A Rs 272-crore project to expand coal production capacity from the Eastern Coalfields (ECL) has got delayed as the public sector company does not want to involve a private operator fearing trade union problems, despite an approval from the Planning Commission.

The project is the expansion of Rajmahal mines in Jharkhand that will almost double its capacity from the current 10 million tonne per year. Thanks to the delay, additional coal supply to NTPC?s Farakka and Kahalgaon thermal power units are also consequently delayed. The coal ministry has supported the decision of the subsidiary of Coal India Limited that private extraction of coal will affect relations between the management and trade unions, resulting in a slowdown of production.

The project was approved four years ago in May 2005 by the Cabinet Committee on Economic Affairs for Rs 50.08 crore. The Cabinet also directed ECL to select a contractor for outsourcing the job. Accordingly, ECL floated tenders twice but rejected the winning bids on the plea that the cost structure of the company that won the bid didn?t meet the standards laid down by the Central Mine Planning & Design Institute.

In 2008, ECL submitted a fresh proposal to the Centre to expand the capacity of the Rajmahal mines from 10.5 mt to 17 mt a year with an estimated cost of Rs 272.13 crore, based on April 2008 price levels.

In May, the Prime Minister?s Office directed the Planning Commission to assess the proposal and place it before the department of expenditure in the finance ministry for clearance. The Commission reported that outsourcing the mine for development and production would work out cheaper to which the coal ministry and Coal India too objected.

CIL chairman Partha S Bhattacharyya told FE that he favoured a partial outsourcing model, despite the Planning Commission objections.

?CIL has adopted the partial outsourcing model in many patches. Rajmahal expansion should be done in the same way?.

This would mean ECL would be responsible for overburden removal and a private party would lift the coal and transport it to the coal handling plant. Incidentally, Plan Commission has pointed out that piece meal approaches like partial outsourcing was energy inefficient and should be dispensed with.

?CIL, being a government-owned company, should insist on energy efficient operation and consider the adverse impact of company?s profit on national economy in its policies and operations,? its note on the subject to the company mentions.

But on condition of anonymity, an ECL official informed FE, notwithstanding the Planning Commission?s observation, the original plan has again been flagged before the public investment board, the committee of secretaries at the Centre for approval.

The board includes both member secretary of Planning Commission and secretary, coal.