Evolution of Coal Sector in India

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Information about Evolution of Coal Sector in India
Business & Mgmt

Published on March 10, 2014

Author: energysector

Source: slideshare.net

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Indian Coal Sector - History, Growth, Nationalization and Formation of Coal Companies

Rewave Infra Solutions EnergySector.in Evolution of Coal Sector in India Industry Information Insights 2014

Table of Contents 1. Evolution of Coal Sector ........................................................................................... 2 1.1 Pre-Independence Era ........................................................................................... 2 1.2 Formation of SCCL ................................................................................................ 2 1.3 Post-Independence Era ......................................................................................... 3 1.4 Formation of National Coal Development Corporation .......................................... 3 2. Nationalisation of Coal Mines .................................................................................. 4 2.1 Reasons for Nationalization of Coal Industry ......................................................... 4 2.2 Procedure for Nationalization................................................................................. 4 2.3 Formation of Coal Mines Authority Limited ............................................................ 5 3. Formation of CIL........................................................................................................ 6 4. Reforms in Indian Coal Sector ................................................................................. 7 4.1 Captive Coal Mining, 1993 ..................................................................................... 7 4.2 Coal Mines (Nationalisation) Amendment Bill, 2000 .............................................. 8 4.3 New Coal Distribution Policy, 2007 ........................................................................ 8 4.4 Auction by Competitive Bidding of Coal Mines Rules, 2012 .................................. 8 4.5 Coal Regulatory Authority Bill, 2013 ...................................................................... 8 List of Figures Figure 1: Milestones in History of Coal Sector in India (Before Nationalization) .............. 6 Figure 2: Milestones in History of Coal Sector in India (After Nationalization) ................. 6 Figure 3: Important Legislations in Indian Coal Sector .................................................... 7 1

1. Evolution of Coal Sector Coal is the most abundant fuel resource in India. It is the prime source of energy and perhaps the largest contributor to the industrial growth of the country. Coal mining in India has a long history of commercial exploitation covering nearly 240 years at places close to coal regions in the eastern part of the country. In 1774, Summer & Heatley applied to the East India Company to raise coal in Raniganj coalfield along the Western bank of river Damodar. However, coal mined did not receive adequate attention due to its inferior quality as compared to British coal. 1.1 Pre-Independence Era The abolition of monopoly of East India Company in 1813 paved the way for rapid development of private commercial enterprises. The first joint stock coal company, Bengal Coal Company Limited, was registered in 1843. From a level of output of only about 400 tonnes per annum during the period 1815-1823, it reached a level of 91,000 tonnes during 1846. By this time demand of coal was picking up due to introduction of steam engines. Coal mining activities received a renewed thrust with the setting up of a rail link between Howra and Raniganj in 1853. After 1774, for about a century the growth of Indian coal mining remained sluggish for want of demand but the introduction of steam locomotives in 1853 gave a boost to it. Within a short span, production rose to an annual average of 1 million tonne and India was producing about 6 million tonnes of coal per year by 1900 and 18 million tonnes per year by 1920. The production got a sudden boost from the First World War but went through a slump in the early thirties. The production reached a level of 29 million tonnes by 1942 and 30 million tonnes by 1946. Since 1920, a number of commissions and committees made observations on the question of conservation of coal, safety of mines, etc. which led to introduction of regulations and control of the coal industry in India. 1.2 Formation of SCCL All these were directed towards state ownership of the mines of the industry. In 1945, the Singareni Collieries Company Limited (SCCL) became the first Government owned coal company in India. In that year Government of Nizam of Hyderabad bought all the 2

