The Hyderabad-based Singareni Collieries Company Ltd (SCCL) is a major producer of coal in the country. While the company is on an aggressive mode to expand its production of coal, still the mainstay for electricity generation in India, there are many stumbling blocks on the way. Delays in forest and environmental clearances, land acquisition, and rehabilitation & resettlement issues are among the problems faced by the company. Coupled with these are poor reserves, deep-seated coal and higher stripping ratio which are adding up to the overall cost of production. Safe bulk production technologies in the mining sector have to be established in the country; else, it will not be possible to ensure affordable availability of thermal power, the CMD of the company S Narsing Rao, told BV Mahalakshmi in an interview. True, India?s coal reserves are limited, but factors such as the lack of political will, poor logistics and vested interests mean more coal imports. Despite the odds, SCCL has lined up impressive plans to take up greenfield underground projects in Andhra Pradesh. Excerpts from the interview:

Having moved to a revival phase after a deep recession period, what kind of investments have you planned for the next two years?

In the 11th Five Year Plan, a capital investment outlay of Rs 5,600 crore has been sanctioned. We have invested about Rs 2,000 crore in this fiscal and would be investing Rs 3,600 crore in the next two years. We propose to add a 600-MW plant and hope to commercialise the plant by October 2013. We have about 27 mining projects, of which 16 are opencast and 11 underground, which are in various stages of implementation. Besides, we have received approval for new projects as well.

What are the challenges in coal production? What are the current coal reserves and what is the average cost of production?

Since opencast coal reserves are exhausting, we have to go for underground mining. In an underground mining process, the percentage of coal extraction is about 25-40% and very rarely does it go up to 40%. However, we are also looking at two exhausted or abandoned mines and converting them to opencast mines. But the cost of production is quite high in regard to the locked-up coal in these mines. On an average, the cost of production is Rs 1,500 per tonne for both opencast and underground mines. In this case, it amounts to Rs 1,800 per tonne and we may have to forgo profits from power plants. We will be signing a PPA with AP Transco for the proposed 600-mw plant. The net availability from it would be 540 mw, and we would be using 150 mw for our own consumption and the rest would be signed for a PPA with AP Transco.

In terms of reserves, the proven reserves, which can be used for extraction, are about 9,384 million tonne in the Godavari basin. Our reserves stretch over 350 km of Godavari and the production caters to cement, power and steel industries. While it is interesting to note that the country produces over 100 billion metric tonne, only 20-25% of coal is usable. In underground mines, only 40% of the locked up coal is extractable, opposed to 85% to 90% in opencast mines.

Can you tell us about the longwall project of SCCL? Where does the country stand in executing long-wall projects?

China is working on 500 longwall projects, producing over 2,700 million tonne per annum of coal; Australia has 35, the US has 50. India has only five longwall projects that uses the latest technology, producing 550 million tonne. Ours is the Adriyala Shaft longwall project at Godavarikhani in Karim Nagar district of Andhra Pradesh with a coal production capacity of 2.81 million tonne per year (mty). The overall outlay of Rs 864 crore. Incidentally, this project has the distinction of having the highest capital investment in mining projects of the company so far and is also the single largest underground mine in terms of coal production capacity.

The Adriyala project has 54.36 million tonne of deep-seated extractable coal reserves in five horizons. The project envisages the installation of a sophisticated high-production set of longwall equipment and two Quard bolters. The production from the longwall set of equipment is expected to commence from September 2012 and the testing has already begun. This tailor-made technology can help produce over 3 million tonne per annum, against 2 lakh tonne per annum otherwise. With the improvement in technology, equipment capacity is also getting higher to increase production capacity multi-fold. Modern longwall equipment consist of 2×860 kw shearer (cutting machine) in combination with two-legged power roof supports of 1,152 tonne capacity. This is the first time that two-legged chock shields are being used in the country. The success of this project will open avenues for exploiting deep-seated coal reserves to augment coal production and meet the demand in the region.

What is the current supply-demand ratio? What are your views on the rising import levels?

It is estimated that the country requires about 620 million tonne of coal at the end of the 11th Plan and is likely to import 60 million tonne. We have achieved an all-time record in coal dispatches and have set a target to achieve 51.5 million tonne for fiscal 2011 from the present 50 million tonne. During 2008-09, the offtake of coal was 44.52 million tonne against the target of 41.53 tonne. Incidentally, though the demand is increasing, production is unable to meet the demand. Coal contributes to the generation of more than half of India?s annual energy consumption, but output lags.

Imported coal seems to have an edge compared to Indian coal. Though imported coal has to be blended, its energy equivalence is higher. The current level of imports is about 40 million tonne. Coal exports are still a distant dream and may not happen in the next 25 years. As per available statistics, the country?s coal production in the fiscal 2010-11 is likely to reach 571.87 million tonne from an estimated 533 million tonne in 2009-10. Imports are expected to be up 21% to 84.44 million tonne. The country has coal reserves of 267 billion tonne, of which 40% has been proven, but certain environmental issues have kept the pace of production growth low.

How do you position your growth in terms of revenue? How does the scenario look like?

We hope to clock revenues of Rs 6,600 crore with a PAT of about Rs 150 crore for March 31, 2010. Since reserves are getting depleted, we do not see a substantial increase in revenues as the coal story mainly depends on power plants to the extent of 72%. The number of customers registered with SCCL has gone up from 6,375 in 2007-08 to 6,469 in 2008-09. The customers range from power units, cement and heavy-water plants, to some other industries. While the 11th Plan talks about 9.5% CAGR, we are growing less than 6%. The gap is widening, and that has to be necessarily taken in to account.