Pratim Ranjan Bose
Life has come full circle for Coal India Ltd.
Life has come full circle for Coal India Ltd.
In July 2012, the coal major mooted
an ambitious plan to add nearly 65-70 million tonne production, every year, in
the current Plan period (2012-17), by appointing private sector mine developer
and operators (MDO) in large CIL-owned assets.
MDOs coupled with the company’s
own mining activity, were expected to boost coal production by 180 million
tonne – nearly 40 per cent - to 615 mt in the five-year term.
More than a year down the line,
the move appears to have lost its steam. And, if the recent developments are of
any significance, CIL is unlikely to see any major growth in production through
this route in the near or medium term.
The impact is likely to be felt
on the country’s coal production. And, unless the industrial growth remain as
sluggish in the days to come; the demand-supply gap of domestic coal is
expected to increase, leading to higher imports.
Government to blame
The blame should go entirely to
an over-jealous Plan Commission and the Union Government in Delhi .
The ball started rolling with a
simple request, in the middle of 2012, from CIL to the Plan Commission to help company
improve its tender document for appointing mining contractors.
The aim was to improve its
outsourcing model so as to involve private sector in removing prime hurdles
like land acquisition, rehabilitation and resettlement (RnR) of project
affected, tiding over increasingly elaborate and time consuming process of
securing regulatory approvals like environment and forest clearances and so on.
This is in contrast to the
existing outsourcing model where the company is in charge of securing
clearances, land acquisition, mine planning, removal of over-burden and, so on.
Mining contractors are primarily engaged into production and, selling coal at
cost plus method to CIL.
The company felt private sector
has an edge over a state-owned company in crossing endless red-tape and vested
political interest at play right from the block level to the National capital.
It was anticipated that sharing
such responsibilities with the MDOs may pave way for faster implementation of
projects.
Backdoor-privatisation?
But, the Government tried to
steal the opportunity to pave way for back-door entry of private sector in coal
mining.
An inter-ministerial group was
formed combining department of economic affairs, coal ministry, Plan
Commission, Labour and so on. To give a further boost, Prime Minister’s Office
(PMO) laid out a roadmap to award such contracts beginning this fiscal.
After hectic rounds of
discussions, Plan Commission last month came out with a draft document
proposing CIL to share all responsibilities with regard to land acquisition,
RnR, environment and forest clearance and so on and, offer ready-to-operate
mining assets on a silver spoon to private miners on 25-year contract !
While CIL is asked to limit its
monitoring on the MDOs to merely an annual inspection by an independent
inspector; the National miner is held accountable for “every social commotion” (dubbed
as “indirect political events”) that may impact the production and
profitability of the MDO.
The cost of such ‘commotion’ is
huge. As per the detailed force majeure
clauses drafted by the Plan Commission; CIL will be contract bound to pay huge
penalties on daily basis for each such work stoppage.
To cut the long story short,
CIL’s proposal to share key responsibilities with MDOs is turned on its head so
much so that appointment of MDOs may leave a telling impact on the company’s
finances.
A non-starter
Naturally CIL is now resisting
the model.
And, even if the government
forces it to adopt the same through a Presidential Directive, rest assured the
company will use every loophole in thwarting the move as it did in the epic battle
for fuel supply pacts.
Apparently, there is more than
one reason why the Plan Panel proposed model will prove to be a non-starter.
Take for example the clause on
land requirement. The Plan Panel wants the MDO model to take off with 20 per
cent of the project land available. CIL is asked to release the rest of the
land to the contractor in four equal instalments, every five years.
In reality CIL never had access
to so much of project-land, at one go. An average mining project in the country
takes off with hardly 5 per cent of the total land required.
It means Coal India will not
award a single contract through the prescribed model till they have access to
20 per cent of any mining reserve. And, considering the demand-supply gap in
coal, the government cannot make it wait till such land is available.
Mining will go on as usual.
Production targets will be missed. Precious dollar will be spent in importing
an energy resource which is abundantly available in the country.
***
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