Millennium Post

All that’s black is not coal

How trustworthy is Coal India (CIL) chairman S Narsing Rao’s supply commitment to the power sector in terms of both quantity and quality for the current financial year? Supply is linked with production. When CIL is failing to meet its annual production targets for the last several successive years, how can it guarantee that its supply commitment to the power sector in 2013-2014 will be fully met? The year has just begun. Rao has been forced to make a public statement on the subject following the complaints by the power major, NTPC Limited, CIL’s No. 1 customer, over the poor quality of coal and the monopoly domestic coal producer’s failure to meet supply schedules. NTPC also held back the payment of some Rs 2,000 crore to CIL mainly over quality disputes.

Whatever Rao may claim, CIL’s coal quality – especially those supplied to state sector power plants and the giant NTPC – has always been a suspect. What is very often passed off as coal to those power plants is to a good extent a composition of shells (black stones) and solid mud. Ask any state power corporation (formerly state electricity board), suffering from frequent boiler tube leakages leading to plant shut-downs and generation disruption, about the quality of coal it receives from CIL, it‘ll blame the shells which are passed on as coal. If private sector power plants have less complaints about CIL’s coal quality, it could be because of the flexibility these private enterprises enjoy to deal with dishonest CIL officials to ensure better coal quality.

Actually, one doesn’t even need to go by coal quality complaints from public sector customers such as NTPC and state power corporations. A dig into CIL’s old corporate dossier itself would expose how an outgoing CIL chairman’s claims of large pithead stocks had often been challenged by his successor as shells in good measure and balance sheets were redone to lower the pithead stocks and ‘income’ from those books of accounts so that the incumbent’s performance was not unfairly compared with his predecessor’s favourably fudged top and bottom-line figures. However, there is no point in blaming the CIL chairman, who presides over a large number of quasi-independent mining subsidiaries each headed by a chairman-cum-managing director (CMDs). The mischief is generally done at the operational subsidiary end and less at the level of the head of the umbrella company, which CIL is. Unfortunately, CIL chairman mostly receives the flak for all the wrong doings by the subsidiaries of the holding firm.

The increasing presence of shells and solid black mud in CIL raisings is also, in a way, due to the mining practice. To save on high initial investment and operational costs and gestation period, CIL has long been emphasising on the open-cast mining process in preference to underground mining. The latter requires large investment in technologies such as long-wall, conveyors and safety equipment. Raisings from open cast mines often carry lot of impurities, including black substances other than pure coal such as shells and mud. Laxity on the part of miners – callously or deliberately – let those undesirable substances go unfiltered.

Open cast mines can operate up to a certain depth and not beyond while better varieties of coal stay in deeper seams which remain untapped. In effect, the open cast mining process could even amount to slaughter mining for quick gains in many cases. The process may help a mining company make easy and faster bucks from its operations, but the ultimate loser is the nation. The power plants are worst sufferers.  Deep underground mines under Bharat Coking Coal Limited (BCCL), a CIL subsidiary, proved to be a hotbed of corruption and inefficiency as the report of the Parliament-appointed Chari committee revealed as early as in the 1980s.

Rao may be wrong on both the basic premises, the availability of coal and its quality. His suggestion of a third party joint sampling at loading point, which has just began, too may not help improve the situation because of the continuation of age-old tradition of pilferage and adulteration in transit in collusion with transport operators, including the Railways. Such a sampling initiative would have been more meaningful to power producers if it is conducted at the final delivery point. There is nothing personal about the controversy over CIL’s inability to keep supply commitments in terms of quantity and quality. The utility of coal is principally in its conversion into electricity generation. In India, it is almost a primary source of energy. The public sector CIL should be as much concerned with its production, pricing and quality as the most important user of the commodity, electric power generation companies.

The issue of domestic coal quality is serious and can be addressed by CIL alone. The matter raised by NTPC and state power corporations is pertinent. If left uncorrected, it will affect both coal production and power generation as power plants have taken a strong position that they would not pay for shells and solid mud supplied as coal. Electricity companies are billed on the basis of calorific value of coal. Until recently, the CIL management had shown little regard to the complaints of power producers, which consume almost 78 per cent of the domestic coal output. Massive shortage of domestic supplies coal and CIL’s near monopoly status in the business seem to make the CIL management go easy on consumer complaints  However, the NTPC action, supported by state power corporations, blocking payment to CIL has made the coal monopoly and the department of coal sit up and look for an amicable solution. Initially, the coal PSU had hit back by cutting fuel supplies to some of the NTPC plants.

India’s current power generation capacity is around 2,15,000 MW. Of this, 1,23,700 MW is coal-based. The country’s annual demand for coal is expected to grow from 649-million tonnes now to 730 million tonnes in 2016-2017, making the country heavily dependent on more expensive, imported coal, given that the projected local availability would only be around 550 million tonnes. NTPC’s requirement alone is 160 million tonnes. The efficiency of thermal power plants is substantially dependent on the quality of raw materials they use. (IPA)
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