Narsing Rao, who takes over as chairman next month, says country’s coal production should rise in two-three years
India’s problem of low coal production can be overcome with a little help from the government and some initiatives from the industry, said Narsing Rao, who will take over as chairman of Coal India Ltd by the end of next month.
“There are problems of land acquisition, relief and rehabilitation, forest and environment and there is also the problem of evacuation,” Rao said in a telephone interview from Hyderabad on Wednesday. “These are challenges. These are surmountable.”
Rao, chairman and managing director of state-run Singareni Collieries Co. Ltd, has been selected as the new chairman of Coal India, the world’s largest miner of the mineral. He is set to take over from Zohra Chatterji, an additional secretary in the ministry of coal.
Chatterji has been acting chairman since the beginning of this month after the previous acting chairman N.C. Jha retired on 31 January.
Rao will be leading Coal India at a time when it is facing a tough challenge. The company, listed on BSE in November 2010 after an initial public offer that was oversubscribed 15.3 times, ran into production bottlenecks the subsequent year owing to a workers’ strike, excessive rains and lack of clearances for new mines.
The company is struggling to meet its scaled-down production target of 440 million tonnes (mt) for the current year from 452mt set earlier, even as customers are clamouring for more supplies and price discounts.
“The biggest challenge is to enhance both the quantum and productivity of the mines. The second significant issue is to close out the overseas acquisitions to strengthen our supply position. These are long pending issues,” said Kameswara Rao, executive director at consultancy PricewaterhouseCoopers.
“The new chairman of Coal India has the advantage of strong mineral and financial resources at his command. The challenge will be formulating a robust strategy and ensuring implementation.”
The company will have to look at underground mining in a big way for which Narsing Rao will have to draw on his expertise at Andhra Pradesh-based Singareni, Kameswara Rao said.
Last week, the Prime Minister’s office directed Coal India to sign fuel supply agreements with power producers, some by March, assuring them coal supplies to meet 80-100% of their requirement.
Narsing Rao claims to have successfully brought down the number of worker strikes during his stint at Singareni, where 70,000 workers operate the mines.
“Industrial relations is the hardest aspect of the coal mining industry,” Narsing Rao said. “These are manual mines where there are head loads. There are very difficult working conditions and underground mines. But naturally there will be problems,” he said.
But managing a small localized mine is easier, Narsing Rao said compared with the spread out Coal India that operates 467 mines. “Here law and order situation gets controlled well as we have the backing of the state government,” he said.
Singareni has limited reserves in its existing 50 mines and is looking for areas in Orissa and Chhattisgarh.
For Coal India, its acquisition strategy involves the world. In the past few years, it has held talks with US-based Peabody Energy Corp., Massey Energy and Indonesia’s Sinar Mas, but has been unsuccessful. Its new mandate is to consider even small unlisted mining blocks as energy security becomes a top priority for the nation.
“It’s a good idea to look for good-quality assets. It is good to own it if that means we are not paying high international prices for the coal,” Narsing Rao said.
Rao said the dream of being self-sufficient in coal production can be realized if the government gives speedy environmental clearances to new mines and Parliament approves a draft law on land acquisitions, ending the uncertainty of those willing to sell their land.
Coal companies can do their bit by investing in infrastructure, especially in eastern India, where bottlenecks and strikes are common and fuel waits at pitheads, sometimes for months, to be transported. This also affects production.
“Coal companies are cash-rich. They should have been focusing more on infrastructure,” Rao said. “When they start working on a mine, they can simultaneously put up railway sidings and 30-40km of roads.”
Low cost of production is an advantage for coal miners and some of their margins must be invested in infrastructure development, which is like a “low-hanging fruit” to boost productivity, he said.
“In about two-three years, we should be able to step up coal production as much as possible,” he said, speaking of the industry as a whole.
Rao, an officer from the Indian Administrative Service from the 1986 batch, is not a newcomer to Coal India as he had served as a director on its board from February 2007 to March 2008.
But his hands-on coal industry experience has come from his five-year stint in Singareni, which is set to produce 52.3-54 mt of coal in 2011-12 ending on 31 March, from 51.3 mt in the previous year.
Rao has also been a chief technical adviser to the United Nations-Asia Pacific on rural development between 1999 and 2005. He was earlier head of Girijan Co-operative Corp., an Andhra Pradesh initiative for tribals.
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