Pvt coal output only 15% of govt target

Even as the government has bet big on private sector participation to increase the coal output, the latest data suggest that these firms were able to produce only around 15 per cent of their annual target set in the current Five-Year Plan period (2007-12).

The government has so far allotted 189 coal blocks with 40,000 million tonnes (mt) of coal reserves till the end of March 2008, but actual production has taken place only in 13 coal blocks, according to data provided by the Ministry of Coal.

The government, however, is not accepting responsibility for the poor performance, saying that the delays in production are attributable to a host of reasons.

“Many allottees are sitting on coal blocks. There are cases where blocks were allocated even 10 years back,” said Minister of State for Coal Santosh Bagrodia. “We can only provide linkages. Giving clearances is not our duty.”

The government has set up an ambitious target of producing about 104 mt coal from captive blocks for the terminal year of the current Plan period, but production is only around 15 mt.

The captive production has to increase by 40 per cent every year to achieve the targeted output of 104 mt per year.

During 2007-08, about 52 blocks with total geological reserves of above 11,000 mt were allocated to public and private companies. Of this, 21 blocks with reserves of about 9,000 mt were allocated to companies engaged in the power sector.

However, out of these 52 coal blocks, in at least six cases the production work has not picked up because the companies have not been able to form JV agreements, according to the findings of a review meeting held by the ministry earlier this year.

“The major problem that arises in joint allocation of blocks is the degree of ownership. Most of the times, a company with a prior experience of mining desires a greater share and take a lead in mining work which others might not allow them to have. The sharing model does not really work,” said a senior analyst from an accounting and consultancy firm.

Also, unavailability of bank guarantee is a major reason why production work in most of the allocated blocks could not be started. For example, production work on 29 out of the 52 blocks has not taken place because the allocated block has not submitted the bank guarantee.

“These are smaller companies to which the banks do not provide guarantees easily. It has been seen that at least in the first two rounds of bidding, very inconsequential companies have been awarded the blocks. It is not always possible,” said the same expert.

The companies who have been allocated mines have also confirmed that a lot of coal projects are held up.

“There are many companies who have been sitting on blocks for at least two years. In such cases, coal blocks are allocated but there has not been much headway in production,” said a senior official from Essar Power.

The citing of these problems by the ministry and companies comes despite the recommendations of the T L Shanker Committee, which set out a road map for coal sector in India and suggested measures to streamline coal production.

Meanwhile, the government is mandating the coal controller to submit a report — twice a year — for proper monitoring of the coal mines. The results of these exercises are not known.