Captive coal block mining: Issues and the way forward…

Infraline has organized a Round Table Conference on “Captive coal block development: issues and the way forwards” on 1^st April at India International Centre in New Delhi. Among others Mr R V Sahi was the moderator of discussion and the eminent panelists were Shri B.M. Verma, Ex Chairman, Jharkhand State Electricity Board, Ex CMD, Uttarakhand Power Corporation, Shri Sanjeev Agararwal, Managing Director, AES Chhatisgarh, Chhitiz kumar ,VP,GE finance.

I had an opportunity to present my views to the august gathering and I was the first speaker at the round table discussion.

My Views:

1. Till date, 198 coal blocks with reserves of 42 billion tones were allocated, but production commenced from only 23 blocks which is around 24million tones this year. It is projected to grow at CAGR of 24% to achieve 55MT by the end of 11^th plan, but the govt have projected a production of 104MTs in the terminal year of 11^th plan which seems quite unreachable looking at the slow pace of captive coal production.
2. Issues are plenty, starting with all governmental procedures, clearances from different ministry, land acquisition, R&R problems, mafias and naxalites menace coupled with lack of expertise and technological constraints.
3. For an unexplored block, the time line as suggested by the MoC is almost 72 months or 6 years.
4. Problem starts with allocation of coal blocks which is done under some recommendations from the ministry, no clear rules and guidelines. Then, time taken for grant of prospecting license, preparation of geological report with the help of CMPDIL, all clearance related issues and at last the land acquisition problems.
5. I suggested to form a/ many separate autonomous body for all geological surveys and report preparation without any interference from CMPDIL
6. A shell company like in case of UMPPs be made to facilitate all clearance from the ministry and if possible help in land acquisition and at the time of allocation of the coal block , the shell company be transferred to allocate which could save precious time for coal block development.
7. Coal blocks retained by CIL which it plans to explore after 5 years must be freed from its clutches and be allocated to private/govt parties for development.
8. Strict monitoring is utmost necessary so as to keep a regular check on the progress of coal blocks. A stick and carrot approach from the govt will help streamline the process.
9. In case of joint allocation time line must be fixed for the consortium partners so as to make a consensus decision as to which options they do agree to. If they fail to get into a consensus, coal blocks must be de-allocated and they should not be given any chance for further allocation of coal blocks.

Besides I have also raised question about coal block allocation to

1. Sasan UMPP and its diversion of coal to other plants

• In case of Sasan UMPP, MoC allowed for diversification of surplus coal to the same end use but to a different plan ( in case of Sasan UMPP, it is chitangi power plant developed by RPL in state of MP)
• The govt has approved the mine plan of RPL for a coal production of 20MTPA while the requirement of the UMPP comes around 15MTPA.The surplus coal thus generated will be used in Chitarngi power plant
• As such, RPL do not have an requirement of Chhatrasal coal block which was allotted for Sasan UMPP and the coal production from this block can not be treated as surplus coal and can not be diverted to chitrangi power plant as suggested
• The development of this coal block would be easier for RPL in an economic point of view as it is adjacent to the coal blocks developed by it. But the question lies…can it be considered as surplus coal of sasan UMPP. If not, then should MoC allow the coal to be used at other power plants of RPL or the coal block be de allocated from RPL?

The second issue I had raised was about the allocation of 2 coal blocks for CTL projects recently.

• What is the necessity to allocate 2 CTL blocks when Govt could have allocated 1 block for trial basis so as to find out the viability of the project
• Is it not that by allocating two coal blocks, the Govt had unnecessarily blocks a huge resource of coal quantity?
• What is the economic sense of coal block allocation at this time when recession is gripping the world economy and the oil is well below the $50 mark?

Experts View:

• In their presentation, besides MoEF clearance, other major issues that surfaced are
• Infrastructure development/sharing in case of coal block development
• Trust between private agencies which prepare GR with CMPDIL
• Commercial terms of agreement with CIL and subsidiaries for their infrastructure and expertise sharing
• Independent autonomous status to CMPDIL in line with CEA in power sector.
• Formation of coal regulator at the earliest
• Mining lease transfer to lenders in case of defaulting in the part of the developer
• Commercial sale of coal so as to attract foreign players to the coal mining
• Allocation through competitive bidding
• Govt should facilitate or help in land acquisition problems as it helps the govt undertaking through an act.
• Right choice of model of contract ( MDO, JV etc)

After individual presentations, Mr Shahi opened the forum for discussions and invited comments specifically any suggestion to CIL, Ministry fo Power, Ministry of Coal for captive coal block development.

After an intense questions answer session, it was concluded that Government should act as a facilitator in obtaining all the clearances, even it should transfer the PL at the time of coal block allocation.

All agree to suggest for an independent autonomous CMPDIL , it should come out of the clutch of CIL and act independently as technical expertise provider. There may be some kind of commercial agreement with CIL to share the already available infrastructure with them or else the coal block allocattees should form a forum to take up this issue and must contribute to tackle this issue in a larger way.

Though the discussions ended in a high note but some questions remained unanswered. The coal scenario is detoriating day by day and India resorts to high volume of import to mitigate the deficit part of coal demand, is it not the right tome for the Govt to look forward and take some drastic decisions so as to kick start the captive mining in a big way?