Key Reforms Measures

The vision for coal mining industry should be to come out with an innovative and comprehensive action plan for providing effective solutions and their progressive implementation. This will involve innovation and research in satellite based remote sensing, robotics, mining equipment, mining operation, extraction, beneficiation, processing and transportation.

The task of transformation of the coal sector is formidable given the size of investment requirement and the level of political interference that is expected during such process.

The following efforts can become the cornerstones of reform in the sector:

1. Deregulation of the coal sector

Deregulation and opening of the sector to private participation will spur state owned Coal India Limited (CIL) to improve performance, and help attract investments to the tune of USD 8-10 billion required to upgrade existing mines and open new ones in the next five to seven years. Recognizing this, Government has now decided to offer access to state-owned mining blocks to investors. Simultaneously, Coal India is being encouraged to further identify coal blocks wherefrom coal extraction will be commercially viable. As soon as attractive blocks are offered and successes become visible, private sector investment would increase significantly.

2. Independent Regulatory body

An independent Regulatory body to govern investment and operation in the sector is required. Such a body will help create a level playing field and will allow the Government to distance itself from activities like allocation of blocks, approval for mines, etc. The body can also be expected to introduce competitive price regulation.

3. Improvement in operational efficiency of the coal companies

Coal India is in need of an organizational transformation to gradually align its operating costs to international standards. Mining costs of CIL are at least 35 percent higher than those of leading coal exporting countries such as Australia, Indonesia, and South Africa.

The productivity should increase from 0.5 tonnes per man-year to 5 tonnes per man-year in underground coal mines using long wall mining and from 15 tonnes per man-year to 30 tonnes per man-year in open cast mines. To improve productivity, Coal India will need to invest in new technologies, improve processes in planning and execution of projects, and institutionalize a comprehensive risk management framework. State of the art equipment for open cast mines and also long wall mining system are required. More thrust should be given to safety for evolving accident free mining.

4. Strengthening of logistics in coal distribution

In India, the logistics infrastructure such as ports and railways are overburdened and costly and act as bottlenecks in development of free market. Privatization of ports may bring the needed efficiencies and capacities. In addition, capacity addition by the Indian Railways is necessary to increase freight capacity from the coal producing regions to demand centers in the northern and central parts of the country. On the Indian rail network, freight trains get a lower priority than passenger trains, a problem that promotes delays and inefficiency. Special freight corridors would raise speeds, cut costs, and increase the system’s reliability.

5. Policy and Regulatory Framework

The coal industry in India has traditionally been characterized by state monopoly, lack of independent regulation and lack of transparency in tariff determination. The Government has now realized that a high growth rate in domestic production of coal cannot be sustained without carrying out structural reform and introduction of competition through participation of the private sector.

In this regard, the Government has taken the following measures:
• Distancing of the Government from price determination of all grades of coal
• Opening of captive coal mining for power, iron and steel, and cement to private investment
• Foreign investment in Indian companies taking up coal mining for captive use has been permitted
• The allocation of coal blocks are to be done on the basis of competitive bidding
• Allowing State Government companies or undertakings to carry out mining of coal (or lignite) reserves (either by opencast or underground method) anywhere in the country
• Reduction in customs duty on coal imports to 5 percent
• and Downsizing of the budgetary support to the national coal industry

6. Investment in R & D

Work is required on clean coal technology to prevent the global warming and environmental pollution effects. For a long time there has been a talk about integrated gasification and combined cycle technology. Organizations like NTPC, BHEL and CSIR laboratories should work on this project. Coal India and other producers should help in this project by contributing in beneficiation and washing of the coal input. There should be a time bound programme for getting the results from this project. These results will have far reaching implications on the choice of technology for all future mining applications.

7. Focusing on technology for future

India’s numerous technology research institutes are working on energy related R&D. However, there is a possibility that they are operating in a fragmented fashion. The Government may get improved recoveries on its investment by concentrating on few important technology areas. To start with focus may be applied for tighter emission standards and development of technologies for extraction of methane from coal deposits.

All mining operations today involve continuous use of explosives, thereby generating high noise level, vibrations and shocks and very high level of dust pollution. This also takes away very large area as explosive safety zone and environment safety zone. Alternative technologies for using high power laser system for safe, pollution free and precision mining need to be evolved.

8. Information Technology for the Mining Industry

India has a unique blend of small and large scale mining operations. There is a need for assimilating the advances in Information & Communication technologies into mining operations for technological upgradation. Experiences from the oil & gas exploration where most advanced ICT have been successfully used will be useful in the mining industry as well. Many times the oil & gas industry has given the thrust to ICT out of necessity– 3D imaging & visualization and networking of large scale super computers. Indian mining industry could further modernize by using softwares for an integrated data management, analysis & 3D geological modelling, 3D plant design and advanced real time control & monitoring systems. Application of Information Technology should lead to robotic mining for improving the precision, safety and overall yield from mining.

In addition to the above, the following measures, which have been accepted in principle, are awaiting implementation:
• Freeing the sector from controls on distribution
• Establishment of a regulatory authority to resolve price disputes between producer and consumers of coal
• Granting of infrastructure status to coal sector
• Allowing public sector enterprises for joint venture projects with private sector.

For detailed & updated information on the Indian Coal Sector, refer to the report - 'Overview of Coal Sector in India 2005'

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