Coal India plans to become a full-fledged mining company

18 September 2017

Coal India Ltd (CIL) is looking to diversify from its core business of coal extraction and become a full-fledged mining company in a bid to mitigate the growing pressure from renewable energy.

The state-controlled enterprise has the competence to expand into mining of various natural resources such as iron ore, bauxite, copper and nickel, said S.N. Prasad, CIL’s director (marketing).

“Mining is our strength,” said Gopal Singh, interim chairman and managing director. “Because of the expertise in mining, CIL will be very successful in whatever mining venture it undertakes.”

This is a striking shift in strategy from pursuing growth in coal extraction. Previously, CIL was given a target of scaling up coal production to 1 billion tonne by 2020, but in an unprecedented move, the Union government cut its production target for the current year from 660 million tonnes to 600 million tonnes in view of tepid demand.

The spadework for diversification has already started, and officials at the Kolkata-based company said some copper and nickel mines in Africa have been identified, but it has not been decided yet how CIL may invest in them. The company is likely to have different verticals for different resources, these officials said, asking not to be named.

“In the light of pressure from renewable energy, it is a step in the right direction,” said Partha S. Bhattacharyya, former chairman of CIL.

Mining industry leaders such as BHP Billiton Plc or the Rio Tinto Group leverage their expertise to extract a wide variety of resources from across the world, he added. However, CIL should start this diversification within India, and ideally with iron ore mining, according to Bhattacharyya.

To begin with, the Union government should consider handing control of Orissa Minerals Development Co. Ltd (OMDC) to Mahanadi Coalfields Ltd, according to Bhattacharyya. Vizag-based Rashtriya Ispat Nigam Ltd was given control of OMDC in 2011, but the state-owned steelmaker could not restart mining at OMDC’s mines in Odisha.

“If Mahanadi Coalfields gets control, it can transform OMDC in a year because of the clout it enjoys with the Odisha government,” said Bhattacharyya, who had briefly served as an independent director on the board of OMDC. Its mines are used to produce high quality iron ore with 68% ferrous content, but they are currently not operational for want of regulatory clearances.

CIL has mandated KPMG to prepare a vision document for 2030, Singh said, adding that even as the company diversifies, coal mining will remain its core focus.

Pressure from renewable energy is only going to increase, and very soon, there may not be any growth in demand for coal, according to Bhattacharyya.

Source-livemint