chapter 4: profile of eastern coalfields limited -...

Profile of Eastern Coalfields Limited

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CHAPTER 4

PROFILE OF EASTERN COALFIELDS LIMITED

Introduction

In the previous chapter, entitled “A Brief History of Coal Mining and Coal Deposits in

India”, we have provided a fascinating description of the historical background of coal

industry in India, nationalization of coalmines and formation of CIL and its subsidiaries

including Eastern Coalfields Limited. The present Chapter particularly portrays in detail

the historical background and the profile of Eastern Coalfields Limited which is the main

focus of our study. In this connection we have made an attempt to discuss briefly different

revival plans adopted by the company from time to time for its improvement and also

highlight the prospect of turnaround of Eastern Coalfields Limited in near future.

4.1 Origin of Eastern Coalfields Limited (ECL)

Eastern Coalfields Limited (ECL) owes its origin to “Raniganj Coalfields” which is the

birth place of coal mining in the Country. In 1774, first mining operation in the Country

was started in Raniganj Coalfields by Sumner & Heatly, a British mining firm at the

instance of Warren Hestings to procure coal mainly for the manufacture of arms and

ammunition. In 1820, first Coal Company, M/s. Alexander & Company was established

in India. In 1835, first Indian enterprise, M/s. Carr & Tagore Company was formed when

Raniganj coalfields passed into the hands of Prince Dwarakanath Tagore, the grandfather

of Nobel Laureate Poet Rabindranath Tagore. In 1843, the first joint stock Coal

Company, M/s. Bengal Coal Company, was formed after amalgamating M/s. Carr &

Tagore Company and another coal company, M/S Gilmore Homfray & Co. then in

existence. Since then, underground coal mining operation had been continuing in

Raniganj Coalfields by numerous small owners. Raniganj Coalfields remained the

principal producer of coal in India in the 19th Century and for a considerable period of

the 20th Century. 1

In our earlier chapter we have already discussed how Eastern Division of earlier Coal

Mines Authority Limited (CMAL) was converted into Eastern Coalfields Limited (ECL)

and was incorporated on November 1, 1975 as a wholly owned subsidiary of CIL under

Companies Act, 1956. 2 ECL took over 414 mines, 314 in West Bengal, including all the

private sector coal mines of Raniganj Coalfields and 100 in Jharkhand (then Bihar),

which were then under Eastern Division of CMAL, and regrouped into 123 mines i.e. 84


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in W.B. and 39 in Jharkhand. The company commenced its commercial operation from

that date. At the time of nationalization, only around 214 out of the 414 mines taken over

were working. Most of the mines, with small base hold, had shafts fitted with old stream

winders having limited capacity and there was hardly any mechanized open cast mines in

ECL. Instantly after nationalization, all these small mines were reconstituted to boost

production through: a) Restructuring of existing mines having potential, b) Development

of new mines, and c) Infrastructure development.

Eastern Coalfields Limited operates in the States of West Bengal and Jharkhand. The

strength of ECL lies in its inventory of premium grade coal at Raniganj Coalfield. The

Company is producing around 30 MT of coal annually and catering primarily to the needs

of power sector. ECL for the last three decades has been fuelling economic growth of

India meeting requirements of a wide array of consumers like thermal power plants, steel

plants, cement factory, fertilizer units and innumerable industrial units. As on October 1,

2010 there were 104 working mines in ECL, 85 being underground mines and 19

opencast mines. Of these, 88 mines were in West Bengal and 16 in Jharkhand. As on

April 1, 2010 there were 85,617 persons (81,128 nos. as on 01.04.2011) including 7750

(9.05 %) female employees in the payroll of ECL. The annual turnover of the company

for the year 2009-10 was around Rs. 6281 crores. 3

4.2 Area of Operations and Geographic Location of ECL

Total command area of ECL is 1620 Sq.km. covering different coalfields as shown in

Table 4.1.

Table 4.1: Command Area of ECL for Operations

Source: Annual Report & Accounts of ECL 2009-10, p. 12

Raniganj & Mugma

Coalfields

1530

Sq. Km.

Located in Burdwan, Birbhum, Bankura,

Purulia districts of West Bengal and

Dhanbad district of Jharkhand.

Saherjuri & Rajmahal

Fields

90

Sq. Km.

Located in Deoghar and Godda districts

of Jharkhand.


