Coal India Ltd (CIL), which meets about 80% of the country?s coal requirements, faces serious difficulties in stepping up its coal production even as the domestic demand for coal grows at a fast pace, thanks to capacity addition in key sectors like power, cement and steel. Growing environmental hurdles to mining operations in India have forced the world?s largest coal miner to look at acquisition of overseas coal assets to meet domestic demand and keep growing. In an interview with FE?s Noor Mohammad and Subhash Narayan, CIL chairman NC Jha discusses his company?s business plans and also replies to the criticism that the PSU has not done enough to increase its production to meet demand. Excerpts:
There is a general impression that CIL has become a drag on the domestic power sector. What do you have to say about that?
The demand for coal increased sharply in 2005-06 following the implementation of the Electricity Act, 2003. In view of that, a directive came from the government of India that all the blocks that were with CIL should be retained and the rest should be allocated for captive mining. Following that, some 208 coal blocks were allocated for captive mining. These blocks have a combined coal resource of 48 billion tonnes, of which 38 billion tonnes are with the power sector.
CIL holds coal reserves of 64 billion tonnes, part of which is under forest cover. Some parts also comes under environmentally sensitive areas. We produce over 400 million tonnes of coal a year. How much coal is being produced by captive mines? If you do an analysis, you will find that CIL?s fields are already under extensive exploitation.
Then came the go, no-go area concept. You cannot enter even a ?revenue forest? area. Any diversion of forest land takes at least four-to-six years. Forest land belongs to states, but unless the Centre gives approval, states cannot go ahead.
A large number of industries have come up around the coal field areas. Nine of our coalfields are in critically polluted areas. No expansion project can be taken up in these areas because of a mining moratorium ordered by the ministry of environment and forests. Rehabilitation is another issue hampering coal mining. Just one person can stop our mining. With each passing day, conditions are becoming more critical. Unless cooperation from states comes, CIL cannot increase production.
Can we skirt around the environmental hurdles by switching over to underground mining?
Underground mining is not profitable in India because the bulk of the coal reserves are located at depths of less than 300 metres. We cannot extract more than 30-35% of coal through this kind of mining. Underground mining is not feasible in India. Opencast mining is the best option.
There is also an allegation that CIL has not made adequate investment.
We need environmental clearances to make investment. More coal-bearing areas need to be brought under mining. But for that you need environmental clearance. Seventy million tonnes of coal is lying at pitheads as of March end.
The power ministry has suggested diverting e-auction coal to power plants facing fuel shortage. What is your stand on that?
E-auction coal is supplied to non-core sectors. We sold 45 million tonnes of coal through e-auction in the financial year 2010-11 and it accounted for 17.8% of our overall revenue.
What is the impact of environmental hurdles on your production plans?
We have formulated a 20-year production plan. As per the original plan, we had targetted production of 520 million tonnes in 2011-12 and 663 million tonnes in 2016-17. Our production plan was drafted on the assumption that wherever there is coal, we can mine. But under the current scenario, we expect to produce 452 million tonnes of coal in 2011-12 and 556 million tonnes in 2016-17. The revised target for 2016-17 is subject to clearances.
What is the cash reserves position of CIL? Where do you plan to spend this money?
We have cash reserves of R40,000 crore. The bulk of the money is parked in fixed deposits and a small part in mutual funds. Substantial money would be required to finance our overseas acquisitions. We plan to invest at least R6,000 crore in the current financial year. We also plan to invest a part of the fund in developing coal washeries. Ultimately, we will sell washed coal, which is more energy efficient.
We also have to complete exploration in five blocks that we have got in Mozambique. Meanwhile, we have also received three proposals for equity stake in coal blocks in the US, Australia and Indonesia. But according to rules, we cannot pick up equity in any non-listed company. We have sought clarification from the coal ministry whether stakes in overseas assets also come under the category of ?non-listed companies.?