Study Material for qualifying examination for selection from Non-Executive to Executive cadre (Coal India Limited) Part-1

Section-I : Organizational Profile, Finance and Strategic Initiatives

Coal Industry in India- a retrospect, nationalization of coal mines

• Coal mining in India has a long history of commercial exploitation covering nearly 220 years starting in 1774.
• East India Company in the Raniganj Coalfield along the Western bank of Damodar river.
• India could produce 6.12 million metric tons (6.75 million short tons) per year by 1900 and 18
• million metric tons (20 million short tons) per year by 1920.
• The production got a sudden boost from the First World War.
• Production reached a level of 29 million metric tons (32 million short tons) by 1942 and 30 million metric tons (33 million short tons) by 1946.
• Setting up of the National Coal Development Corporation (NCDC), a Government of India
• Undertaking in 1956 with the collieries owned by the railways as its nucleus was the first major step towards planned development of Indian Coal Industry.
• Along with the Singareni Collieries Company Ltd. (SCCL) which was already in operation since 1945 and which became a Government company under the control of Government of Andhra Pradesh in 1956, India thus had two Government coal companies in the fifties. SCCL is now a joint undertaking of Government of Telangana and Government of India sharing its equity in 51:49 ratio.

Coal Mining Regions

• Coal reserves in India is one of the largest in the world. As on April 1, 2012, India had 293.5 billion metric tons (323.5 billion short tons) of the resource.
• The production of coal was 532.69 million metric tons (587.19 million short tons) in 2010-11.
• The production of lignite was 37.73 million metric tons (41.59 million short tons) in 2010-11.
• As on 2011, India ranked 3rd in world coal production.
• The energy derived from coal in India is about twice that of energy derived from oil, whereas worldwide, energy derived from coal is about 30% less than energy derived from oil.

Distribution of coal reserve by states

80,356.20Tertiary

The top producing states are

Orissa – Talcher in Angul district

Chhattisgarh

Jharkhand

Other notable coal-mining areas include

Singareni collieries in Khammam district, Telangana

Jharia mines in Dhanbad district, Jharkhand

Nagpur & Chandrapur district, Maharashtra

Raniganj in Bardhaman district, West Bengal

Neyveli lignite mines in Cuddalore district, Tamil Nadu

Singrauli Coalfield and Umaria Coalfield in Madhya Pradesh

Nationalisation of coal mines

On account of the growing needs of the steel industry, a thrust had to be given on systematic exploitation of coking coal reserves in Jharia Coalfield. Adequate capital investment to meet the burgeoning energy needs of the country was not forthcoming from the private coal mine owners.

Unscientific mining practices adopted by some of them and poor working conditions of labor in some of the private coal mines became matters of concern for the Government. On account of these reasons, the Central Government took a decision to nationalize the private coal mines.

The nationalization was done in two phases, the first with the coking coal mines in 1971-72 and then with the non-coking coal mines in 1973.

In October, 1971, the Coking Coal Mines (Emergency Provisions) Act, 1971 provided for taking over in public interest of the management of coking coal mines and coke oven plants pending nationalization. This was followed by the Coking Coal Mines (Nationalization) Act, 1972 under which the coking coal mines and the coke oven plants other than those with the Tata Iron & Steel Company Limited and Indian Iron & Steel Company Limited, were nationalized on May 1, 1972 and brought under the Bharat Coking Coal Limited (BCCL), a new Central Government Undertaking.

Another enactment, namely the Coal Mines (Taking Over of Management) Act, 1973, extended the right of the Government of India to take over the management of the coking and non-coking coal mines in seven States including the coking coal mines taken over in 1971. This was followed by the nationalization of all these mines on May 1, 1973 with the enactment of the Coal Mines (Nationalization) Act, 1973 which now is the piece of Central legislation determining the eligibility of coal mining in India.
All non-coking coal mines were nationalized in 1973 and placed under Coal Mines Authority of India. In 1975, Eastern Coalfields Limited, a subsidiary of Coal India Limited, was formed.

The North East Indian states enjoy special privileges under constitution of India. The Sixth Schedule of constitution and article 371 of constitution allows state governments to formulate its own policy in order to recognize customary tribal laws. For example, Nagaland has its own coal policy which allows its natives to mine coal from their respective lands. Similarly, coal mining in Meghalaya was rampant till imposition of ban on coal mining by National Green Tribunal. The Nagaland Coal and Meghalaya Coal has large buyers in North India, Central India and Eastern India.

