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CIL shuts underground mining with Centre push to convert all mines profitable

Indronil Roychowdhury
Coal India Ltd, CIL, underground mines, Eastern Coalfields Ltd, low-cost operation, market news

The Centre s push to convert all Coal India Ltd (CIL) mines as profit-making mines has resulted in the closure of underground mines across subsidiaries since underground operations are not cost-effective.

The government has opted for low-cost operation to keep margins at ease and except for Eastern Coalfields Ltd (ECL), underground coal production has witnessed a negative growth in all other subsidiaries. ECL has registered positive growth in production from underground mines for the seventh consecutive year, Niladri Roy, general manager, ECL, said.

He said of the 50.16 MT of ECL s production, 20.5 MT came from two underground mines Jhajra and Rajmahal. A CIL official on the condition of anonymity said these were the two operational underground mines left and the rest had been closed down in the plea of converting every coal mine a cost plus mine.

ECL, known for producing maximum coal from underground mines and running the country s deepest underground mine Chinakuri, shut 11 underground mines in two years. It is likely to further close down the operational underground mines and enhance production from open cast mines. Coal was excavated from a depth of 625 metres at the Chinakuri mines and CIL adopted a technology in which coal could be mined at 1,700 metres and at a rock temperature of 57 degrees centigrade. But underground mining affects productivity as well as increases under recoveries and the company wouldn’t have been able to achieve 607 MT of production, had it continued to lift coal from underground mines.

Underground productivity is 1/1 percent-th per man-shift compared to the production from open cast mines. Under recoveries from underground production were Rs 13,000-14,000 crore, which used to be made up by the production from open cast mines. With the closure of underground mines under recoveries has come down to Rs 6,000 crore and the cost of production has drastically fallen from an average of about Rs 3,500 per tonne to Rs 1,600. Coal production from underground mines costs around Rs 6,000 per tonne, whereas it costs between Rs 1,500 and Rs 1,800 per tonne from open cast mines.

India was gradually turning to a high cost coal mining destination. But, with the closure of underground mines, nearly all the present 82 mining areas have turned to be cost plus mines, and under recoveries could be easily recovered even with subdued e-auction. But, 8% of the CIL s total mining staff of 2,98,066 were engaged in underground mining and it had become very difficult to deploy that workforce in open cast mines.

But, a section of CIL officials felt although the move enabled CIL to achieve higher growth rate, reduce under recoveries, cut cost of production, converted most of the operational mines as cost plus or profit-making mines and kept margins at ease despite subdued e-auction, this is not going to be sustainable since open cast reserves are fast depleting. Underground mines remain the future and India will have to look for high-cost technology to meet the challenges of the near future, Roy said.