Strategies for Enhancing Coal Production: Insights and Recommendations
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K.B. Trehan – Director, Mining & Metals, IISD / INR
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Expand the reserve and resource base
2.
Focus on enhancing productivity
3.
Speed up clearances
4.
Equipment approvals
5.
Essentials for high capacity mining
6.
International best practices in contract management
7.
Avoid regulatory overkill
8.
Summary
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▪
India is amongst the lowest spenders on
mineral exploration in the major
economies of the world.
▪
The total exploration (regional,
promotional and detailed) drilling per
annum in coal and lignite is around 2.5
lakh meters per annum with a spend of
about Rs. 250 Cr. as against US$ 600
million in Australia
▪
The total quantum of drilling is to be
increased to 20 lakh meters per annum
with an outlay of around Rs.1500 Cr. - To
be outsourced in a big way and relevant
approvals to be expedited.
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▪
Indian Coal mines have a
long way to go in terms of
productivity.
▪
The largest underground coal
mine produces around
1MTPA whereas in USA,
Russia, China, Australia and
South Africa, it is 10 MTPA.
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Contd.
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▪
OC is a success story in India. Thanks to the vision of the mining
industry leadership –
Some of the Outsourced Opencast OBR contractors have Australian
level of equipment availability, utilization and productivity.
In UG Mines, Joy and Bucyrus operated CMs have set some
productivity records.
▪
To replicate these success stories…
Contd.
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▪
Invest in “TECHNOLOGY, PEOPLE
& SYSTEMS” –
Three pillars of
productivity.
▪
Invest in
“Training”
– Shortage of
skilled manpower or political
difficulty of hiring right manpower.
▪
Investing in high cost of equipment
is worth only
if they are going to be
productive.
▪
Training
people
in advanced
equipment and methods of working
is a must.
▪
Focus on
“Mining as a System”
instead of each piece to be
understood at all levels.
▪
Coal companies should look at
“lifecycle cost of equipment and
cost per ton”
instead of the
cost
of initial acquisition.
▪
Provide
“funding for equipment”
(like some CIL collieries), as
banks do not have expertise in
lending to underground
equipment.
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The present clearances: mine lease, mine plan, environmental approval,
forest clearance take between 5 to 8 years; target it to reduce it to 2
years.
▪
EMP should take a maximum of 210 days but it takes 540 to 720 days.
▪
FC to be targeted in 150 days instead of 3 to 5 years.
▪
Banks have instructions not to lend to projects without completing land
acquisition, R&R (100%), forest clearance and environmental clearance -
So??
Contd.
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Can we look at legally binding time limits?
▪
Put up for bidding only those projects with complete clearances:
Land is acquired fully, R&R is completed, EC and FC are in place;
The bids will then be reasonable or else speculator bidders would win and
projects will not take off.
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▪
DGMS and Coal Mining Companies in India
are credited with good safety record and
they are to be complimented.
▪
Concept and Awareness of “Zero
Dangerous Occurrence“ to be introduced
and reviewed for complete safety.
▪
The procedures are based on Coal Mines
Regulations of 1957 and Indian Electricity
Rules of 1956.
▪
There is a shortage of testing laboratories in
India. For roof supports, there are no labs,
leading to testing outside India thus,
resulting in delays.
Contd.
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▪
Once approved and tested in an internationally recognized laboratory
duly following internationally accepted testing processes, no further
testing in India may be insisted.
▪
Systematic Support Rules, which specify the support pattern in
underground mines, need to be revised continuously due to advances in
technology, equipment and understanding of the roof strata.
▪
In the absence of above changes, the equipment market would be
cornered only by a few established players, thus, stifling innovation and
customer choice leading to higher prices and slower pace of technology
absorption.
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▪
Identify high capacity – 20 to 50
MTPA opencast mines:
Deploy high capacity HEMM
suiting mine specific conditions;
Maintenance and repair
contracts
Outsource development work
and other services
Spares from OEM with
performance guarantee,
strategic warehouse locations –
Minimize inventory carrying
costs.
