Often published news of coal stocks reaching ‘alarming’ proportions with power and steel plants are nowadays the readily available tool with policy makers at home and abroad to justify lower growth projections of the country’s economy in the years to come. It is ironical that India being the world’s third largest producer of coal and fourth largest producer of iron ore with significant reserves of copper, zinc, lead, lignite etc. is resorting to expensive import of non-coking coal. India imported 42.68 million tones non coking coal during 2006-2007 to colossal 68.13 during 2010-11, simply as the producers are unable to match the burgeoning demand due to dearth of advanced technology backed by adequate sustained technical support for opencast and underground mining. The added reasons for the dismal output continue to be policy and environmental issues along with transportation and supply side constraints from the point of evacuation to the consumers. During 2010-11, the mining industry grew by 5.8 percent as compared to 6.9 percent in 2009-10.
It is well-known that financial closures have been delayed for number of important power and steel projects in the recent past due to non assured supply of coal which remains the dominant source of India’s energy, meeting 52.4% of country’s primary energy requirement and the major mining segment having maximum and heterogeneous deployment of plants and machineries. It is also the key source of direct and indirect employment, mainly in the backward areas. Not to mention, it is the prime driver of the economy with power sector accounting 77% of non-coking coal off take. According to Planning Commission projections, coal will continue to have a dominant share till 2032 meeting over 50% of the primary commercial requirement and the country’s coal reserves will last for over 80 years considering the current production.
Over the years, the growth rate in coal production has gone up from 6.1 percent during 2007-08 to 8 percent during 2009-10, with 80% being accounted by Coal India followed by Singareni Coal Company
Tata Steel, Meghalaya and others (mostly captive producers). However, what becoming more clear now is that the growth rate earlier projected by Coal India is not achievable due to rising demand trend far surpassing supplies. As per the approved plan document, projected indigenous coal production/supply in the terminal year of the plan (2011-12) was 680 million tons. However, due to various reasons with CIL and its subsidiaries and persisting teething issues, the production target for 2011-12 was kept not more than 452 million tons.
Raw coal production during 2010-11 was 431.32 million tons showing no growth over previous years. However the target set by Ministry of Coal for the same period was 460.5 million tons with dispatches lower at 424.30 million tons which calls for serious, planned expansion in production output by addressing various issues impeding growth.
Thrust for Exploration
According to the mining industry sources, apart from CMPDIL, there are few agencies that have necessary technical competence and resources to undertake exploration in the country. It is also stated that behind the impediments towards exploration and capacity building, are challenges of infrastructure development. Creation of infrastructure is persisting challenge, particularly where adjoining blocks have not been developed. Industry sources explain that deficient connectivity through roads, non- availability of basic necessities like water, power, and accommodation arrangements will remain. Availability of basic infrastructure is prerequisite before start of mine development activities. Non-availability of supporting infrastructure, they claim is mostly due to lack of coordination with the local authorities at the state levels, thereby delaying the development of the project. Also on a micro level, industry sources point out that there is dearth of competent trained manpower to understand the working situation and dynamics of mining activity to set up the supporting infrastructure facilities.
Land Acquisition Issues & Environmental ClearancesOne of the major detriments towards raising output by mineral producers is delayed land acquisition for expansion. SAIL and CIL along with some other secondary producers of steel, copper and lignite have been facing delayed land acquisition. According to CIL sources, it has identified mines comprising, Talcher, IB valley, Rajmahal and North Karanpra which are said to have unlimited potential but expansion is a problem. This is due to the location of these reserves which are on tribal lands. The issue is coupled with that of environmental and forest clearances that is threatening to derail the PSU behemoth’s expansion plans.
According to a recent document prepared by the company, acquisition of forest and non-forest land, shifting and rehabilitation of villages, approval and environmental management plan and the law and order position in some states are the major hurdles in achieving the target. Land acquisition of course remains the major hurdle especially due to inadequate resettlement and rehabilitation policies in the states which have coal and other mineral reserves. Industry sources point out that scattered land holding pattern and poor land holding records make land acquisition a contentious issue. Delays also occur due to ownership dispute between the Revenue Authority and the Forest Department. Delays in handling over the forest land after its release by the centre and the state governments takes place. Besides, there are not infrequent differences between the project developers and state authorities, resultantly expanding time limits for production.
