Coal Sector Evolution in India

Coal Sector Evolution In India

Industry Information Insights 2014

Table of Contents

Introduction

Pre-Independence Era

Formation of SCCL

Post-Independence Era

Formation of NCDC

Nationalization of Coal Mines

Formation of CMAL

Formation of CIL

Reforms in Coal Sector


Captive Coal Mining, 1993

Coal Mines (Nationalisation) Amendment Bill, 2000

New Coal Distribution Policy, 2007

Auction by Competitive Bidding of Coal Mines Rules, 2012

Coal Regulatory Authority Bill, 2013

Introduction

History of Coal Sector (Before Nationalization)

Summer & Heatley applied to EIC to

mine coal

1774

1843

Bengal Coal Company Limited

Registered

Introduction of steam locomotives

1853

1900

Coal Production at 6 MTPA

Formation of SCCL

1945

1956

NCDC came into existence

Introduction

History of Coal Sector (After Nationalization)

Formation of BCCL

1971

1973

Nationalisation of coal mines

BCCL, NCDC and CMAL merged to CIL

1975

1985

NCL and SECL from CCL and WCL

Creation of MCL from SECL

1992

Introduction

Important Legislations in Indian Coal Sector

1973

Coal Mines Nationalisation Act

1993

Captive Coal Mining Allowed

2000

Coal Mines Nationalisation Amendment Bill

2007

New Coal Distribution Policy

2013

Coal Regulatory Authority Bill

Introduction

Coal is the most abundant fuel resource in India. It is the prime source of energy and perhapsthe largest contributor to the industrial growth of the country.

Coal mining in India has a long history of commercial exploitation covering nearly 240 yearsat 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 Raniganjcoalfield along the Western bank of river Damodar. However, coal mined did not receiveadequate attention due to its inferior quality as compared to British coal.


The abolition of monopoly of East India Company in 1813 paved the way for rapiddevelopment of private commercial enterprises. The first joint stock coal company, BengalCoal Company Limited, was registered in 1843.

From a level of output of only about 400 tonnes per annum during the period 1815-1823, itreached a level of 91,000 tonnes during 1846. By this time demand of coal was picking up dueto introduction of steam engines. Coal mining activities received a renewed thrust with thesetting 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 wantof demand but the introduction of steam locomotives in 1853 gave a boost to it. Within a shortspan, production rose to an annual average of 1 million tonne and India was producing about6 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 inthe early thirties. The production reached a level of 29 million tonnes by 1942 and 30 milliontonnes by 1946.

Since 1920, a number of commissions and committees made observations on the question ofconservation of coal, safety of mines, etc. which led to introduction of regulations and controlof the coal industry in India.

Formation of SCCL

In 1945, the Singareni Collieries Company Limited (SCCL) became the first Governmentowned coal company in India. In that year Government of Nizam of Hyderabad bought allthe shares the company and brought the company under India Trust Fund of the NizamGovernment.

The company actually started production in 1889 at Yellandu area of present Andhra Pradeshand sixty thousand tonnes of coal was produced in that year.

Post-Independence Era

After Independence, the country embarked upon the five-year development plans to improveeconomic condition of the people. At the beginning of the first Plan, annual production wentup to 33 million tonnes.

During the first Plan period itself, the need for increasing coal production efficiently bysystematic and scientific development of the coal industry was being felt.

Formation of NCDC

In 1956, National Coal Development Corporation (NCDC) came into existence in the publicsector as Government-owned Company in pursuance of the Industrial Policy Resolutions of1948 and 1956 of the Government of India. It was started with a nucleus of 11 old statecollieries (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 anddeveloping new coal resources, besides introducing modern and scientific techniques of coalmining.

Along with the Singareni Collieries Company Limited (SCCL) which was already inoperation since 1945 and which became a Government company under the control ofGovernment of Andhra Pradesh in 1956, India had two Government coal companies at thattime. SCCL is now a joint undertaking of Government of Andhra Pradesh and Government ofIndia 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 newcollieries by opening mines mainly in areas away from the already developed Raniganj andJharia coalfields. Eight new collieries were opened during this period and the productionincreased to 8.05 million tonnes by the end of Second Plan.

During the Third Five Year Plan (1961-1966), NCDC had built up a larger productioncapacity; 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 severalcollieries. By this time, the contribution of NCDC to the India’s coal production (67.72 milliontonnes) increased to about 9.6 million tonnes.

With gradual rise in the demand of coal due to commissioning of new power plants anddevelopment of other coal-based industries during the Fourth Five Year Plan (1969-1974),NCDC’s production increased to 15.55 million tonnes by the terminal year of Fourth Five YearPlan (1973-74).


Right from its genesis, the commercial coal mining in modern times in India has beendictated by the needs of the domestic consumption. On account of the growing needs of thesteel industry, a thrust had to be given on systematic exploitation of coking coal reserves inJharia Coalfield.