shares the company and brought the company under India Trust Fund of the Nizam Government. The company actually started production in 1889 at Yellandu area of present Andhra Pradesh and sixty thousand tonnes of coal was produced in that year. 1.3 Post-Independence Era After Independence, the country embarked upon the five-year development plans to improve economic condition of the people. At the beginning of the first Plan, annual production went up to 33 million tonnes. During the first Plan period itself, the need for increasing coal production efficiently by systematic and scientific development of the coal industry was being felt. 1.4 Formation of National Coal Development Corporation In October 1956, National Coal Development Corporation (NCDC) came into existence in the public sector as Government-owned Company in pursuance of the Industrial Policy Resolutions of 1948 and 1956 of the Government of India. It was started with a nucleus of 11 old state collieries (owned by the Railways) with total annual production of 2.9 million tonnes of coal. This was the first major step towards planned development of Indian coal sector. From its very beginning, NCDC addressed itself to the task of increasing coal production and developing new coal resources, besides introducing modern and scientific techniques of coal mining. Along with the Singareni Collieries Company Limited (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 had two Government coal companies at that time. SCCL is now a joint undertaking of Government of Andhra Pradesh and Government of India sharing its equity in the ratio of 51:49. Performance of NCDC In the Second Five Year Plan (1956-1961), NCDC increased coal production from new collieries by opening mines mainly in areas away from the already developed Raniganj and Jharia coalfields. Eight new collieries were opened during this period and the production increased to 8.05 million tonnes by the end of Second Plan. 3

During the Third Five Year Plan (1961-1966), NCDC had built up a larger production capacity; however it could not be utilized due to a sluggish domestic coal demand. Therefore, the production had to be decreased with the suspension of the development of several collieries. By this time, the contribution of NCDC to the India’s coal production (67.72 million tonnes) increased to about 9.6 million tonnes. With gradual rise in the demand of coal due to commissioning of new power plants and development of other coal-based industries during the Fourth Five Year Plan (19691974), NCDC’s production increased to 15.55 million tonnes by the terminal year of Fourth Five Year Plan (1973-74). 2. Nationalisation of Coal Mines Right from its genesis, the commercial coal mining in modern times in India has been dictated by the needs of the domestic consumption. 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. 2.1 Reasons for Nationalization of Coal Industry The fragmentation of the holdings, unsafe mining conditions, and inadequate capital investment had resulted in deterioration of the coal industry to such an extent that the mines were not amenable to any scientific exploitation and management. The industry required heavy investments to meet the growing requirements of the nation. In 1951 the Working Party for the coal Industry was set up which included representatives from coal industry, labor unions and the government. The working group suggested the amalgamation of small and fragmented producing units. Faced with these circumstances, the Government took over the entire coal industry in 1971 and 1973. 2.2 Procedure for Nationalization 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 were some of the major concerns 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. 4

In the first phase, 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 (Nationalisation) 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 and brought under the Bharat Coking Coal Limited (BCCL), a new Central Government Undertaking. 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. 2.3 Formation of Coal Mines Authority Limited In the second phase of nationalization, by promulgation of the Coal Mines (Taking over of Management) Ordinance, 1973 on 31st January 1973, the Central Government took over the management of all 711 non-coking collieries and in next phase of nationalization, these mines were nationalized with effect from 1st May 1973. A public sector company namely Coal Mines Authority Limited (CMAL) was formed to manage these non-coking coal mines. This was followed by the nationalization of all these mines with the enactment of the Coal Mines (Nationalisation) Act, 1973 which is at present the Central legislation determining the eligibility of coal mining in India. Although public sector mining companies in coal sector also existed in the form of Singareni Collieries Company Limited (SCCL) and NCDC, share of these early state sector undertakings was only 26.3% of the total coal production at the time of nationalisation. Thus, the government took over 214 coking coal mines in October, 1971 leading to the formation of the Bharat Coking Coal Limited (BCCL), followed by takeover of more than 700 mines in non-coking coal sector in January, 1973. 5