Integrated Planning RequiredOne of the major initiatives to raise productivity is to address the transportation issues of the minerals. There is a need to have an integrated planning right from the mines and railways to power and steel plants and other bulk end users of the mineral resources. The planning process till recent past for movement of coal from the collieries to power plants and secondary steel plants was being dealt at the Linkage Committee level. The Committee was to spell out the long-term linkages and hence gave the railways a tool to plan for capacity augmentation. However with the new policies of auctioning the captive mines and fuel supply agreements that have now got reduced. In this scenario, it is now essential for the railways to be actively involved in new policies as it is an important component of the supply chain. It will also be important for the railways, followed by examining the transportation bankability, to provide evacuation support from the point of origin through better connectivity initiatives. Important connectivity through new coal blocks like Shivpur-Tori-Hazaribagh projects will have to be expedited soon.
Technological Advancements ImperativeAlong with addressing all the other measures to increase productivity, the vital initiative to raise mining output will have to come from adoption of advanced mining technologies. Induction of advanced technology in the Indian mining sector has been tardy. There is limited use of global positioning and geographic information system and technologies to map mining activities. Though with the requirement to raise mine output, there has been very gradual adoption of newer machinery and solution, despite the same, the desired output has always shown steep fluctuation, during the lifecycle of the equipment comprising wheel loaders, articulated dump trucks, excavators, crushers and screens, conveyors, bucket wheel extractors, draglines or surface miners among other equipment. Inability to attain the desired output has affected the flow of return on the capital intensive technology that has been deployed. One of the main reasons behind the same, according to the equipment suppliers, has been due to the initiative of the mine owners, as they prefer to use their own personnel to operate the technologically advanced equipment shortly after they have been deployed at the site, rather taking support of the suppliers. As a result, there have been instances of frequent break-down of the machinery as the operator’s personnel have less understanding of the working features of the equipment. Besides, there has been dearth of transparent guidelines of annual maintenance contracts from the mine owners. However, it has been learnt that the PSU’s notably CIL, Hindustan Copper have started putting in place newer guidelines for equipment suppliers to provide AMC.
Another major cause for low utilization of the equipment is non-availability of genuine spare parts on time. It is alleged that there has been percolation of spurious parts leading to frequent breakdown of the machinery. The case manufacturers claim to have heavily taken place in underground mining equipment, which is one of the reasons for lower output. These issues need to be addressed, more so as because there is emphasis by the miners to acquire higher capacity machines that of course need sustained technical support to raise output.
The new Mines and Minerals Development Regulation Act (MMDR) 2011 envisages to increase productivity by addressing the issues on a macro level. During September 2011, the union cabinet approved the proposal to introduce the MMDR bill 2011 in terms of the National Mineral Policy 2008 to replace the existing MMDR act of 1957.The MMDR Act is still awaiting parliamentary approval.
The MMDR act is aimed at introducing more supportive and legislative environment for attracting investment and technology into the Indian mining sector. It provides mechanism for grant of prospecting license or mining lease through competitive bidding in notified areas of known mineral reserves and on the basis of first time principle in non-notified areas where presence of mineral reserves is not known. In order to facilitate the exploration of deep-seated and concealed mineral deposits(other than bulk minerals like bauxite, iron ore lime stone) using high technology and venture capital, the act also provides inclusion of new concession named high technology reconnaissance-cum exploration license.
The other provisions of the act are on profit sharing where it emphasizes suitable compensation of the project affected persons. Provision of the act also includes setting up of National Mineral Development Fund by the Union Government out of the proceeds of the cess levied by the Union Government. The amount from the NMF shall be utilized in meeting the administrative expenses of the National Mining Regulatory Authority and the National Mining Tribunal detecting and preventing illegal mining as well as promoting scientific management of mining activities. Implementation of the act by incorporating observation and suggestion of the mining companies along with various stakeholders in the sector, is expected to address the issues of the mining industry thereby enabling it to raise output.