Reasons for Nationalization of Coal Industry

The fragmentation of the holdings, unsafe mining conditions, and inadequate capitalinvestment had resulted in deterioration of the coal industry to such an extent that the mineswere not amenable to any scientific exploitation and management. The industry requiredheavy investments to meet the growing requirements of the nation.

In 1951 the Working Party for the coal Industry was set up which included representativesfrom coal industry, labor unions and the government. The working group suggested theamalgamation of small and fragmented producing units. Faced with these circumstances, theGovernment took over the entire coal industry in 1971 and 1973.


Procedure for Nationalization

Adequate capital investment to meet the burgeoning energy needs of the country was notforthcoming from the private coal mine owners. Unscientific mining practices adopted bysome of them and poor working conditions of labor in some of the private coal mines weresome of the major concerns for the Government.

On account of these reasons, the Central Government took a decision to nationalize theprivate coal mines. The nationalization was done in two phases, the first with the coking coalmines in 1971-72 and then with the non-coking coal mines in 1973.


In the first phase, the Coking Coal Mines (Emergency Provisions) Act, 1971 provided fortaking over in public interest of the management of coking coal mines and coke oven plantspending 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 theTata Iron & Steel Company Limited and Indian Iron & Steel Company Limited, werenationalized and brought under the Bharat Coking Coal Limited (BCCL), a new CentralGovernment Undertaking.

The Coal Mines (Taking over of Management) Act, 1973, extended the right of theGovernment of India to take over the management of the coking and non-coking coal minesin seven States including the coking coal mines taken over in 1971.

Formation of CMAL

In the second phase of nationalization, by promulgation of the Coal Mines (Taking over ofManagement) Ordinance, 1973 on 31st January 1973, the Central Government took over themanagement of all 711 non-coking collieries and in next phase of nationalization, these mineswere nationalized with effect from 1st May 1973. A public sector company namely CoalMines 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 CoalMines (Nationalisation) Act, 1973 which is at present the Central legislation determining theeligibility of coal mining in India.

Although public sector mining companies in coal sector also existed in the form of SingareniCollieries Company Limited (SCCL) and NCDC, share of these early state sectorundertakings 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 ofthe Bharat Coking Coal Limited (BCCL), followed by takeover of more than 700 mines innon-coking coal sector in January, 1973.

Formation of CIL

BCCL (Bharat Coking Coal Limited), NCDC (National Coal Development Corporation) andCMAL (Coal Mines Authority Limited) merged to constitute Coal India Limited (CIL), withheadquarters at Kolkata, in 1975 as holding company of five subsidiary companies.

1. Eastern Coalfield Limited (ECL)

2. Bharat Coking Coal Limited (BCCL)

3. Central Coalfields Limited (CCL)

4. Western Coalfields Limited (WCL)

5. Central Mine Planning & Design Institute Limited (CMPDIL)

Subsequently, two more subsidiaries - Northern Coalfields Limited (NCL) and South EasternCoalfields Limited (SECL) were carved out with effect from 28th November, 1985 of the thenCCL and WCL respectively for proper management of the projected increase in productionand investment planned.

Formation of CIL

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 allthe collieries in the state of Orissa.

Thus CIL has now eight subsidiaries out of which CMPDIL is an engineering, design andexploration company for preparing perspective plans, rendering consultancy services andundertaking exploration and drilling work for establishing coal reserves in India, collection ofdetailed data for formulation of project reports for actual mining.

The other seven subsidiaries of CIL are coal producing companies. The coal mines of Assamand its neighboring areas are controlled directly by CIL under the unit named as NorthEastern Coalfields.


Captive Coal Mining, 1993

The Coal Mines (Nationalization) Act, 1973 was amended in June 1993 to allow coal miningby 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 end-use, which wouldbe notified by the Government from time to time.

Coal Mines (Nationalisation) Amendment Bill, 2000

It was introduced in the Rajya Sabha on 26 April, 2000 in order to carry out necessaryamendments to the Coal Mines (Nationalisation) Act, 1973 to allow Indian companies to minecoal and lignite without restriction of captive consumption and to allow the Indiancompanies in the public and private sector to undertake exploration of coal and ligniteresources in India.


New Coal Distribution Policy, 2007

In October 2007, the Ministry of Coal issued the New Coal Distribution Policy to regulate thedistribution 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.

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 areacontaining coal through auction by competitive bidding. The Rule establishes how coalblocks has to be allocated for specific end use like power projects, commercial mining andoutlines the framework for allocation coal blocks for government companies as well as othercompanies.


Coal Regulatory Authority Bill, 2013

The Ministry of Coal introduced the Coal Regulatory Authority Bill, 2013 in the Lok Sabha inDecember, 2013 with the purpose of regulating and conserving resources in the coal sectorand protecting the interests of consumers of coal and producers of coal. One of the functionsof the Regulatory Authority will be to specify the principles and methodologies fordetermination of price of raw coal, washed coal and any other by product generated duringthe process of coal washing.

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Coal Sector Evolution in India