KOLKATA (miningweekly.com) - Passing strictures on mining major Coal India Limited (CIL), the Indian government directed the miner to identify and explain reasons for poor production from underground mines and submit a detailed action plan for its rectification.

According to an official in the Coal Ministry, the government had sought details from CIL on the major reasons for the low production, even though the largest proportion of the company’s manpower was deployed in these mines, as well as for delays in implementing several schemes and plans for incorporating improved technology and investments.

The Ministry pointed out that the miner was able to achieve a production of only 37-million tonnes from its 237 underground mines, in its total coal production of 562-million tonnes from 429 mines during 2013/14 and that total production from underground mines had remained stagnant for several years.

The government has sought a detailed analysis of production from underground mines for the last ten years, along with corresponding manpower deployment in each of the mines, the official said.

The Ministry wanted CIL to prepare a time-bound action plan for each of its mining subsidiaries for induction of the latest technology and investment plans for each underground mine. This could this lead to increasing production in the shortest gestation period, but also the necessary mandatory forest and environment clearance process would be dealt with faster, as underground mining entailed minimum environmental degradation, the official added.

Despite the government’s push for CIL to step up production, the miner faced inherent disadvantages that had not yet been addressed by the government.

Last year, CIL conveyed to the government that it would go slow on developing new underground mines unless the government permitted it to charge a higher price for coal produced from these mines.

Justifying a higher price for coal from underground mines, the miner in a briefing to the Ministry said that the cost of production from existing underground mines had gone up by an average of $16/t over the past year and production at the same time was falling at rate of one-million tonnes a year.

The communication said that cost of production from underground mines was around $54/t and to ensure a minimum 12% rate of return, the government would have to allow CIL to have a differential pricing for coal from underground and opencast mines.

CIL, along with Singareni Collieries Company Limited, had last year also sought a differential rate of royalty payments for underground and opencast mines along with a ‘tax holiday’ provision as incentives to invest in underground mines, but a government response was still awaited, a CIL official said.

However, the Ministry official said that manpower deployment cost structures had been sought for this very reason - to identify higher cost of production, as lack of investment on technology and consequent high manpower deployment were feared to be the prime cause for higher cost of production.