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COAL MINING REFORMS IN INDIA

| 30-Apr-16

The current coal situation in India reminds us of the famous line, "Water, water, everywhere, but not a drop to drink!" India, with estimated coal reserves of 301 billion tones is said to be the fifth-largest in terms of reserves. But still coal imports are growing at a greater rate than the rate of production of coal in India. India's coal production has almost stagnated for past 3 years around 550 MT. Existing problems faced by Coal sector in India are -

    Land Acquisition, Rehabilitation and Reclamation policy
    Delay in getting environment/ forest clearance
    Allocation of coal blocks
    Logistics Problems
    Non-existent Private sector


In the last decade there have not been many reforms in the coal sector in India. Also the limited participation of private sector has lead to over dependence on PSU's. In the light of the existing problems, there is need for many reforms on various fronts-Legislative, Technological etc. Figure 1 mentions the probable reforms that can be different reforms that can be undertaken to increase India's coal production.


                

                                      Figure 1 Reforms in Coal sector


Legislative Reforms

One of the biggest hurdles for any company before they want to start mining coal is to get clearances from various departments viz. environment, forest etc in a timely manner. Some of the reforms that can be implemented are as follows-


    Single window clearance and fast clearance for all coal projects - Currently it takes anywhere between 4 years to 10 years for getting all clearance and starting coal production from a mine. Various clearance are required before starting a mine-


     Exploration
     Prospecting
     Submission of initial feasibility report
     Land acquisition
     Environment and forest clearance
     Submission of Detailed production report
     Environment management plan
     Environment impact assessment report
     Submission of Mine closure plan

 

As various clearances are required before starting a mine, there should be co-ordination between various ministries/ departments to provide clearance in a time-bound manner. As the investment is huge and gestation period is high, it discourages most of the private companies to invest in this sector. Even government PSU like CIL faces the same hurdle because of lack of coordination between different ministries.

In order to smoothen the process, there should be a system of single window clearance and in a time bound manner. This will attract more private players and can help India increase its Coal production significantly. The amount of loss on account of delay is very huge as compared to loss due to improper allocation. Faster clearance will help generate revenue for government, reduce coal imports, provide employment and stop illegal mining. All this should be done without compromising the requirements that companies need to fulfill.

There should be accountability on the part of the officers, departments to process the files in a time-bound manner. For any callous delay on their part, punitive action should be taken. If the top administration becomes very serious and business like, all thing will fall in place and coal production will jump up. According to a recent report, 179 projects of Coal India are pending with different ministries for different clearance, some for environment clearance, forest clearance, expansion Plan and Environment management plan. If all are cleared, CIL could increase its production by 100 million tones.


    Land Acquisition and Rehabilitation & Resettlement policy - This is one of the most contentious issues which deter the entry of most companies into coal mining. Under Coal bearing area (acquisition and development) act, 1957 after prospecting and exploration, the state/ central government can transfer the rights only to government PSU/ government companies for mining. For private companies, mining for only captive purpose is permissible in India.


As far as Rehabilitation and Resettlement is concerned the major issue is ambiguity in the R & R policy as centre has its own policy, state has its own policy and the company has its own policy. There should be a standard policy throughout the states and this should be done in accordance, without impacting the interests of the landowners in a transparent and time bound manner. The policy of providing jobs to landowners, compensation should be done in a transparent and time-bound manner.


FDI in Coal Mining-In order to boost domestic coal production, the government should invite foreign players. Foreign companies will also bring new technology and technical expertise with them, which could be helpful for India. Also, Indian private players should be encouraged to invest in coal mines. Currently, most of the private players are operating captive mines and that coal production is not used for power generation. Also, commercial sale of coal by private players should be encouraged. Government can decide the terms and conditions of sale but to increase the coal production, commercial sale of coal from private companies should be promoted.

 


FDI limit
    

Activity

100 %
    

Private Indian companies involved in coal mining for captive consumption

100 %
    

Setting up of coal processing plant on condition that washed coal won't be sold in the open market

74 %
    

Exploration and mining of coal/lignite for captive purpose

                               Table 1: FDI limits in Coal Sector in India

 

FDI in mining sector in India

                              Figure 2 FDI in mining sector in India

 

As it can be found from Table 1, India currently does not invite FDI in mining of coal. Hence, there is a great opportunity for investment in this sector.


Technological Reforms- In order to increase the production in the current scenario, coal mines in India should implement latest technology, machinery to increase production.


    Implement latest technology- Today, close to 90 % of coal produced in India in through opencast mines. In order to increase the share of underground mining, mining companies need to invest in latest technology like implement long-wall mining, if the geology permits. Compared to China and US, which are producing around 5 MT from an underground mine, India hardly produces close to 1MT from its most developed underground mine. This gap can be breached by introducing proper underground techniques, latest machinery with proper support system. This can help increase coal production significantly without having any adverse impact on environment.


    E-auction, E-tendering and E-procurement- E-auction is a very innovative and transparent way of selling coal by coal companies. This brings in more transparency, reduces corruption and helps small/ local players to meet their coal requirements. Although, the selling price is more as compared to market price but there are no constraints in purchasing by this mode. The biggest advantage for coal companies is the customer has to pick the coal from source, so the company need not worry about logistics.


     E-tendering and E-procurement is a major initiative taken by many subsidiaries of Coal India Limited, and it needs to be replicated to other mining companies as well. This not only brings in transparency and reduces corruption but also provides helps participation of smaller players.-repetition. In this everything is system generated, pre-tendering, tendering and post tendering. Details like past experience, quotation etc are to be entered by the client into the system, and once locked can't be changed so it removes any scope of manual tampering. The advantages of e-procurement are reduced cycle time, more transparency, increased competition and efficiency. For this Mahanadi Coalfields Ltd received prestigious eIndia Award in the year 2010 under G2B initiative.


    Increased spending on Survey and exploration- India has got vast reserves of coal, but those reserves are not proven. Hence, India needs to increase spending on survey and exploration to unearth more coal reserves. Currently, India spends very little on survey and exploration as compared to countries like US and china.


CONCLUSION

India is a growing economy and in order to meet the growth, one of the most important aspects is to meet the power requirements. In order to achieve the growth rate, India's coal production has to increase significantly, so that country's economy could be back on track. Various reforms as mentioned in the above article related to policies, technology etc needs to be implemented so that coal sector in India could be revived.

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