Coal India Ltd (CIL) may now ask for a permanent leasehold of the 42 de-allocated running mines, instead of running them for just six months, as sought by the government. CIL feels a permanent leasehold is now possible since the Centre has retained the option of allocating coal blocks to state governments and PSUs on a nomination basis.
The world?s largest coal miner has been jittery about taking over operational mines for six months from April next year, since issues like planning, investment and workforce absorption pose several hurdles.
The government has recently asked CIL to prepare a comprehensive plan for managing the mines, but CIL insiders believe this would be a drain on the company?s resources since the transfer would not create any value for CIL unless those are given for permanent holding.
?This has been a sort of shirking responsibility by the government. Why should a listed company, struggling to meet its own production target, be involved in any such activity, devoid of business and shareholders? interest? The coal ministry could have formed a task force consisting of experts and officials, which could have prepared a plan on a mine-to-mine basis?, a former CIL director said on the condition of anonymity. But a member of the coal ministry?s advisory committee felt since CIL would have to operate the blocks, it was appropriate for the company itself to set the mechanism for it.
The ministry has already asked the coal block allocatees not to create further burden, including recruitment of manpower, during the period they are allowed to operate by the Supreme Court order. They have been asked not to strip off assets of the coal mines during the period. But these will be of very little help to CIL in solving the multifaceted problems.
First, it is practically impossible to make any temporary plan for mining. Second, its status is only of a caretaker of the blocks and therefore it doesn?t hold any right on the land of coal mines. So any change in the land pattern in the course of mining may lead to litigation. Even over burden (OB) removal without having any right on the land is not permissible by law. Third, CIL cannot make any investment on the mines since these will be under its control for only six months. Running mines without any investment even for six months is near impossible. An investment having just six months? impact is not feasible in mining. Fourth, and the biggest problem, is absorbing the workforce of other companies for a temporary period.
?Is it possible, say, the workers of Sarisathali coal block, in the pay role of CESC Ltd at present, become CIL employees for six months and then after the block is auctioned they become employees of another company? After the mine comes to CIL, in whose pay structure it would pay the workers? Should it continue with the CESC pay structure or bring the workers under the CIL pay structure? Is it tenable for CIL to maintain different and discriminatory pay structures even for a six-month period? Can permanent workers of a company be brought under a temporary contract? All these issues are haunting the CIL management and we are apprehensive that this could pave way for a labour unrest?, a CIL official said.
However, Subrata Chakravarty, director technical of Eastern Coalfields Ltd (ECL), which is expected to get four operational blocks, said there wouldn?t be much of a problem in operating those blocks in which production is outsourced. ?We can continue with the same mining contractor for the contract period without having to alter the agreement made with the owner of the mine from whom CIL would take over. All contracts are made according to the provisions of the Indian Contract Act. So even if the owner of the mine is declared illegal, the contract remains legal. New contractors can be engaged through tendering after the expiry
of the contract period?, Chakravarty said.
Partha. S. Bhattacharyya, member of the advisory committee in the coal ministry and former CIL chairman, felt that production in most operational mines was outsourced and therefore running the mines on an ?as is basis? after the takeover wouldn?t be a big problem.
During coal nationalisation, CIL took over operations of running mines on an ?as is basis? but the difference is that it could steadily continue with production then since the mines were given to it permanently and proper planning and investment was possible. But in a temporary handover, planning and investment remains a grey area. There are chances that production would hit a roadblock in those mines and even CIL?s regular operations get hampered with problems arising from labour and managerial issues. These blocks, if properly operated, can give CIL an incremental production of at least 150 million tonne a year. But the fear is that production from these blocks may fall below the normal level, aggravating the shortage of supplies.
In a normal situation, last fiscal, five of CIL?s eight subsidiaries failed to meet their production targets. Mahanadi Coalfields Ltd, the second largest coal producing subsidiary, could record only 110 mt against a target of 120 mt, while Northern Coalfields, produced 69 mt against a target of 72 mt in FY14. Central Coalfields Ltd produced 50 mt against a target of 54 mt and Western Coalfields Ltd produced 40 mt against the target of 44 mt. North Eastern Coalfields produced 6,60,000 tonnes against the target of 1 million tonne.
CIL ended FY14 producing 462 mt against a target of 482 mt. Under normal circumstances it has been estimated that the demand-supply gap may rise to 185.5 mt by 2016-17. But with the coal sector placed on the verge of a transition following the Supreme Court order, the demand-supply gap may widen in the short term, a ministry official said.
Many problems can be addressed with ease ?if CIL asks for these blocks once and for all. It is a valid demand, as the mechanism to operate those blocks will have to be put in by CIL,? Bhattacharyya said.
The government in its formula for coal block auction has kept a provision of allocating coal blocks to state governments and PSUs on a nomination basis. Although there has been no decision from the government so far about giving a permanent leasehold of the 42 mines to CIL, the mines can be brought under the provision of nomination. The operational mines can be first transferred to CIL for six-month period in line with the Supreme Court order and on expiry of the period given to CIL on permanent lease. This would clear most hurdles on investment, planning and workforce absorption, a CIL official said.