MDO Concept An answer to Indian captive coal mining

Tapas DasSupdt. Engineer

Department of Mining and BeneficiationM. N. DASTUR & COMPANY (P) LTD, Consulting Engineers, KOLKATA

01/02/2015

PrefaceIn the year 1992, Ministry of Coal build a screening committee constitute of government officials from the Ministry of Coal, the Ministry of Railways and the relevant state government to allocate a number of coal blocks on nomination basis, which were not in the production plan of CIL and SCCL, to equilibrate rising demand for coal in power and iron & steel sector.

From 1993 to 2011, 216 coal blocks were allocated, in which more than half of the coal blocks were allocated in between 2005 to 2009, when government was preparing for more transparent and improved allocation process.

In 2012, Central Vigilance Commission directed the Central Bureau of Investigation to investigate the influence of corruption in the process of coal block allocation which is known as Coal allocation scam or “COALGATE”.

In March 2014, the Controller and Auditor General of India (CAG) office reported that the Government of India allocated coal blocks in an inefficient manner, which resulted "windfall gain" to the coal block allottees. The Parliamentary Standing Committee also reported that all coal blocks distributed between 1993 and 2008 were done in an unauthorized manner and allotment of all mines in this period should be cancelled.

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e-auction of coal blocks, 2015The Supreme Court of India through its judgment dated August 25, 2014 read with its order dated September 24, 2014 had cancelled allotment of 204 captive coal blocks. Subsequent to the Supreme Court Judgment, The Coal Mines (Special Provisions) Ordinance, 2014 (published on October 21, 2014), was promulgated and rules were framed by Government of India for auction and allotment of all blocks which suffered cancellation.

Pursuant to Section 6 of the ordinance, the Central Government appointed MSTC Limited through Ministry of Coal, to organise a series of auctions for allocation of captive coal blocks using its e-commerce website.

On December 24, 2014, MSTC announced that the e-auction of 24 coal mines of Schedule-II of the ordinance will take place between February 14 to February 22, 2015. Subsequently MSTC will conduct next e-auction of 23 coal mines from Schedule III of the ordinance in between February 25 to March 05, 2015.

MSTC will also conduct the process of allotment of coal blocks to government companies on nomination basis according to the ordinance in between January 22 to March 27, 2015.

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Captive coal blocks for allocation

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SCHEDULE –

II (Mainly Brownfield)

Sl. No. Name Prior Allottee State005 Namchik Namphuk Arunachal Pradesh Mineral Dev. & Trading Corporation Arunachal Pradesh026 Gare-Palma IV/4 Jayaswal Neco Ltd. Chhattisgarh028 Gare-Palma IV/2 Jindal Power Ltd. (Now Jindal Steel & Power Ltd.) Chhattisgarh029 Gare-Palma IV/3 Jindal Power Ltd. (Now Jindal Steel & Power Ltd.) Chhattisgarh030 Gare-Palma-IV/1 Jindal Strips Limited (Now Jindal Steel & Power Ltd.) Chhattisgarh037 Gare-Palma-IV/5 Monet Ispat Ltd. Chhattisgarh040 Chotia Prakash Industries Ltd. Chhattisgarh041 Gare-Palma-IV/7 Raipur Alloys & Steel Ltd. (Now Sarda Energy & Mineral Limited) Chhattisgarh060 Parbatpur-Central Electrosteel Castings Ltd. Jharkhand064 Tokisud North GVK Power (Govindwal Sahib) Ltd. Jharkhand103 Kathautia Usha Martin Ltd. Jharkhand107 Gotitoria (East) BLA Industries Ltd. Madhya Pradesh108 Gotitoria (West) BLA Industries Ltd. Madhya Pradesh110 Mandla North Jaipraskash Associates Ltd. Madhya Pradesh114 Amelia (North) Madhya Pradesh State Mining Corporation Madhya Pradesh119 Bicharpur Madhya Pradesh State Mining Corporation Ltd.(MPSMC) Madhya Pradesh124 Sial Ghoghri Prism Cement Limited Madhya Pradesh151 Marki Mangli-II Shree Veerangana Steels Maharashtra152 Marki Mangli-III Shree Veerangana Steels Maharashtra154 Belgaon Sunflag Iron & Steel Co. Ltd. Maharashtra162 Talabira-I Hindalco Industries Ltd. Orissa191 Sarisatolli Calcutta Electricity Supply Corporation Ltd. West Bengal192 Ardhagram Sova Ispat Limited, Jai Balaji Sponge Ltd. West Bengal200 Trans Damodar West Bengal Mineral Dev. & Trading Corp. Ltd. West Bengal

