Ashish Gupta, Observer Research Foundation
India is currently the third largest consumer of electricity and this position will continue over the coming years on account of sustained economic development, urbanisation, improved electricity access and an expanding manufacturing base. Recently, the Ministry of Coal, Power & Renewable Energy stated that universal and affordable energy access 24/7 is the mission of the present government under Prime Minister. This mission cannot be fuelled without coal and therefore it requires special attention. This is important because Coal occupies an important place in India’s energy basket due to its affordability. Unfortunately, the coal sector is unable to garner the requisite momentum because of its entrenchment with the political class. There have been discussions happening for a very long period to reform this crucial sector by adopting international best practices. But the reforms initiated are either not sufficient to bring desired change in the coal sector or reforms are implemented in a hasty manner. Some of the key reforms that are required to keep the sector attractive are given below:
Mine Development Operator (MDO)
MDOs usually work on contract basis for mining coal. They are not the owners of the coal block and are generally averse to take on risk. Currently 68 percent of coal production comes from work outsourced to MDOs. Some MDOs are of international repute but the compensation for the contracted work is so low that there is no incentive to use specialised mining equipments. Apart from this when CIL outsources, it is only for a limited time and at fixed cost of production. This only allows use of shovels that last for 9 years and dumper last for about 5 years. Commercial mining practices cannot be used in this environment and because of this large quantity of coal is left unmined at the coal blocks.
Division of coal blocks
Many coal blocks with large coal reserves are divided into smaller coal blocks and awarded to different companies. This block-wise division of the coal is not really economic because the coal block divisions are not necessarily congruent with the natural geological boundaries. This can lead to unnecessary wastage between the blocks.
Currently CIL has 0.3 million manpower in which 0.06 million comprised of technical personnel including clerical staff. Coal India also faces superannuation of about 750 middle and senior management personnel every year, which leads to draining of years of knowledge base. While the bottom managerial level is being replenished, there is a vacuum in the middle management preventing adequate supply of talent to top management.
Most of the engineers are either opting for more lucrative disciplines and many who are trained to perform the task want to work as planning engineers rather than to work on field. The pay structure is still not at par with software engineers though it is a highly technical field with high risk attached to it. This is a very critical issue hindering the growth of the coal sector.
Reluctance to change
Starting from the establishment of the CIL in 1975, more thrust was given to acquire engineers only. Now engineers are not required to play a role of activist, environmentalist, human resource person, finance manager and so on like it used to be in the past. All these disciplines are now distinct from one another and require special skill set. Absence of specialised skill leads to engineering solutions that do not take into account the social and economic element.
CIL’s productivity is criticised routinely. But the question is, is it CILs fault? The government is looking to disinvest 10% share of its shareholding in CIL. The move will certainly generate much needed revenue for the government and will also improve efficiency in the working of CIL. But a memorandum of the trade unions submitted to the Joint Bipartite Committee for Coal Industry has highlighted deep concerns of workers over disinvestment of CIL.
Needless to say, the governments in the past have failed to unite unions. What is not clear is if this is inevitable or intentional. CIL cannot be faulted for opposing moves towards efficiency because unions which are affiliated to political parties that actually oppose efficiency. The government needs to take a rational stand and engage in dialogue with trade unions for increasing efficiency, productivity and wages.
Given the changing dynamics in the market CIL needs to adopt best management culture and techniques. CIL is an energy company, for energy companies nothing is more critical than efficiency.
Views are those of the author
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Courtesy: Energy News Monitor | Volume XII; Issue 24