▪
In Underground Mines - 5 MTPA
longwalls and 1 MTPA per CM
board and pillar projects have to be
identified.
Focus on faster mine development
using Roadheaders, Bolter miners
and achieve a progress rate of 3
meters per operating hour.
Outsource development work.
Invest in Longwall mines –ploughs
for thin seams and top coal caving
for thick seams, for improving
production, productivity and safety.
Adopt global best practices in
mining technology and
management.
Contd.
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Unless a critical market is created, no reputable OEM would invest in
India to produce the equipment – all major OEMs have factories in
China.
▪
In India too, all the Auto majors have manufacturing facilities – simple
reason being scale of the market.
Application of Auger / Highwall mining technology
Phase out manual mining
Track daily productivity and costs
Contd.
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Cost Management
Daily reporting of productivity and costs
Electronic shift planning capability through shift data collection
Provide data validation and upload at the end of each shift
Web portal reporting
Contd.
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Improving Efficiencies
Plan for the long term
Mine planning
Production scheduling
Safety
Wash Plants yields
Equipment selection
Appropriate infrastructure
PLANNING, PLANNING & MORE PLANNING -- Always consider the
WHOLE production chain
Contd.
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Integrate Systems & Technology
Technology is often ignored, not understood, under utilized, poorly
implemented and managed
New technologies MEAN CHANGE & MUST BE MANAGED
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Risk sharing between the employer and the contractor is not equitable:
LA, R&R, EC, FC need to be with the owner.
▪
Long term contracts do not have price variation clauses; and in contracts
with price variation clause, the formula weightages do not reflect the cost
components effectively.
▪
In composite EPC and Operations contracts, the liabilities of EPC phase
do not end till the operation phase is concluded – No major OEM is
willing to accept this.
▪
The acceptance criterion for performance tests are not clearly defined.
▪
Engineer’s role under the contract is that of a “referee” and not just
“owner’s representative” – this aspect is completely ignored.
Contd.
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Prepare model contract documents as done by NHAI.
▪
Model documents are prepared by Secretariat for infrastructure in the
Planning Commission and approved by the Cabinet Committee on
Infrastructure headed by the Prime Minister for Airports, Roads, Highways,
Power, Telecom and Railways.
▪
The same Secretariat could prepare and approve the model documents for
the coal / mineral sector also.
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▪
Legislators across the world are competing with each other leading to
regulatory overkill
Australia: Resource super profit tax, Strict Carbon Control laws
USA : Closing down of coal based power plants which do not
meet the strict carbon emission norms
Indonesia: Royalty based on index price fixed by the Government
India: 26% profit sharing for coal and lignite companies
▪
Investors do not worry about regulations but they are looking for fair,
consistent and predictable application of regulations.
▪
Having an independent regulator who has the authority to regulate coal
prices is imperative.
18
8
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T
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f
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m
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g
t
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I
n
d
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a
n
c
o
a
l
s
e
c
t
o
r
S
u
m
m
a
r
y
1.
Expand the resource base by increasing the spend on EXPLORATION.
2.
Invest in “PEOPLE, Technology & Systems.”
3.
Focus on PRODUCTIVITY enhancement through TECHNOLOGY &
TRAINING.
4.
Speed up forest and environment CLEARANCES.
5.
Streamline equipment approvals by DGMS.
6.
Identify high impact OC and UG projects and bring them to production
in a well defined TIME frame with TRAINED skilled manpower, tracking
operations SHIFTWISE, Cost Management & integration of Systems &
Technology.
7.
Use international BEST practices in contract management.
8.
Avoid regulatory overkill.
9.
Lets be “VALUE CONSCIOUS” and not “Cost Conscious.”
19
Enhancing coal production requires a multi-faceted approach including expanding reserves, focusing on productivity, expediting clearances, ensuring equipment approvals, implementing high-capacity mining essentials, adopting international best practices, avoiding regulatory overkill, and investing in technology, people, and systems to improve overall efficiency and output in the sector.
