No option but to raise output, says next CIL chief

Coal producers are facing a host of issues, ranging from land acquisition to forest and environmental clearances. However, there is no alternative but to handle all the issues, increase production and meet the demand, feels S Narsing Rao, chairman and managing director of Singareni Collieries and CMD-select for Coal India. Rao, a 1986-batch Andhra Pradesh-cadre IAS officer who has been at the helm of affairs at Singareni for over five years, spoke to K V Ramana on the task before him.

You have been handling coal assets located in Andhra Pradesh. What’s your take on assets across the country?
Overall, Jharkhand, West Bengal, Chhattisgarh and Orissa have very good coal reserves. There are quality issues in the coal available in Orissa. But there are options — we can wash and use such coal or use it as it is in the power sector. Boilers can be designed in such a way that the coal becomes useful. Generally speaking, power plants can be set up at pithead level to cut down on costs. In Chhattisgarh, there are good reserves in terms of volumes and mineability. Jharkhand and West Bengal, too, have good coal assets. Maharashtra, too, has good potential compared to Andhra Pradesh, which is not at all good in terms of mineability.

How about production?
It is already established that there are about 65 billion tonne of coal reserves in India. We tend to compare everything with China... China has about 125 billion tonne of coal reserves, almost double the reserves we have. But they produce some six times more coal than us at around 3,200 million tonne, whereas we are finding it difficult to touch a production of about 600 million tonne.

Is it because of issues related to mechanisation?
Whether you attribute it to mechanisation, public sector attitude, law and order problem, infrastructure, issues related to land acquisition or forest clearances, we have our own set of problems. We can’t compare them with China and it would not be appropriate as well. They have their issues and we have our own.

What can Coal India do?
There is a great responsibility on Coal India. The country is facing a huge shortage of coal. The only job now is to produce more coal and supply. Rest all will follow, including reduction in cost of production, improving efficiencies, etc.

What is the demand and supply situation now?
There is a demand for about 700 million tonne and if we can produce that much and supply, that part is taken care of. Rest are all housekeeping issues.

Right now, the estimate is that Coal India would produce about 440 million tonne for the full year. But it would not be appropriate for me to talk about that at this point.

But coal companies are not able to feed the utilities...
There is a demand-supply gap of about 130 million tonne as we speak. Estimates show that 22,000 mw coal-fired power stations are ready, but they are not operational due to want of coal. Take the example of Andhra Pradesh, where there are three power stations with a capacity of about 1,210 mw, but there is no supply from Coal India though there is a linkage. So is the case with other utilities at the national level. The coal supplies are enough for 50-60% capacities. Either the units have to continue to operate at that level or import. Either of them is expensive.
What is the solution?
The only solution is to produce more coal. In fact, the gap is increasing. Substantial capacity addition has taken place in coal-fired thermal power stations during the current Five Year Plan, so there is greater demand for coal.

Why do you think no fuel supply agreement (FSA) was signed in the last few years?
FSAs will be signed if there is coal available. Signing of an FSA is a clerical act... what is important is the availability of coal.
Is it feasible to ask for 80% FSA assurance?
I don’t think we should get into that specific level. Logically speaking, if you are power plant owner, you will ask for 100% coal, why just 80%. But the quantum of supplies is decided based on the availability. The only option is to reduce the generation or import the coal. If you reduce the generation, the fixed cost will go up and if you import, the variable cost will go up. So, in the first option, there is shortage in power supply coupled with high cost. The second option offers adequate power supply, but at a higher cost. Now, the choice is before the nation, the government and other stakeholders.

What are the key challenges?
There is the land acquisition problem. Secondly, there is the R&R (resettlement and rehabilitation) issue and the third is the environment issue. There is no point in coal companies blaming environmental problems. Instead, they should start looking at what needs to be done. Forest is one issue on which we are helpless. Coal reserve is site specific and if there is a forest on those reserves, it is for the government to decide whether to prefer a forest to coal or the other way. That’s anyway not a major issue. The companies should be willing to spend more on environment, or there is no point in booking profits. But more important are the infrastructure related issues at newly developed sites for evacuating the produced coal.

Are forests a major problem area?
Yes, there is a problem and the nation has to take a call on it. For instance, if the coal available in the forest costs us about Rs 2,000 a tonne and the one outside the forest costs Rs 3,000, all of us have to decide whether we should pay more and protect the forest. There is no free lunch at the end of the day and there is always a trade-off. But, I think we should look at those issues on a case-to-case basis.

How do you plan to handle the open cast versus underground mining issue?
Today, I think Coal India is doing about 11-12% underground mining and Singareni Collieries is at about 24-25%. In some cases, the geological conditions are such that you can only do open cast mining. But, there are certain reserves where you can do underground mining alone. There are certain issues... underground mining is time consuming and expensive compared with open cast and there are also issues related to accidents, etc. The larger issue is that through underground mining, depending on the reserve and the technology, we can extract to a maximum of about 60% and leave the rest forever, as against almost 100% in open cast. So, the question is whether we can afford to leave such valuable reserves under the earth forever.

What is the ideal proportion of mining?
There is nothing called an ideal proportion. If you take China, about 95% of their coal is mined underground. If you take countries like Australia or the US, substantial proportion is through open cast. But, over a period of time, the composition of open cast has to come down and underground should increase since we can’t go for larger depths in open cast mining.

Can we cut down on imports?
Yes and no. In the next 2-3 years, if we can increase production by about 120-130 million tonne, we can reduce thermal coal imports significantly.

Can we bridge a 200 million tonne supply gap by 2016-17?
Let us see. If we can add 200 million tonne in the 12th Five Year Plan, I think we would have done a huge service to the nation. In the current plan period, the incremental addition is estimated to be 85-90 million tonne.

What is the target for Coal India?
The targets are still being worked out. I will be able to talk about them only after going to Coal India. I can’t tell you today how much time I would take to sort out the issues or increase the production. However, I have certain advantages. After working for over five years in Singareni Collieries, I understand the nature of the activity. It is going to be a change of place.