India’s Energy Scenario & Coal
India is currently among the top three fastest growing economies of the world. As a natural corollary India’s energy needs too are fast expanding with its increased industrialization and capacity addition in Power generation. This is where ‘Coal’ steps in. In India coal is the critical input for major infrastructure industries like Power, Steel and Cement.
Coal is the most dominant energy source in India’s energy scenario.

• Coal meets around 52% of primary commercial energy needs in India against 29% the world over.
• Around 66% of India’s power generation is coal based.
• India is the 3rd largest coal producing country in the world after China and USA.

Coal India Limited at a glance
Coal India Limited (CIL) as an organized state owned coal mining corporate came into being in November 1975 with the government taking over private coal mines. With a modest production of 79 Million Tonnes (MTs) at the year of its inception CIL today is the single largest coal producer in the world. Operating through 81 mining areas CIL is an apex body with 7 wholly owned coal producing subsidiaries and 1 mine planning and consultancy company spread over 8 provincial states of India.

CIL also fully owns a mining company in Mozambique christened as ‘Coal India Africana Limitada’. CIL also manages 200 other establishments like workshops, hospitals etc. Further, it also owns 26 technical & management training institutes and 102 Vocational Training Institutes Centres.

Indian Institute of Coal Management (IICM) as a state-of-the-art Management Training ‘Centre of Excellence’ – the largest Corporate Training Institute in India – operates under CIL and conducts multi disciplinary management development programmes.

CIL having fulfilled the financial and other prerequisites was granted the Maharatna recognition in April 2011. It is a privileged status conferred by Government of India to select state owned enterprises in order to empower them to expand their operations and emerge as global giants. So far, the select club has only five members out of 217 Central Public Sector Enterprises in the country.

Unmatched Strategic Relevance

1. Produces around 81.1% of India’s overall coal production
2. In India where approximately 52% of primary commercial energy is coal dependent, CIL alone meets to the tune of 40% of primary commercial energy requirement
3. Commands nearly 74% of the Indian coal market
4. Feeds 82 out of 86 coal based thermal power plants in India
5. Accounts for 76% of total thermal power generating capacity of the Utility sector
6. Supplies coal at prices discounted to international prices
7. Insulates Indian coal consumers against price volatility
8. Makes the end user industry globally competitive

Thus, plays a key role in “India Growth Story” and making India incorporate globally competitive.

Mission of Coal India Limited
To produce and market the planned quantity of coal and coal products efficiently and economically in an eco-friendly manner with due regard to safety, conservation and quality
 

Corporate Structure and Subsidiary Companies

Coal India is a holding company with seven wholly owned coal producing subsidiary companies and one mine planning & consultancy company. It encompasses the whole gamut of identification of coal reserves, detailed exploration followed by design and implementation and optimizing operations for coal extraction in its mines. The producing companies are:

• Eastern Coalfields Limited (ECL), Sanctoria, West Bengal
• Bharat Coking Coal Limited (BCCL), Dhanbad, Jharkhand
• Central Coalfields Limited (CCL), Ranchi, Jharkhand
• South Eastern Coalfields Limited (SECL), Bilaspur, Chattisgarh
• Western Coalfields Limited (WCL), Nagpur, Maharashtra
• Northern Coalfields Limited (NCL), Singrauli, Madhya Pradesh
• Mahanadi Coalfields Limtied (MCL), Sambalpur, Orissa
• Coal India Africana Limitada, Mozambique
• The consultancy company is Central Mine Planning and Design Institute Limited (CMPDIL), Ranchi, Jharkhand.
• North Eastern Coalfields (NEC) a small coal producing unit operating in Margherita, Assam is under direct operational control of CIL.

Coal India’s major consumers are Power and Steel sectors. Others include Cement, Fertiliser, Brick Kilns, and small scale industries.
 

MoU Excellence

For previous three consecutive years CIL has bagged ‘Excellent’ rating in its Memorandum of Understanding (MoU) – a negotiated contract between Government and CIL Management – for performance evaluation on key physical and financial parameters.
 

