In an exclusive interview with INFRASTRUCTURE TODAY, Anil Swarup, Secretary, Ministry of Coal, Government of India, shares how the Ministry of Coal has envisaged a mine-by-mine plan to achieve the one billion tonne target by 2019-20.
The government has set a target of coal production of one billion tonnes by 2019 - 2020; what in your view are the key milestones that need to be achieved to achieve this target and what is the roadmap to achieve these milestones?
The Ministry of Coal (MoC) is targeting coal production of 1.5 billion tonnes. Of this one billion tonnes will come from Coal India Limited (CIL) and the remaining 500 million tonnes will come from non-CIL sources, particularly from the mines that are presently being auctioned or allocated to non-Coal India entities. For the 42 schedule-II mines, the peak rate is 90 million tonnes (MT) and for the 32 additional schedule-III mines the peak rate is 130 MT. That said, the 204 coal blocks together have an estimated coal production of over 800 MT. Therefore, we can safely assume that by 2020, around 500 MT will be produced from these mines.
For the mines currently held by CIL, the MoC has drawn up a mine-wise plan clearly detailing what is required to take a mine from level X to Y. This framework includes evacuation, land acquisition, environmental clearance, law and order, etc. All the issues associated with increasing production or productivity have been clearly identified and a strategy has been chalked out for each mine. In fact, the strategy is already being implemented. The progress is clearly evident in the coal production in the recent months. To my knowledge, in the past decade, coal production has never grown by 7-8 per cent, so it has given us hope that we can ramp up production.
What are the key challenges that you think you will face to achieve this target of 1.5 billion tonnes?
Evacuation, environment and forest clearance, land acquisition and local law & order problems are the four major challenges, in varying degrees in different mines. Fortunately, the ministry has been able to identify these issues and we will follow a specific strategy to address each issue. For example, earlier all evacuation activities were being performed by the railways. Now a decision has been taken, along with the state governments, to set up joint ventures in each of the concerned states. For these joint ventures, each evacuation line will be an independent profit centre, unlike the railways, where evacuation is one of their many projects.
The state governments have in-principle agreed to this arrangement and Memorandums of Understanding will be signed with them in the next one month. The ministry is now in the process of circulating a draft, which is at various levels of approval. This arrangement will especially work well in the coal-bearing states, as the intent is to move coal from accessible areas to inaccessible areas.
These will primarily be the projects to evacuate coal to the main lines. India sits on 300 billion tonnes of coal. However, there is no evacuation where these reserves exist. If the evacuation issue can be addressed, production will not be a challenge. We have a situation, where it takes around 12 hours to fill a rake and in others it is done in an hour and a half. Therefore, the ministry is also considering mechanisation for improving the turnaround time leading to efficient evacuation.
Which are the concerned entities with whom JVs will be formed?
The JVs will be formed between Coal India Ltd with a 64 per cent stake, Ircon 26 per cent stake and the concerned state government with a 10 per cent stake. The state governments are necessarily a party because large number of issues are still with them. It is believed that once they have a stake in the JVs the clearances will move at a faster pace. The major chunk of the investment will come from CIL and Ircon.
What are some of your key takeaways since the first ordinance was passed and the recent coal auctions?
The use of IT applications to achieve transparency in a situation as complex as the coal auctions is the biggest key takeaway here. The coal issue is complex because of cancellation of blocks by the Supreme Court. In the past all actions related to coal were questioned, some rightly and some not so rightly. Given the large number of stakeholders in the coal sector, bringing in transparency and objectivity were essential to mitigate the challenges. This is why we opted for the auction route and it seems to have gone fine so far. In fact, the auctions have clearly demonstrated that even a complex issue such as coal can be tackled efficiently and efficaciously through the application of IT in a transparent manner.
In your view, will this be the process for the future blocks as well? Do you think that this auction process can become the model of allocation for other minerals too?
We would follow the same auction methodology with minor modifications on the basis of our past experience. But this process would, by and large, remain the same for all the 204 blocks.
As far as other ministries are concerned, it will be their decision. But my understanding is, having demonstrated a successful auction process, it would be useful for other ministries to customise this for their use.