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Essentials for Enhancing Coal Production K.B. Trehan Director, Mining & Metals, IISD / INR
Agenda 1. Expand the reserve and resource base 2. Focus on enhancing productivity 3. Speed up clearances 4. Equipment approvals 5. Essentials for high capacity mining 6. International best practices in contract management 7. Avoid regulatory overkill 8. Summary 2
1. Expand the reserve and resource base India is amongst the lowest spenders on mineral exploration in the major economies of the world. $ per Sq. Km The total exploration (regional, promotional and detailed) drilling per annum in coal and lignite is around 2.5 lakh meters per annum with a spend of about Rs. 250 Cr. as against US$ 600 million in Australia India Australia Canada The total quantum of drilling is to be increased to 20 lakh meters per annum with an outlay of around Rs.1500 Cr. - To be outsourced in a big way and relevant approvals to be expedited. 0 50 100 150 3
2. Focus on enhancing productivity Indian Coal mines have a long way to go in terms of productivity. Type of Mine CIL OMS (Metric Tons) USA (Metric Tons) Opencast 10.73 68.20 Underground 0.84 20.88 Overall 4.92 39.60 The largest underground coal mine produces around 1MTPA whereas in USA, Russia, China, Australia and South Africa, it is 10 MTPA. Activity India US, Australia, South Africa, Poland Shaft sinking: 400 mts 36 months 12 to 18 months Incline Drivage: 1000 mts 18 to 24 months 12 to 15 months Roadway Development 3 to 8 mts per day 3 mts per operating hour Lack of investment in technology is the principal reason. Contd. 4
2. Focus on enhancing productivity OC is a success story in India. Thanks to the vision of the mining industry leadership Some of the Outsourced Opencast OBR contractors have Australian level of equipment availability, utilization and productivity. In UG Mines, Joy and Bucyrus operated CMs have set some productivity records. To replicate these success stories Contd. 5
2. Focus on enhancing productivity Focus on Mining as a System instead of each piece to be understood at all levels. Invest in TECHNOLOGY, PEOPLE & SYSTEMS Three pillars of productivity. Invest in Training Shortage of skilled manpower or political difficulty of hiring right manpower. Coal companies should look at lifecycle cost of equipment and cost per ton instead of the cost of initial acquisition. Investing in high cost of equipment is worth only if they are going to be productive. Provide funding for equipment (like some CIL collieries), as banks do not have expertise in lending to underground equipment. Training people in advanced equipment and methods of working is a must. 6
3. Speed up clearances The present clearances: mine lease, mine plan, environmental approval, forest clearance take between 5 to 8 years; target it to reduce it to 2 years. EMP should take a maximum of 210 days but it takes 540 to 720 days. FC to be targeted in 150 days instead of 3 to 5 years. Banks have instructions not to lend to projects without completing land acquisition, R&R (100%), forest clearance and environmental clearance - So?? Contd. 7
3. Speed up clearances The way forward Can we look at legally binding time limits? Technical opinion 5 months Opinion on forest land 5 months Revenue opinion 5 months Recommendation by State 4 months Approval by the Ministry 3 months Put up for bidding only those projects with complete clearances: Land is acquired fully, R&R is completed, EC and FC are in place; The bids will then be reasonable or else speculator bidders would win and projects will not take off. 8
4. Streamline approvals by DGMS DGMS and Coal Mining Companies in India are credited with good safety record and they are to be complimented. No. of fatalities per million tons of coal Concept and Awareness of Zero Dangerous Occurrence to be introduced and reviewed for complete safety. India South Africa The procedures are based on Coal Mines Regulations of 1957 and Indian Electricity Rules of 1956. USA China 0 1 2 3 4 There is a shortage of testing laboratories in India. For roof supports, there are no labs, leading to testing outside India thus, resulting in delays. Contd. 9
4. Streamline approvals by DGMS The way forward Once approved and tested in an internationally recognized laboratory duly following internationally accepted testing processes, no further testing in India may be insisted. Systematic Support Rules, which specify the support pattern in underground mines, need to be revised continuously due to advances in technology, equipment and understanding of the roof strata. In the absence of above changes, the equipment market would be cornered only by a few established players, thus, stifling innovation and customer choice leading to higher prices and slower pace of technology absorption. 10
