Coal India's production declines on overburden removal constraints

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Owing to a delay in the finalisation of overburden removal contracts and land issues, Coal India’s production during May this year, fell by 1.1 per cent to 46.59 million tonnes (mt) as the miner was able to produce around 1.5 mt of coal daily.

Overburden removal refers to the removal of top-soil to expose the coal seams making them ready for mining. Any delay in this process impacts the future-readiness of the company to sustain output levels. 

In March this year, the state-owned miner was to register a daily output of 2.55 mt, which declined to 1.46 mt in April, primarily on account of a lack of exposed coal seams.

“Last year, many overburden removal contracts couldn’t be finalised which has now impacted production. However, the issue has been addressed and output is likely to increase in the coming months”, a company executive said.

Sources suggested that the reverse auction mechanism may be the primary reason why such contracts couldn’t be finalised on time. Except Western Coalfields, nearly all other subsidiaries of the company were plagued by this problem.

Although Coal India took it upon itself to carry on overburden removal activities as contract finalisation took time, it wasn’t enough.

During March-May 2019, Coal India’s spend on stripping activity, a true reflection of removing the top-soil, went down by 11.15 per cent to Rs 2,201.69 crore.

Signs of this looming problem first surfaced in the latter half of last year when it was found that while opencast production grew at around 11 per cent, overburden removal dropped by 3.4 per cent.

Since over 90 per cent of Coal India’s production comes in from opencast mines, overburden removal needs to be kept proportionate to production to sustain growth.

Plagued by such lack of stripping activities, land and labour issues, South Eastern Coalfields (SECL), the company’s largest subsidiary, registered production decline by 14.7 per cent at 11.90 mt.

However, despite this crucial problem,
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, the Maharatna firm’s second most important subsidiary, upped production by 12.3 per cent at 11.64 mt, while Northern Coalfields increased output by five per cent at 8.87 mt.

The production rise in these and other important subsidiaries is on account of sorting out land acquisition issues. In April this year, Coal India spent Rs 143.06 crore to acquire 632.93 hectares of land after employing 50 displaced people and compensating another 59 as one-time settlement.

Although company officials noted that the problem has been resolved, it is faced with another challenge – the monsoons are knocking at India’s doorsteps.

While company exectives acknowledge that mining is a seasonal business and production usually takes a hit during the rains, it is also unproductive for the company to expose the coal seams to downpour. Not only does it risk accidents, but such exposure can also lead to deterioration of the coal quality if it is left bare to the showers.

On the other hand, the world’s largest coal miner also registered a decline of 1.4 per cent in shipping coal to the consumers on account of lack of rakes availability.

The company, in association with the Indian Railways, is in the process of procuring its own railway rakes which, Coal India thinks, will help it ship greater amount of coal to its consumers and free up some of the railway rakes to make them available to other sectors.

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