NEW DELHI: In what can be seen as a clear rebuff to the recent leaked CAG draft report, the coal ministry has expressed its helplessness in giving the exact cost of production of coal from different blocks in the country.
It has cited the presence of several variable factors, which makes estimating the cost difficult even for various mines in the same area.
The ministry’s views are in response to a query made by the power ministry, which wants to compare the cost of coal production from blocks given to Coal India (CIL) and its subsidiaries and the ones being quoted by private sector companies that have been allotted captive coal blocks.
The coal ministry, in its response, has said that geo-mining conditions, such as size of the property, seam thickness, mineable reserves, whether the area is geologically disturbed and also the method of extraction of coal (open cast or underground mine), stripping ratio and kind of mechanisation, are the main cost determinants.
In addition, nature and surface feature of land, the amount of rehabilitation and resettlement work and availability of infrastructure near the project site also alter cost. “…cost of production may vary to a large extent even between mines located in the same area/coalfield,” the recent coal ministry memorandum to the power ministry states. The ministry, however, has said that it would still get more details, so that a normative cost of production of coal per million tonne (mt) for the identified coal blocks could be ascertained.
Last month, a leaked draft report of CAG on allocation of captive coal blocks between 2004-09 had said that the government’s failure to auction coal blocks may have resulted in windfall gains of R10.7 lakh crore to power companies, some of them PSUs. At a media interaction, coal minister Sriprakash Jaiswal expressed ignorance about any such report, but said captive coal blocks were allotted under a policy being followed by successive governments for the past several years.
“The coal ministry’s observation on estimating the cost of production of coal blocks brings out the fact that it is difficult to put any definite sum on captive mining. So, the basis of the loss calculated by CAG itself becomes questionable,” said a private sector power producer who has been allocated a captive coal block, asking not to be named.
The power ministry has sought the cost of production of different mines of CIL subsidiaries, so that it could change the standard bid document for power projects being awarded under Case I or Case II bidding. “We could compare the mining cost quoted by private sector companies with the comparable data of CIL companies to see if companies are overstating cost,” said a power ministry official.
While the debate on the cost of coal production from captive blocks is on, the coal ministry is set to introduce auction of coal blocks in a couple of months. This will eliminate any chances of companies making windfall gains as those with best bid would get the coal block.
Since 1993, 216 coal blocks have be allocated to eligible public and private companies (into power, steel and cement production) under the Coal Mines (Nationalisation) Act, 1973. Out of these, 24 coal blocks have been de-allocated due to undue delays in bringing the blocks under production within a specified period of time. So the net captive blocks at present stands at about 197 blocks with 50 billion tonne of reserves.
However, so far only about 28 such blocks have started production and are mining just over 30 mt of coal against potential of over 200 mt.