Captive coal blocks for allocation

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SCHEDULE – III

(Mainly Greenfield)

Sl. No. Name Prior Allottee State008 Durgapur-II/Taraimar Bharat Alluminium Company Ltd. Chhattisgarh010 Tara Chhattisgarh Mineral Development Corporation Ltd. Chhattisgarh018 Durgapur-II /Sarya DB Power Ltd. Chhattisgarh027 Gare-Palma IV/8 Jayaswal Neco Ltd. Chhattisgarh048 Brinda Abhijeet Infrastructure Pvt. Ltd. Jharkhand049 Sasai Abhijeet Infrastructure Pvt. Ltd. Jharkhand050 Meral Abhijeet Infrastructure Pvt. Ltd. Jharkhand066 Moitra Jayaswal Neco Ltd. Jharkhand077 Jitpur Jindal Steel & Power Ltd. Jharkhand080 Rohne JSW Steel Ltd., Bhushan Power & Steel Ltd., Jai Balaji Industries Ltd. Jharkhand083 Dumri Nilachal Iron & Power Ltd., Bajrang Ispat Pvt. Ltd. Jharkhand096 Ganeshpur Tata Steel Ltd., Adhunik Thermal Energy Jharkhand102 Lohari Usha Martin Ltd. Jharkhand115 Mandla South Madhya Pradesh State Mining Corporation Ltd. Madhya Pradesh116 Dongeri Tal-II Madhya Pradesh State Mining Corporation Ltd. Madhya Pradesh137 Kosar Dongergaon Chaman Metaliks Ltd. Maharashtra141 Nerad Malegaon Gupta Metallics & Power Ltd.,Gupta Coalfields & Washeries Ltd. Maharashtra153 Marki Mangli-IV Shree Veerangana Steels Maharashtra152 Marki Mangli-III Shree Veerangana Steels Maharashtra158 Jamkhani Bhushan Ltd. Orissa164 Utkal B 1 Jindal Steel & Power Ltd. Orissa168 Utkal B 2 Monet Ispat Ltd. Orissa169 Mandakini Monet Ispat Energy Ltd., Jindal Photo Ltd.,Tata Power Company Ltd. Orissa183 Utkal C Utkal Coal Ltd. (formerly ICCL) Orissa

ECL

SCCL

NLC

BCCLCCLNCL

NEC

MCL

SECL

WCL

RSMML

GMDC

Lignite CoalCoking & Non-cocking Coal

ABC Coal Mining Company/Subsidiary

Government of India

Mine Developer and Operator (MDO)Exploration / Geological /

Surveying Service Mine Operator Logistic Service

Captive CoalUsing Industry

Power / Non Power

Coal India LimitedMinistry of Coal

By vesting power of supreme court Ministry of Coal has appointed MSTC Ltd. For organising e-auction of coal mines listed in The Coal Mines (Special Provision) Ordinance, 2014

OWNERS’ ENGINEER

Captive Coal Mine Allottee

Capti

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Indu

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Tech

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Com

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Coal

Min

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Roya

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Excess Coal

Prod

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Coa

lMDO

conc

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Scope of OWNERS’ ENGINEER Technical Due diligence and revalidation of earlier studies. Pre-feasibility and feasibility study. Detail project report. Financial analysis, cash flow forecast and cost management. Supervision of exploration & assessment of reserve. Mine-pit geotechnical services. Assessment of technical parameters to finalise mine size & technology selection. Pit optimization and mine design. Design and preparation of all engineering documents, drawings and schemes for supporting infrastructures, mine workings, material handling system, transportation routes and washing plant as required by owner, statuary and legislative organisations. Selection and sizing of major and auxiliary mining equipments. Procurement assistance Services as required by the client e.g. assess and verify specifications, enquiries, tenders, expediting and inspection. Long term and short term planning.