5. High Capacity Mining Opencast & Underground In Underground Mines - 5 MTPA longwalls and 1 MTPA per CM board and pillar projects have to be identified. Identify high capacity 20 to 50 MTPA opencast mines: Deploy high capacity HEMM suiting mine specific conditions; Focus on faster mine development using Roadheaders, Bolter miners and achieve a progress rate of 3 meters per operating hour. Maintenance and repair contracts Outsource development work and other services Outsource development work. Invest in Longwall mines ploughs for thin seams and top coal caving for thick seams, for improving production, productivity and safety. Spares from OEM with performance guarantee, strategic warehouse locations Minimize inventory carrying costs. Adopt global best practices in mining technology and management. Contd. 11
5. High Capacity Mining Opencast & Underground Unless a critical market is created, no reputable OEM would invest in India to produce the equipment all major OEMs have factories in China. In India too, all the Auto majors have manufacturing facilities simple reason being scale of the market. Application of Auger / Highwall mining technology Phase out manual mining Track daily productivity and costs Contd. 12
5. High Capacity Mining Opencast & Underground Cost Management Daily reporting of productivity and costs Electronic shift planning capability through shift data collection Provide data validation and upload at the end of each shift Web portal reporting Contd. 13
5. High Capacity Mining Opencast & Underground Improving Efficiencies Plan for the long term Mine planning Production scheduling Safety Wash Plants yields Equipment selection Appropriate infrastructure PLANNING, PLANNING & MORE PLANNING -- Always consider the WHOLE production chain Contd. 14
5. High Capacity Mining Opencast & Underground Integrate Systems & Technology Technology is often ignored, not understood, under utilized, poorly implemented and managed New technologies MEAN CHANGE & MUST BE MANAGED 15
6. International best practices in Contract Management Issues Risk sharing between the employer and the contractor is not equitable: LA, R&R, EC, FC need to be with the owner. Long term contracts do not have price variation clauses; and in contracts with price variation clause, the formula weightages do not reflect the cost components effectively. In composite EPC and Operations contracts, the liabilities of EPC phase do not end till the operation phase is concluded No major OEM is willing to accept this. The acceptance criterion for performance tests are not clearly defined. Engineer s role under the contract is that of a referee and not just owner s representative this aspect is completely ignored. Contd. 16
6. International best practices in Contract Management Prepare model contract documents as done by NHAI. Model documents are prepared by Secretariat for infrastructure in the Planning Commission and approved by the Cabinet Committee on Infrastructure headed by the Prime Minister for Airports, Roads, Highways, Power, Telecom and Railways. The same Secretariat could prepare and approve the model documents for the coal / mineral sector also. 17
7. Avoid regulatory overkill Legislators across the world are competing with each other leading to regulatory overkill Australia: Resource super profit tax, Strict Carbon Control laws USA : Closing down of coal based power plants which do not meet the strict carbon emission norms Indonesia: Royalty based on index price fixed by the Government India: 26% profit sharing for coal and lignite companies Investors do not worry about regulations but they are looking for fair, consistent and predictable application of regulations. Having an independent regulator who has the authority to regulate coal prices is imperative. 18
8. Transforming the Indian coal sector Summary 1. Expand the resource base by increasing the spend on EXPLORATION. 2. Invest in PEOPLE, Technology & Systems. 3. Focus on PRODUCTIVITY enhancement through TECHNOLOGY & TRAINING. 4. Speed up forest and environment CLEARANCES. 5. Streamline equipment approvals by DGMS. 6. Identify high impact OC and UG projects and bring them to production in a well defined TIME frame with TRAINED skilled manpower, tracking operations SHIFTWISE, Cost Management & integration of Systems & Technology. 7. Use international BEST practices in contract management. 8. Avoid regulatory overkill. 9. Lets be VALUE CONSCIOUS and not Cost Conscious. 19
