"Coal demand-supply gap will have to be met with imports"

Nirmal Chandra Jha, chairman of Coal India Limited (CIL) in an interview with Governance Now. Jha is retiring on January 31


Sweta Ranjan | January 30, 2012

Photo Chinky Shukla
Photo Chinky Shukla

Nirmal Chandra Jha, chairman of the Coal India Limited (CIL), has many plans that could further enhance the growth of the Maharatna public sector enterprise, which is the world’s largest coal producer. Jha, a postgraduate in mining engineering from the Indian School of Mines, Dhanbad, has a rich and diverse experience of over three decades in this industry. As the director (technical) of CIL, Jha played a key role in introduction of many mining-oriented initiatives. In an interview with Sweta Ranjan, he talks about the company’s business model, growth prospects, potential, future plans and acquisitions.

Can you tell us about the latest statistics on coal production, supply, demand and reserves?
The total demand of coal this year for India as a whole is 696 million tonne (MT) of which the domestic availability has been worked out at around 554 MT. It leaves a gap of 142 MT. This gap primarily has to be met through imports. There is no other source. Last year the imports were around 85-86 MT.
The main reason (for the gap) is that the domestic producers, which are primarily CIL and Singareni Collieries Company Limited (SCCL) and some captive blocks, are not able to produce the desired quantity of coal. There are certain constraints. Our target of coal production for the current year is 447 MT. Up to July we were more or less on the target. The growth is around 1.6 percent over the previous year though the desired growth was a little more but because of some problems in the rainy season we are only about 3.5 MT behind target against the total of 125 MT.

What is the road map to meet our coal requirements for thermal energy?
Coal requirement for thermal power generation is quite huge. In 2007, the government formulated a policy called New Coal Distribution Policy (NCDP). As per that policy, CIL and the other government companies, i.e. SCCL, were mandated to meet everybody’s coal demands. As per that policy, CIL does not have the option of not issuing a letter of assurance even though it does not have the coal balance. In this process about 600 MT per annum requirement of coal for power plants alone has been (estimated) and for that quantity letters of assurance have been issued. But we don’t have plans for producing that much coal because the coal bearing areas which are with us do not have the potential of producing that much more.
The maximum coal that we could produce by 2011-12 was 520 MT. This was worked out five years ago. But as days passed, different constraints emerged and we had to revise our target to 452 MT. So there was a 70 MT shortfall. But the demand grew by 600 MT. When I look at my coal balance, there is a clear gap of around 400 MT. It has to be imported if these (power) plants have to really come up. The maximum quantity of imports was about 85-86 MT. If the entire demand of the current fiscal is to be met, then 142 MT has to be imported.

CIL plans to acquire mines in Indonesia, Australia and the US. Acquisition in Indonesia might be feasible, but what about Australia and the US?
The US fits in, in the sense that the heat value of US coal is quite high. Indonesian coal does not have that much heat value. US coal has high heat value of 6,500 kcal per kg as compared to 4,000 kcal per kg of Indian coal.

How viable is a logistics supply chain from these countries to India?
One has to work out as to where coal is available. Coal is not available in plenty in Indonesia and coal that is available carries moisture as high as 30-35 percent. If coal carries more moisture, naturally the heat value reduces. It’s difficult to burn such coal. So one has to weigh in options: whether to buy coal from the US, Australia, South Africa or Indonesia, whether adequate quantity of coal is available and if this business sustains in case we don’t buy from the US. So, taking all these factors into account, I feel getting coal from wherever available is a better option.

Is it not going to be a very expensive affair?
Yes, it is going to be expensive. The price is going to be high but where is the choice? If the industry has to grow and the market has to be competitive, then one has to look for coal wherever it is available. Because of the distance, US coal would be around 60 percent more (costly). Landed cost from Indonesia would be somewhere around $80 (per wet MT) whereas from the US it would be around $120-125. It is 50-60 percent higher but when you compare in terms of energy, it compares well.

