Coal India undermined by basic equipment flaws – by Krishna N Das (Reuters India – July 25, 2014)

NEW DELHI – (Reuters) – As Prime Minister Narendra Modi’s government looks to shape up Coal India Ltd (COAL.NS) for a potential major restructuring, the world’s biggest coal miner still faces basic problems: it does not have enough mechanical shovels, dumpers and explosives.

The new government, which has a 90 percent stake in the company whose total market value is about $40 billion, is exploring a break up and opening up the sector to foreign investment to boost output and cut imports, sources have said.

But the firm, which accounts for more than 80 percent of India’s production and employs 350,000, has not met its output target for years, ensuring the country remains the world’s third-largest coal importer despite sitting on huge reserves.

A failure to boost efficiency could threaten long-run plans to spin off some of the seven units of the coal miner, a vital part of the government’s reform strategy. [ID:nL3N0O6458]

Two units produced less in the last fiscal year than a year ago, partly due to lack of basic equipment and ageing machinery, Power and Coal Minister Piyush Goyal told parliament this week.

The minister did not provide data but according to a top official at one Coal India unit this issue could be cutting Coal India’s annual output by more than 10 percent. The official declined to be identified due to its policy on talking to media.

Coal India spokesman Vijay Sagar said it was difficult to assess how much production was affected due to shortages of equipment or explosives. The latter is in short supply mainly due to a restriction on moving chemicals such as ammonium nitrate to prevent it from being misused by extremists.

Nonetheless, resolving equipment issues may be easier to address than other problems such as difficulties pushing through land acquisition, delays in getting environmental clearances and lack of transport facilities.

Coal India produced 462 million tonnes in the last fiscal year, against a target of 482 million.

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