“Modern techniques needed to accelerate exploration” : Mr Sachdev

The mining industry in India is going through a lot of churning with decadent rules being questioned and new tools like auction and notifications coming into play. A healthy debate on the new policies and regulations being introduced by industry professionals is an important exercise which cannot and should not be ignored. In our Q&A sessions, we will try and bring out the opinions of experts on some of the issues which matter to the industry and hope that a debate will ensue.

Mr R K Sachdev, President, Coal Preparation Society of India is a respected industry specialist. We were fortunate to catch up with him and seek his views on recent developments.

1.       You are former Advisor (Coal) to GOI and currently, President, Coal Preparation Society of India (CPSI), can you give us a brief background of your experience working in the coal industry and your current role as President of CPSI?

Having spent over 5 decades in the Indian coal industry, I have seen many phases of the Indian coal industry; pre Nationalisation and post Nationalisation. After graduating from the prestigious Indian School of Mines, Dhanbad, I started my professional career with the erstwhile National Coal Development Corporation (NCDC), which later gave birth to Coal India Ltd in 1975. I have worked in underground mines, open cast mines, and planning & design division and also in the Ministry of Coal as the Adviser to the Government of India. My 15 years long service in the Ministry of Coal gave me an opportunity of having hands down experience in policy making, international bilateral relations, perspective and five year planning and above all inter ministerial and inter sectoral problems and allied issues. During my post retirement period I worked the World Bank, US DOE / USAID India, GTZ / GIZ, Ministry of Programme Implementation, Expenditure Reforms Commission etc. This gave me a wide and varied experience which has kept me active in the Energy Sector. This also helped me in establishing of CPSI through which I have been spearheading the cause and the concept of coal washing in India. Coal washing has been a passion for me. I am of the firm belief that the Indian coal industry can become internationally competitive only if it is able to adhere to integrity of ‘coal production and supply’ chain by adherence to quantity, quality and timely delivery of supplies to all its customers.

2.       How would you rate the recently issued Coal mines (special provisions) ordinance recently issued?

Since this Ordinance was issued with to ‘comply’ with the order of the Supreme Court, one has really nothing to comment further. However, in my humble view the government could have chosen some other route without putting the running mines / end users into a situation of uncertainty especially when the economy is already very coal hungry.

3.       Do you think there are enough checks and balances to ensure that a large portion of coal reserves are not consolidated with a few owners?

If the new Rules which the government is reported to be working on, ensure that only companies having end use plants, running / under construction or in planning stage will qualify for bidding this can be avoided.

4. The ordinance does not provide any preference to the previous allocatee’s of coal blocks (ROFR), some of whom have invested substantial resources in development of these blocks, possibly to maximize the revenue govt. can generate from the auction process. Do you feel such steps would give confidence to foreign investors to invest in the mining sector in India?

I think we should wait and watch till the new Rules are in place and the auction process takes off. I am given to understand that the government companies are likely to get such an option. As yet it is not known as to how the private and government-private JV owned operating captive mines and the end-use plants would be treated.

5.       Do you feel that post allocation and auction of coal blocks, the supply of coal will improve?

Not immediately. It can happen after about two years. This the minimum time required for any new mine to start production of coal. This, however, is subject to how fast the  statutory clearances and lands for the projects are available?

6.       The ordinance has an enabling provision to sell coal but it does not explain how profiteering etc can be controlled?

No one, not even the government starts any business unless it makes profit. Once the Regulator is in place, it is his job to check any unreasonable profiteering.

7.       India does not have a mineral valuation code. How can we ensure that the valuation of coal asset or base price fixation is not overvalued or undervalued?

We have been going by ISP (Indian Standard Procedure for coal reserve estimation, 1956) so far exploration norms are concerned. Since we hardly export any major mineral other than Iron Ore, not having any such code is not proving to be a handicap. Till date most coal resources have been owned and operated by the government controlled entities. Need of such a code was not felt so far. As we are gradually moving towards market driven business environment, I think mineral valuation code will also get developed.

8.       How would the state govt’s and PSU’s which are allocated coal blocks manage the development of their coal blocks? Would there be a larger role for PPP’s or MDO’s in years to come?

Surely, because most companies who have been operating captive coal mines were doing so through some form of contract or MDO approach. Even Coal India Ltd is using contractors and MDOs. As we go along, MDO model should get further refined and PP must come fast. This gives a shared responsibility to both the partners.

9.       It appears there would be demand for MDO’s in development of the coal blocks ..an MDO’s top priority is to maximize its revenue.. and are known to cut corners in their operations which affects safety of men, equipment, environment and impacts stake holders. How can we effectively regulate the operations of an MDO?

Let us not forget an MDO brings his own fleet of mining machinery which depending upon the size of contact cost him crores of rupees It cannot  market competition until and unless it gets a fair return on the investment. In effective sense an MDO is also a mining company. It cannot afford to risk its reputation and business, unless it is a ‘fly by night’ MDO sort..

10.   There is an urgent need to incentivize exploration and delineation of additional coal resources. However, the bureaucratic frame work does not allow for this. In your opinion, what can be done to unshackle these processes and put in place a fast track exploration programme.

I agree that there should be adequate number of coal concessions / block available for putting on auction. This requires an accelerated pace of detailed geological exploration. This is very weak area today. For this I do not blame bureaucratic fame work. It is mind set of our geologists who have failed to move ahead with time. They still think that drilling is the only answer. As a result Coal India is spending huge sums and targets of exploration are fixed on ‘meterage’ drilled and not on ‘acreage’ explored and geological documentation accomplished. The geologists particularly those employed in Coal India Ltd are averse to or shy of application of modern geophysical techniques through which drilling meterage can be substantially cut down with better and more accurate knowledge of sub surface geology and in less amount of time and with significant reduction in costs.