Figure 1: Milestones in History of Coal Sector in India (Before Nationalization) Summer & Heatley applied to EIC to mine coal 1774 Introduction of steam locomotives 1853 1843 Bengal Coal Company Limited Registered Formation of SCCL 1945 1900 Coal Production at 6 MTPA 1956 NCDC came into existence Figure 2: Milestones in History of Coal Sector in India (After Nationalization) BCCL, NCDC and CMAL merged to CIL 1975 Formation of BCCL 1971 1973 Nationalisation of coal mines Creation of MCL from SECL 1992 1985 NCL and SECL from CCL and WCL 3. Formation of CIL BCCL (Bharat Coking Coal Limited), NCDC (National Coal Development Corporation) and CMAL (Coal Mines Authority Limited) merged to constitute Coal India Limited (CIL), with headquarters at Kolkata, in 1975 as holding company of five subsidiary companies. 1. 2. 3. 4. 5. Eastern Coalfield Limited (ECL) Bharat Coking Coal Limited (BCCL) Central Coalfields Limited (CCL) Western Coalfields Limited (WCL) Central Mine Planning & Design Institute Limited (CMPDIL) 6

Subsequently, two more subsidiaries - Northern Coalfields Limited (NCL) and South Eastern Coalfields Limited (SECL) were carved out with effect from 28th November, 1985 of the then CCL and WCL respectively for proper management of the projected increase in production and investment planned. Further, considering the prospects of Orissa Coalfields in eighth and ninth plan periods, Mahanadi Coalfields Limited (MCL) was carved out of SECL on 3rd April, 1992 to manage all the collieries in the state of Orissa. Thus CIL has now eight subsidiaries out of which CMPDIL is an engineering, design and exploration company for preparing perspective plans, rendering consultancy services and undertaking exploration and drilling work for establishing coal reserves in India, collection of detailed data for formulation of project reports for actual mining. The other seven subsidiaries of CIL are coal producing companies. The coal mines of Assam and its neighboring areas are controlled directly by CIL under the unit named as North Eastern Coalfields. Figure 3: Important Legislations in Indian Coal Sector 1973 1993 Coal Mines Nationalisation Act Captive Coal Mining Allowed 2000 Coal Mines Nationalisation Amendment Bill 2007 2013 New Coal Distribution Policy Coal Regulatory Authority Bill 4. Reforms in Indian Coal Sector 4.1 Captive Coal Mining, 1993 The Coal Mines (Nationalization) Act, 1973 was amended in June 1993 to allow coal mining by both private and public sector for captive consumption for production of iron and steel, generation of power, washing of coal obtained from a mine and other enduse, which would be notified by the Government from time to time. 7

4.2 Coal Mines (Nationalisation) Amendment Bill, 2000 It was introduced in the Rajya Sabha on 26 April, 2000 in order to carry out necessary amendments to the Coal Mines (Nationalisation) Act, 1973 to allow Indian companies to mine coal and lignite without restriction of captive consumption and to allow the Indian companies in the public and private sector to undertake exploration of coal and lignite resources in India. 4.3 New Coal Distribution Policy, 2007 In October 2007, the Ministry of Coal issued the New Coal Distribution Policy to regulate the distribution of coal. This policy dispensed with the classification of consumers of coal into ‘core’ and ‘non-core’ sectors and instead treated each new consumer on merit. 4.4 Auction by Competitive Bidding of Coal Mines Rules, 2012 The Central Government introduced Rules under the Mines & Minerals (Development & Regulations) Act, 1957 with an objective to establish procedure for allocation of area containing coal through auction by competitive bidding. The Rule establishes how coal blocks has to be allocated for specific end use like power projects, commercial mining and outlines the framework for allocation coal blocks for government companies as well as other companies. 4.5 Coal Regulatory Authority Bill, 2013 The Ministry of Coal introduced the Coal Regulatory Authority Bill, 2013 in the Lok Sabha in December, 2013 with the purpose of regulating and conserving resources in the coal sector and protecting the interests of consumers of coal and producers of coal. One of the functions of the Regulatory Authority will be to specify the principles and methodologies for determination of price of raw coal, washed coal and any other by product generated during the process of coal washing. 8

Information is the key to success Rewave Infra Solutions 133-D, Mayur Vihar Phase - II Delhi – 110 091 (India) Phone: +91-95603-66515 E-Mail: mail@energysector.in

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