Prime Minister Narendra Modi’s new Indian Government is looking to shake up Coal India Ltd (CIL) with a major restructuring. Basic problems are behind a great deal of the inefficiency at the world’s biggest coal miner. For instance, it does not have enough mechanical shovels, trucks or explosives. The government, which has a 90% stake in the company (total market value about $40 billion), is exploring a break up and opening up the sector to foreign investment to boost output and cut imports, sources have said, according to Reuters.
CIL accounts for more than 80% of India’s production and employs 350,000, but has not met its production targets for years, “ensuring the country remains the world’s third-largest coal importer despite sitting on huge reserves,” Reuters says.
“A failure to boost efficiency could threaten long-run plans to spin off some of the seven units of the coal miner, a vital part of the government’s reform strategy.
“Two units produced less in the last fiscal year than a year ago, partly due to lack of basic equipment and ageing machinery, Power and Coal Minister Piyush Goyal told parliament this week.
“The minister did not provide data but according to a top official at one CIL unit this issue could be cutting annual output by more than 10%. The official declined to be identified due to its policy on talking to media.
“Coal India spokesman Vijay Sagar said it was difficult to assess how much production was affected due to shortages of equipment or explosives. The latter is in short supply mainly due to a restriction on moving chemicals such as ammonium nitrate to prevent it from being misused by extremists.
“Nonetheless, resolving equipment issues may be easier to address than other problems such as difficulties pushing through land acquisition, delays in getting environmental clearances and lack of transport facilities.”
Coal India produced 462 Mt in the last fiscal year, against a target of 482 Mt.
Experts say a shortage of mechanical shovels and trucks was partly due to CIL’s procurement policy that forces it to issue a tender for every big purchase, even for spare parts. Shortages of critical spare parts, including truck tyres, can halt machinery for months, said Dipesh Dipu, a partner at Jenissi Management Consultants, which advises resource firms.
Coal India’s Sagar said though procurement of big equipment may take time things had improved in the past three years after the appointment of an external monitor to oversee purchases.
Reuters further reports that CIL’s productivity, in output-per-man each shift, was 4.92 t in 2011-12, below a target of 5.54, according to the last available Planning Commission figures. The global average is about three times of that.”
“Productivity in underground mining is less than 1 t.” About a tenth of India’s underground output is loaded by hand, according to the planning commission, which has asked for it to be fully mechanised by 2017.
In addition, the number of hours an open-pit shovel would run would be around 22 hours a day in the private sector, but just 15 hours in a public sector firm like Coal India, according to experts.
Minister Goyal said there was scope to improve mechanisation in underground mining and that CIL was looking at a consultancy’s recommendations on technology and modernising mines.
KPMG Advisory Services’ recommendations include more detailed planning for mines, using international benchmarking for equipment productivity, refuelling of machinery in the field and improved training of workers.
