy terrain takes you through that pitch dark (of course, you have the battery and cap-lights) tunnel to a junction where it has branched out into three. The manager asks you to get down and…Gosh…to put your lights off!!!

“Here you are, gentlemen, right below the Damodar river, in India’s deepest underground coal mine,” he proudly declares.

Later on, as you get accustomed to that ambience, you start exploring the coal seams. Sparkling coal, a little brittle, stuck to the walls; all high quality steel-grade II coals with low ash and moisture… good feed for our steel plants. And there is substantial quantity lying below the ground, yet to be tapped.

But alas! Chinakuri-1 is long dead! The last (significant) production was reported decades ago. Today, the mine doesn’t produce a single bagful of coal a day, informs the manager. There is no technology available to extract coal from such depth and nobody dares to give a try, given its tragic past.

Arindam Bandyopadhyay

Chinakuri’s tragic pastSo here you stand, right under the Damodar river, at the core of India’s deepest coal mine, Chinakuri-1, which falls under the Raniganj coalfield in the command area of Eastern Coalfields Ltd (ECL). At a depth of 650 mtrs, it was once Asia’s deepest underground mine until the Chinese dug out with something deeper and larger.

The terrain makes the mine “valley-type”. It comprises of Degree 3 coal seam. ECL estimates that the mine still has substantial balance reserves of around 150 million tons (mt) and extractable mineable reserves of 76 mt. In adjacent Chinakuri 3, the total reserves are again 150 mt and that mine is being operated by conventional methods.

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