What is the ministry´s approach towards coal swapping?
There are two types of swapping that we are contemplating. Initially, bilateral swapping has been approved which is relatively simple. It is being done at the level of existing linkages, where coal is unnecessarily being carried to users located at a greater distance, when it can be utilised for closer units. Till last year, 15 swaps have happened across the country with the first set of swapping entailing a saving of Rs.1,100 crore p.a. Ultimately, swapping is likely to lead to savings of Rs.6,000 crore p.a.
We are also contemplating a second kind of swapping, i.e., trilateral and multilateral. These types of swapping are more complex as multiple stakeholders are involved and take longer to execute.
What are the various challenges in executing the swapping?
The challenges that we are facing are multifold. Initial swapping was simple, but in trilateral and multilateral swapping, while one entity may have to sacrifice, gains will accrue to the other stakeholder. The mechanism of transferring the gain from one stakeholder to the other will need to be worked out. The government is facilitating such negotiations with the stakeholders involved.
What is the objective of the government behind auctioning coal linkages?
We are not just looking at the auctioning coal linkages, but are looking into the whole process of allotting linkages. The reason behind such thinking is that for any such allocation we have to clearly identify the price at which the coal linkage should be given and who it should be given to. There has to be transparency in this process as well. We are evaluating whether the pricing and allocation methodology is transparently determined in the existing system.
Although coal production has increased so far, the offtake is not much as we expected from regulated and non-regulated sectors. Why is this so?
It is mainly due to the subdued demand by the power utilities in India. Interestingly, even though the production level has increased, the demand is yet to pick up. But let me tell you honestly that we are still short of the required coal, and need to grow that number in the coming months. And this scenario, according to my understanding, is just a temporary phase.
Is it true that the Ministry of Coal has decided not to allocate the next round of coal mines to the regulated sector?
No, we have not decided yet on who will be the major beneficiaries of the upcoming round of coal blocks. But we still have blocks for the power sector. In three-four cases, some of the entities have gone to the court of law due to some issues that are being considered (there). Once these cases are resolved, we will start the next round of coal block auctions. We are also thinking of handing over these coal blocks to be auctioned as in the case of ultra mega power projects. So we are looking at varieties of instruments through which the government can settle these problems.
The ministry has rolled out an interesting draft for e-auction of coal to be introduced in the unregulated sector. Is there any timeline set for the same?
All the analysis regarding this has been completed. Moreover, we have got the feedback from the industry and the inter-ministerial committee has discussed and deliberated. We should now be able to come out with a clear policy within one and a half months on settling the linkages for the unregulated sector.
But which industry among the unregulated sector will be a major beneficiary?
I don´t think that there will be any individual beneficiaries of this e-auction. What we are trying to do through this e-auction is a transparent mechanism as was available for the other category of blocks. Earlier, these linkages were allocated through a standing linkage committee (SLC) and there could be chances of discretion, subjectivity, and could be questioned subsequently in a court of law, as had happened. So, we feel we should have a similar transparent mechanism to determine who should get these linkages.
Could you quantify the coal linkages to the unregulated sector through e-auction?
Since the coal production is on an increasing mode, we will earmark 25 per cent of the coal production for the unregulated sector. Which would mean that there will be additional coal available to the unregulated sector. Last year, through the linkages, we allocated 55-60 million tonnes and we will be increasing the limit almost by 40 per cent. So we will have another 25 million tonnes or maybe more coming to this segment. Now, this additional amount will certainly be auctioned, not allocated through the standing committee system.
If there is going to be an additional availability of coal for the unregulated sector, then why is there an opposition to e-auction from the present linkage allotments through a standing committee?
Interestingly, those who already have these linkages are opposing the government´s move. No specific sector is opposing. Let´s take a hypothetical case for reference: if I have a privilege of having a linkage by some way or the other, why would I like to be deprived of it? In an auction, I have to bid. Obviously, people who are benefiting from the existing system are opposing this move, which is very fair, but I think it is fairer that everyone should get an equal opportunity to bid.
- RAHUL KAMAT