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Prabhu-led panel bats for more empowered players in coal mining

As the government prepares ground for an overhaul of the coal mining sector, Suresh Prabhu led advisory group for integrated development of power, coal and renewable energy’ has quashed down the idea of restructuring the sector’s monopoly Coal India.

Rather, it has recommended empowerment of its subsidiaries in its report, submitted to the government in December 2014.

“Subsidiaries of Coal India may be given adequate delegation of power capital expenditure and operational flexibility, along with commensurate accountability, so that their dependence on CIL, for decision making, does not hamper fulfilment of targets set out for them,” said the advisory group report reviewed by Business Standard.

Earlier, there have been proposals of splitting CIL into five separate companies to improve its efficiency. While the previous UPA government supported the idea, Piyush Goyal, minister of state for coal, power and renewable energy under NDA government has made clear that splitting is not a solution, efficiency improvement is.

“Several options regarding the restructuring of Coal India were discussed. It was agreed that no major restructuring is required, at least in short term,” said the report.

In the new set of targets for the energy sector, Modi led government has earmarked 1 billion tonne of coal production from CIL by 2019. This would entail a growth of over 18-20% annually for the state mining giant, which currently is at 7-10%.

“In the subsequent two quarters growth rates of 15% could be a big challenge. It would therefore be necessary that specific action plans on various identified constraints made and monitored,” highlighted the report.

For enhancing coal production, the report suggests hiring of ‘Mining Development Operation (MDO)’ agencies and re-opening abandoned underground mines.

“Ministry of coal to give target to each subsidiary to engage at least two MDOs (10 million tonne annual production) each, within six months,” said the report.

The committee has asked for close monitoring of CIL targets for 2014-15, on a fortnightly basis. Also, engage experienced consultative agency which could assist in monitoring performance.

To address availability of coal, the report underlines the need of swapping of coal, rationalisation of coal linkages and monitoring of surplus coal sale from captive mines.

Among the other major suggestions are improving coal evacuation facilities by forming a separate CIL subsidiary for logistics services, including rail connectivity.

The report pushes the idea of private investment and joint ventures by CIL and its subsidiaries in rail linkage projects, to reduce dependence on Indian Railways. It also mentioned setting up of dedicated common rail corridor serving to a cluster of mines in coal rich areas.

The government promulgated Coal Ordinance (Special Provisions) bill, 2014 in October last year, after the Supreme Court cancelled 204 coal block allocations made over the past two decades.

Through this ordinance, it would re-allocate the cancelled coal blocks and also open up the sector for commercial mining by private sector. For the upcoming e-auction, the committee has issues word of caution of reserve bid price, which could lead to cartelisation in tenders.

The report hence emphasised on getting a ‘coal regulator’ “through legislative route, including ordinance to address issues involving various stakeholders.”

The committee was headed by Suresh Prabhu, union railway minister and former power minister in A B Vajpayee’s term. The other members were R V Shahi, (Former Power Secretary) as Member-Convenor, Pratyush Sinha (Former Chief Vigilance Commissioner), Anil Baijal (Former Home Secretary), Anil Khandelwal (Former Chairman, Bank of Baroda), K.K. Nohria (Former CEO, Crompton Greaves), Partho Bhattacharya (Former CMD, Coal India), and Vallabh Bhansali (Former CEO, ENAM) as Members.

For more coal:

· Improvement in performance parameters of CIL subsidiaries – CCL, MCL, SECL, ECL, WCL

· Hire at least two MDOs within six months

· Close monitoring of CIL’s annual targets

· Fast track production from captive coal mines

To make more coal available:

· Separate CIL subsidiary for building evacuation including rail lines

· Joint venture with private companies to build rail links

· Dedicated rail corridor for a mine cluster

· Indian Railways, RITES, IDFC asked to give suggestions

Word of caution on Coal Block Auction

· Reserve bid price vulnerable to controversy & cartelisation

· Power tariff should be cost reflective


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