Fill gaps between resource and expertise 7

Scope of OWNERS’ ENGINEER Preparation of request for qualification and request for proposal for MDO selection. Tender evaluation services as required by the client e.g. assess, verify, enquiries, tenders, expediting and finalisation. Project management & site management services. Monitoring and supervision of construction, commissioning and operation, including HS&E issues, quality control and training of MDO personnel to ensure compliance with the conditions of contract, specifications and drawings. Design, assess and quality control of mine safety system. Environmental audit to prepare EIA and EMP. Submitting regular progress reports to the owner covering all aspects. Assisting owner in mine closure and document/records archiving.

Mercenary in technology provider to quality control 8

Scope of MDO Assisting Block allottee in

Physical Possession of Land.Relocation & Rehabilitation (R&R) of Project Affected Persons/Families (PAP).Training and engagement of PAP.Legislative liaison .

Procurement, installation / Construction and maintenance of Infrastructures. Procurement and Maintenance of Mining equipments. Construction and maintenance of in-mine haul / transportation roads. Complete operational planning and execution through systematic mining plan. Removal, transportation and disposal of Overburden. Procurement, Installation and Maintenance of Coal Handling & Washing Plant. Development & maintenance of transportation routes to Stockyard/Siding/End-use plant. Implementation of quality control and HS&E management activities. Land Reclamation, EMP and Mine Closure.

Operational Risks & Responsibilities will be borne by MDO 9

Probable List of MDOEssel Mininghttp://www.esselmining.com

Adani Mininghttp://www.adanimining.com

JMS Mining Services Pvt. Ltd. http://www.jmssimplex.com

Ambey Mining Pvt. Ltd.http://www.amplgroup.in

Indian Mining Consultancy Pvt. Ltd.http://www.indianmining.in

Integrated Coal Mining Pvt. Ltd.http://icmlindia.com

Maheshwari Mining Pvt. Ltd.http://maheshwaree.com

GVK Industries Ltd.http://www.gvk.com

Saumya Mining Ltdhttp://www.saumyamining.com

Mineral Exploration Corp. ltd.http://www.mecl.gov.in

Thiesshttp://www.thiess.in

Leightonhttp://www.leighton.co.in

India Resources Limitedhttp://www.indiaresources.com.au

Minamento Mining Pvt Ltdhttp://www.minamento.com

Virginia Mining Resourceshttp://www.virginiamr.com

Hargreaves Mining Indiahttp://www.hsgplc.co.uk

Montecarlo Limitedhttp://www.mclindia.com

NCC Ltd.http://ncclimited.com

ITCOLhttp://indiantechnomac.com

AMR India Limitedhttp://www.amrgroup.in

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S

O T

WStrength Huge demand of coal in

domestic market of India. Captive use of coal face no

direct competition from market.

Public Private Partnership (PPP) model will increase cash flow.

Distribution of CAPEX will enable big projects without big players.

Opportunity This model will attract more

Foreign Direct Investment (FDI).

This model will encourage advance technology transfer through expert channel.

Direct 30 years tenure for the allotted coal blocks, which can be extended another 20 years.

Most of the allotted coal blocks have difficult geology, which supports mineral conservation.

Weakness Lack of sufficient information

for the allotted coal blocks. Most of the allotted coal blocks

have difficult geology, which will affect mining efficiency.

Bureaucratic delays in governmental approvals.

Poor Relocation & Rehabilitation (R&R) and Corporate Social Responsibility (CSR).

Threat No prior experience of MDO

model in Indian coal mining sector.

Political swing can effect smooth build up of the model in earlier stage.

Improper allocation of risk and rewards in the MDO model can jeopardize the scenario.

Import of better and cheaper coal.

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THANK YOU