Monsoon sinks Coal India output hopes

After a year of nil growth in production, Coal India, world’s largest miner of coal, might repeat the feat in 2011-12 though the management is still hopeful of meeting its rather modest target of just 5% growth.

Coal India’s production in August and in September till date has been severely affected by heavy monsoon and there is a shortfall of about 16.97 million tonne (mt), chairman NC Jha told reporters after the annual general meeting of the shareholders.

Coal production in the first quarter saw a marginal growth of 1.2% at 96.3 mt, blamed on excessive rainfall in eastern India.

“July production was fine but for August and September it has been extensively bad as in mines of Eastern Coalfields, Bharat Coking Coal Ltd, Central Coalfields and Northern Coalfields, rainfall has been one-and-a-half to three times more than last year. When there are more rains, there are damages to roadways and mines. So, we have lost production but we are hopeful that when dry season comes we will be able to make up and we still strive to achieve the 452 mt target in 2011-12,” Jha said.

He, however, did not elaborate on how Coal India plans to make up for the shortfall.

Coal India is also not going to make much headway in its effort to reopen the abandoned mines where efforts were on bring in operators to revive them with state-of-the-art technologies.

After an invitation for abandoned mines that saw nil response in 2010, Coal India has been working on a revised limited tender document with softer conditions.

“We are in the process of inviting tenders again after getting some feedback from short-listed candidates. But I don’t pin much hope on the abandoned mines. Some of these mines have huge habitation...relocating them is also a problem. When our Jharia and Ranigunj master plans are fully implemented some of the areas with habitation will be evacuated. And then these areas would available for open cast mining, the expertise of which we already have.”

In the meantime, the next round of tenders that we have floated, if we get some positive responses, then for those many mines, we would go ahead,” Jha said.

Out of tenders for 18 mines, 3-4 have already been withdrawn by Bharat Coking Coal, where revival efforts are on.

Coal India had stipulated in the tenders that the developers of the mines would be reimbursed up to 90% of the notified price of coal.

“These being underground mines, for most of the bidders probably that is not proving to be remunerative. These are not grade A and B quality. Also entire risk of investment has to be taken by them.”

Coal India’s effort to make up its failure to spur up its production to meet rising domestic demand for the fuel through imports is also not making much progress, Jha said.

“We got 16 proposals from five companies for long-term coal off-take. But many of the proposals prima facie are not acceptable as they are not ready to offer discounts, and instead asked for premium because of rising prices of coal. Probably they don’t want to commit themselves to one particular party. But that condition is not acceptable to us being a PSU.”

A few global suppliers have agreed to offer discounts, and if the quality of coal that they are offering matches with the requirement of Coal India’s customers then deals could be struck, he said.
Coal India’s effort to acquire mines overseas is also stuck as it is yet to get the nod for relaxation of existing norms for PSUs. “We had flagged two issues to the government. If the response comes before the offers remain valid we would look into the proposals,” Jha said.

Coal India, meanwhile, is working on a policy for rationalisation of linkages with its major customers. “The total linked quantity of coal would remain same but it would be rationalised between consumers,” he said.