Debating India


A source of power

Thursday 2 February 2006, by CHATTOPADHYAY*Suhrid Sankar

Coal India Limited, one of the largest Indian companies in terms of turnover and workforce, has contributed in a big way to stabilising the power sector.

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A mine operated by Northern Coalfields Ltd., one of the CIL subsidiaries.

THE public sector giant, Coal India Ltd. (CIL), is one of the largest coal producing companies in the world. It accounts for around 85 per cent of the total coal production in the country. With a turnover of Rs.306.60 billion in 2004-2005 and a workforce of 458,000, CIL is one of the five largest Indian companies and one of the country’s largest corporate employers. The saga of CIL began in 1774, when Warren Hastings initiated commercial coal mining at Raniganj in West Bengal. By 1820, the first shaft mine was fully operational. In 1975, CIL was formed as holding company with five subsidiaries - Bharat Coking Coal Ltd. (BCCL), Central Coalfields Ltd. (CCL), Eastern Coalfields Ltd. (ECL), Western Coalfields Ltd. (WCL) and a service institute called Coal Mining Placing and Design Institute (CMPDIL). Three more, Mahanadi Coalfields Ltd. (MCL), Northern Coalfields Ltd. (NCL) and South Eastern Coalfields Ltd. (SECL), were set up later.

Of its seven subsidiaries, ECL, CCL and BCCL were making losses. CCL emerged from the red in 2004 mainly owing to the increase in production in its new mines. By 2005 all the subsidiaries became profitable, producing reasonable surpluses. As a result, CRISIL gave it the AAA status, its highest rating. K. Ranganath, Marketing Director, told Frontline: "We are approaching the Union Coal Ministry to obtain mini Ratna status for MCL, NCL, WCL and SECL." CIL’s production in the first nine months of the current fiscal stands at 241.73 million tonnes, as against 228.54 million tones in the corresponding period in the previous fiscal - a growth of 5.77 per cent. While total production stood at 323.58 million tonnes in the last fiscal, 103.5 per cent more than the target, this year it is projected to reach 343 million tonnes. CIL’s despatches in the first nine months of the current fiscal is 245.31 million tonnes, as against 235.04 million tonnes during the same period in the last fiscal - a growth of 4.37 per cent. While total despatches stood at 321.55 million tonnes for 2004-05, 102.6 per cent more than the target, for 2005-06, it is projected to be 344 million tonnes. The average daily loading has also increased from 21,412 wagons in January 2005, to 22,443 this year.

This increase in production has a direct impact on the power sector. At present there are 75 thermal power stations directly dependent on CIL for coal. "As on December 31, 2005, not a single power station dependent on its supply of coal from CIL is in the critical or super-critical situation," said Ranganath. A thermal power plant is in a critical situation when its coal stock is less than the amount necessary for it to function beyond a week. The plant is in a super-critical situation when its stock is less than what is required for four days’ consumption. As recent as March 31, 2005, 19 of the 75 power plants were in the critical and super-critical situation. "The total stocks in the plants have gone up by six million tonnes, in spite of increase in the plant load factor in the current fiscal," said Ranganath.

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K. Ranganath, CIL Marketing Director.

The company has basically two sets of consumers - the core sector and the non-core sector. The core sector consists of power, cement, steel, paper, aluminium, and fertilizer manufacturing units, and Central public sector undertakings (PSUs). The non-core sector, which consumes only 6 per cent of CIL’s total production, includes brick, sugar and glass foundries, and domestic users. Earlier, consumers in the non-core sector were demanding double its actual requirement and CIL was finding it increasingly difficult to cater to them. So in 1998-99, a new system called Maximum Permissible Quantity was introduced, under which the current year’s requirement of the non-core sector could not be more than the maximum quantity drawn in a year in the past three years. However, later the Calcutta High Court ruled in favour of the non-core sector and it was decided that it could purchase coal from CIL on a first-come-first-served basis.

CIL found a solution to this problem by introducing e-marketing for the non-core sector. To take part in the bidding process, a non-core consumer has to register with the service providers. The consumer is then given a password to access the website where the auction is being held. The site gives details of the coal that is being auctioned, including quality, quantity, colliery and floor price. The identity of the consumer is kept confidential. "Although consumption level of our non-core sector is negligible, 10 million tonnes have already been sold in the first eight months of the auction. For the next four months we have placed 10 million more for bidding," said Ranganath. As of December 2005, the auction price was 44 per cent over the notified price. In November 2004, it was 97 per cent more than the notified price. CIL officials expect this price to stabilise at 25 to 30 per cent. Until December, 20,000 bidders participated in the auction, of which 12,000 have been successful. A total of 11.8 million tonnes of coal was lifted virtually.

The power sector, which consumes 78 per cent of CIL’s total production has benefited enormously from e-marketing. CIL is now supplying coal to it at rates almost 44 per cent lower than the market price. This "subsidy" to the power sector from CIL depends on the auction price, which inevitably varies. The cement industry also enjoys a similar benefit.

Mining is considered to be one of the most hazardous activities. To minimise accidents, CIL has laid down and implemented a well-defined safety policy. It has established a structured multi-disciplinary Internal Safety Organisation (ISO), both at the headquarters and subsidiary levels, to monitor the safety status of mines. A glance at statistics available with the Directorate General of Mine Safety (DGMS) shows accidents and fatalities have been reduced in the past 30 years.

See online : Frontline


Volume 23 - Issue 02, Jan. 28 - Feb. 10, 2006

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