Prabhu-led panel bats for more empowered players in coal mining

Prabhu-led advisory group also suggests JVs with mining & infra firms

As the government prepares ground for overhaul of the coal mining sector, the Suresh Prabhu-led ‘Advisory group for integrated development of power, coal and renewable energy’ has quashed the idea of restructuring Coal India Ltd (CIL), which at present has a monopoly in the sector. In a report it gave the government last month, the group has instead recommended empowerment of the company’s subsidiaries.

“(The) subsidiaries may be given adequate delegation of power, capital expenditure and operational flexibility, along with commensurate accountability, so that their dependence on CIL for decision making does not hamper fulfilment of targets set out for them,” said the advisory group’s report, which Business Standard has reviewed.

CHANGES WE NEED
Highlights of the advisory group’s suggestions

For more coal

• Improvement in parameters for performance of CIL subsidiaries — CCL, MCL, SECL, ECL, WCL
• Hiring of at least two mining development operators within six months
• Close monitoring of CIL’s annual targets
• Fast-tracking production from captive coal mines

For better availability

• Separate CIL subsidiary for building evacuation, including rail lines
• Joint venture with private companies to build rail links
• Dedicated rail corridor for a mine cluster
• Indian Railways, RITES, IDFC asked to give suggestions

A word of caution on auctions

• Reserve bid price vulnerable to controversies & cartelisation
• Power rate should be cost-reflective

There have been proposals to split CIL into five separate companies, to improve efficiency. The previous government supported the idea. However, Piyush Goyal, minister for coal, power and renewable energy, has said he feels splitting is not a solution, efficiency improvement is.

“Several options regarding the restructuring of Coal India were discussed. It was agreed that no major restructuring was required, at least in the short term,” said the report.

In the new set of targets for the energy sector, the Narendra Modi government wants CIL to raise its production to one billion tonnes by 2019. This would entail increasing the rate of annual output growth to 18-20 per cent from the current seven-10 per cent. “In the subsequent two quarters, growth rates of 15 per cent could be a big challenge. It would, therefore, be necessary that specific action plans on various identified constraints be made and monitored,” said the report.

For enhancing production, the report suggested hiring of ‘Mining Development Operation (MDO)’ agencies and re-opening of abandoned underground mines. “The coal ministry should give a target to each subsidiary to engage at least two MDOs (10 million tonne annual output) each, within six months.”

The committee has also asked for close monitoring of CIL targets for 2014-15, on a fortnightly basis, and engaging an experienced consultative agency to help monitor performance.

On availability, the report underlines the need for swapping of coal, rationalisation of coal linkages and monitoring the sale of surplus coal from captive mines. Among the other major suggestions are improving coal evacuation facilities by forming a separate CIL subsidiary for logistics services, including rail connectivity. The report pushes the idea of private investment and joint ventures by CIL and its subsidiaries in rail-linkage projects, to reduce dependence on Indian Railways. It also mentions setting up a dedicated common rail corridor for clusters of mines in coal-rich areas.

After the Supreme Court cancelled 204 block allocations made over two decades, the government in October promulgated the Coal Ordinance (Special Provisions) Bill, 2014. Through this, it will re-allocate the cancelled blocks and open the sector for commercial mining by the private sector. For the upcoming e-auction, the committee has issued a word of caution on reserve bid prices, against cartelisation in tenders. The report also emphasises getting a regulator for the sector.

The committee was headed by Suresh Prabhu, Union railways minister who formerly was power minister in the Atal Bihari Vajpayee government. The other members were R V Shahi (former Power Secretary), as member-convenor, Pratyush Sinha (former chief vigilance commissioner), Anil Baijal (former home secretary), Anil Khandelwal (former chairman, Bank of Baroda), K K Nohria (former chief executive officer of Crompton Greaves), Partha Bhattacharya (former chairman of Coal India), and Vallabh Bhansali (former CEO of ENAM).