Production and Growth

Produces over 400 Million Tonnes of Coal annually. Coal production ending Financial Year 2011 was 431.32 Million Tonnes (MTs). CIL’s dynamic production momentum is evident in the fact that in recent years, CIL leaped from 300 MTs mark achieved in 2003-04 to 400 MTs (2008-09) in a time span of 5 years. It took CIL 12 years to cross the 300 MTs production mark from that of 200 MTs achieved in 1991-92. CIL Is targeted to produce 452 MTs FY ending 2012.
Two of the subsidiary companies of CIL South Eastern Coalfields Limited and Mahanadi Coalfields Limited are in the elite club of 100 MTs coal producing companies which number only a few worldwide.

Acquiring assets abroad
It is becoming increasingly evident that domestic coal demand is far outstripping the indigenous production in India. The gap between demand and supply is ever expanding. Especially so in the wake of increased capacity addition in power sector which predominantly coal dependent.

In spite of best efforts, realistically CIL would not be able to satiate growing coal demand. Letters of Assurance (LoA) issued so far are already in excess of CIL’s production. Present analysis indicate that there would be a shortage of 350 MTs of coal by 2016-17. To meet this need coal import is inevitable.

CIL has taken it upon itself, in the interest of meeting the country’s energy requirement, and is foraying into foreign shores for acquisition of coal properties. For the purpose CIL has adopted a three pronged approach. Acquisition of coal properties directly on its own; through equity participation with coal mining companies abroad and through long term coal off-take contracts.

Transparency Initiatives

• Introduced e-auction for selling coal to any consumer from any location in a transparent manner.
• Introduced Integrity Pact in High Value Procurement.
• e- procurement introduced for speeding up purchase of vital inputs

Employee Welfare& CSR

• Pursues a structured CSR policy around coal mining areas to improve quality of life with community consensus and inclusive participation
• Mobile Dispensaries and wellness clinics introduced on a large scale.
• Tele-medicine facilities introduced in central hospitals.
• Provides medical services to employees, their families and local populace through 86 fully equipped hospitals having 5835 beds.
• Employs 1524 specialist Doctors.
• Runs 423 dispensaries and has 640 Ambulances.
• Provides potable water to about 2.3 million populace in remote corners of CIL’s areas of operation
• Supports 536 schools under different categories – Project Schools (55); Privately managed Schools with grant packages (284); Private Committee Managed Educational Institutes (72) and other schools where occasional grants are given (125).
• Introduced ‘Coal India Scholarships’ for 100 Below Poverty Line students plus 25 wards of land losers in government engineering and medical colleges. Scholarship covers education, hostel and mess charges
• Meets the entire cost of wards of workmen securing admission in government engineering and medical colleges
• Committed to generate employment opportunities for people in mining areas by providing vocational training.
• The company Pursues ‘Mining with a human face’ through socially sustainable inclusive model of growth by making Project Affected People stakeholders in the decision making process for their livelihood.
• Medical facilities extended to nearby communities in fully equipped company hospitals.
• Mobile dispensaries and Tele-medicine facilities meant for employees also extended to nearby village populace.

(Figures are as of April 2011)

Care for Environment

One of the inherent tendencies of coal mining is degradation of the land and environment. CIL constantly addresses the impact of mining activities across environmental and social issues. Eco-friendly mining systems have been put in place in all of its mining areas. To make environmental mitigation measures more transparent, CIL introduced state-of-the-art Satellite Surveillance to monitor land reclamation and restoration for all opencast projects.

Coal India has made afforestation over an area of around 32,000 Hectares while the total forest area degraded due to mining operation is around 12,800 Hectares, which means, for every hectare of forest land degraded, CIL has made plantation in 2.5 Hectares of land.

Committed to minimize the adverse impact of coal mining on environment through well structured Environment Management Plans and sustainable development activities.
As a part of ‘Clean & Green’ programme, massive plantation has been taken up by CIL wherever land is available. CIL has till date planted over 73 million trees.
A positive result of this effort towards improvement of environment through massive plantation undertaken in Singrauli Coalfields since 1985, is such that the analysis for the period 1985-1995 and 1996-2002 carried out by Conservator of Forest indicates that the annual average maximum temperature in Singrauli has decreased by 0.4oC while the annual average rainy days increased by 11.2 days and average annual rainfall has increased by 105.6 mm.

CIL has started integration of Environment Management System (ISO:14001) with Quality Management System (ISO:9001) and till date have successfully achieved certification of 53 of its projects. This integration is being extended to all mines in phases.