What has happened to the plan of reviving abandoned mines on a public-private partnership venture model? How good has been the private interest in this initiative?
The proposal of restarting abandoned mines came up from one of the interested parties. That party said in a letter that they have the technology to reopen the abandoned mines without really understanding how these mines were abandoned. We had invited expression of interest (EoI), many people showed interest because in that concept we had allowed taking coal on nomination basis. But when we floated the tender no response came. I don’t bank upon the abandoned mines. If CIL, being the world’s largest coal producing company, cannot revive its abandoned mines, I don’t expect somebody else to come and revive them.

While CIL has in place an ambitious plan of enhancing mining capacities, the fact remains that existing customers are not able to lift off their commitments from the mines due to non-availability of railway rakes.
We have discussed it with railways over the years and in fact we have also deposited the money for construction of new rail lines and creating the infrastructure for movement of coal. But somehow they also have to get forestry clearances because they have to lay lines through forest areas and they have not been able to make much progress.

There have been talks of CIL, state power generation companies and railways setting up a dedicated fright corridor (DFC) for movement of material.
These are the lines through the coalfields. The raw material requirement in the country for coal, iron ore, limestone and others would be huge and increasing tremendously, so the main lines have to be strengthened and a DFC has to be created on which only the raw material can move. Railway has already worked out a plan for DFCs but we have to link up our coalfields with these DFCs.

The country’s total production target is 554 MT for 2011-12 whereas demand is 696 MT.  There is a requirement shortfall of around 142 MT. But our ports have a capacity of handling only 85 MT per annum.
As much as 85-86 MT was imported last year. For additional capacity new ports are being created and commissioned. We have talked to the ports’ trusts and the ministry of shipping. They said that they had the capacity to handle this. I am concerned about the future when the requirement of the import will be much more. If domestic conditions do not change for enabling the coal producers to produce more, the import requirement would be much larger. So the ports capacities have to be created.

Most power plants of today seek higher calorific coal with low ash content, which CIL can supply only post washing and beneficiation. Some power plants have invested in their own facilities or have vendors who do the same. Why hasn’t CIL looked at “value added services” and invested in the same?
In the early 1990s we wanted to take initiatives for washing, beneficiating and then supplying coal, but then washing means extra money and reduced quantity because some quantity gets rejected. The question was who bears that cost. The consumers of coal used to say that the producers should bear that cost and we used to say that since there is an extra cost involved in it, the consumers are the beneficiary and so they should bear that cost.
For a long time there was a debate and so the setting up of non-coking coal washeries did not come up. It was in end of the 90s we demonstrated by washing some coal in our existing coking coal washery converting it to non-coking coal, supplying the washed coal to the power plant and demonstrating that the use of washed coal actually brings benefit to the power plant and the cost of power reduces. Then the desire for getting washed coal started picking up. We decided in 2007 to set up 20 washeries of our own. Action is under way and we have already awarded work for three washeries, others are in pipeline. We have also taken up the second phase of the setting up of washeries. I think in the next decade or so you will see only washed coal getting sold.

A lot of mining takes place in areas affected by left-wing extremism. Are Maoists too involved in mining? If so, how much loss does the country suffer due to it?
It’s a huge quantity … maybe illegally mined. That goes into the market.

Any approximate figures?
I have no idea. In Meghalaya alone, where coal is not mined legally, about 5-6 MT coal comes out every year. Apart from that illegal mining is rampant in Raniganj coalfields of West Bengal and also in Jharkhand.

How many projects of CIL are stuck with the ministry of environment and forests?
See, the process of clearance is still not expedited. Many of our existing, operating mines are now held up because the land ahead is a forest land and the clearances have not come. So, there are quite a number of projects (waiting for environment clearance).

To what extent is coal mining affected by the current debate over land acquisition and displacement?
To a great extent. One must understand that coal mines are a business in which land is the raw material. If you don’t get land you don’t excavate coal. Most of coal production comes from opencast even for underground mining if we do underground mining the surface land is damaged. Law does not permit damaging surface land unless I have acquired that land. So, land is a raw material. Now, if land is not available then mining suffers.

Will this debate impact the implementation of the new coal block policy?
The solution could come if a comprehensive and integrated policy of land acquisition and rehabilitation and forestry clearances, all put together, on mining is framed by the government. Otherwise the coal producer has to keep on moving from one door to the other.



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