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Figure 4.1: Geographical Location of ECL

Source: www.easterncoal.gov.in

http://www.easterncoal.gov.in/


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Figure 4.1 in the previous page shows the Geographical location of the area of operations

under two states, West Bengal and Jharkhand. In Jharkhand, Saherjuri Coalfield in

Deoghar district is having an area of 10 Sq. Kms presently runs as SP Mines Area

whereas Hura Coalfield in Godda District is having an area of 80 Sq. Kms and both of

them are under ECL. ECL’s largest opencast mine, Rahmahal is here. In West Bengal, the

heart of Raniganj Coalfield in Burdwan District is bounded by the Ajoy River in North

and the Damodar River in South. In Dhanbad District of Jharkhand, Mugma field lies on

the west of Barakar River. Formation of coal seams has occurred mainly in two sequences

at ECL- Raniganj measures & Barakar measures. Raniganj measures cover the entire

coalfields of Raniganj viz. Pandaveswar, Kajora, Jhanjra, Bankola, Kenda, Sonepur,

Kunustoria, Satgram, Sripur, Sodepur & Partly at Salanpur Areas whereas coal seams of

Barakar measures are being worked in Mugma, Salanpur, SP mines and Rajmahal areas. 4

Total geological reserve down to a depth of 1200 metre from surface in West Bengal and

600 metre from surface at Jharkhand as on April 1, 2010 (as per GSI) is 29.723 billion

tonne in West Bengal and 16.396 billion tonne in Jharkhand, thus totaling to 46.119

billion tonne with category-wise details being Proved - 15.837 billion tonne, Indicated-

23.754 billion tonne and Inferred - 6.528 billion tonne. 5

The coal reserve of ECL is very significant because of the following facts: 6

i) Raniganj Coalfield in West Bengal has special characteristics containing the best type

of non-coking coal reserves in the country, which is called premium grade coal with

average ash percentage of less than 20%. It has excellent market acceptability in the heat

intensive industries like Glass, Pottery, and refractory, Ceramic, Chemical etc. because of

its special features like high volatile matter, low ash content, long flame, quick ignition

and high heat.

ii) Because of its higher quality and low ash content Raniganj coal is most suited to

Power Utilities for replacing the import quantity. As per MOEF stipulation, with effect

from June 2002, all powerhouses which are situated within metropolitan cities and those

which are more than 1000 KMs away from the source of supply of coal, have to use coal

containing ash less than 34%. Since the average ash content of Raniganj coal is less than

20%, this coal will be used for blending with high ash coal from other subsidiaries. Due

to its unique characteristics Raniganj coal has high demand in the market throughout the


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Country, which usually surpasses the supply position. Thus, this situation will put ECL

coal in highly advantageous position and Company can reap rich dividends.

iii) Coal of Barakar measures though generally is of inferior quality, it is suitable for

modern power houses & other small scale industries. Moreover, for reserves of coal

down to a depth of 600 metre at Jharkhand there exists a scope for comparatively easy

extraction by open cast mining.

4.3. Organization Structure of ECL

Organization Structure is primarily concerned with the allocation of tasks and delegation

of authority. There are several ways of division of work and distribution of authority. 7

An effective organization structure helps its members to achieve organizatio nal objectives

smoothly. ECL is a large organization with huge number of employees scattered in

different coalfields under its control as well as in head office. The company has expanded

vertically and horizontally since its inception in the year 1975. As on 31-03-2010, the

number of employees working was 85, 617. Being a subsidiary of Coal India Limited it is

also a government company incorporated Under Section 617 of the companies Act, 1956.

The Section defines “a government company as a company in which not less than fifty-

one percent of the paid capital is held by the central government or any state government

(s) or partly by central government and partly by one or more state government(s) and

includes a company which is a subsidiary of a government company.” 8 Over the years,

the company has developed a complex organizational structure which is shown in Figure

4.2 in the next page.

Figure 4.2 shows that ECL is managed by its Board of Directors, with the Chairman-cum-

Managing Director (CMD) as the Chief Executive Officer (CEO) of the Company. He is

assisted by four full time Functional Directors i.e. Director (Personnel), Director

(Technical) for Operations, Director (Technical) for Projects & Planning and Director

(Finance). Additionally, there are five part-time Directors on the Board of Eastern

Coalfields Limited, one from the Ministry of Coal, Govt. of India, one from the holding

Company, Coal India Limited and three non-official part-time Directors. In addition,

Governmentt of India has appointed four permanent invitees to the Board: i) Principal

Secretary, Commerce & Industries Department, Government of West Bengal, ii) Principal

Secretary, Land and Land Reforms Department, Govternment of West Bengal, iii) Chief


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Operations Manager, Eastern Railways and iv) Director (Technical), Damodar Valley

Corporation. 9

Figure: 4.2: Organization Structure of Eastern Coalfields Limited

Source: http:// www.easterncoal.gov.in, Retrieved on 25.05-2012



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The Board of Directors is responsible for effective management and control of the

company. The CMD is the chief executive of the subsidiary company. Functional

Directors perform their functions as chief- in- charge in their respective areas with the

help of other executives under them as shown in the organization chart. Director

(Personal) is the administrative chief of human resource management of the company,

which is so important for a huge company like ECL where employees’ remuneration

plays a dominant role in total cost of production. It has eight important wings with

separate establishments for effective and efficient utilization of human resources of the

company. Director (Technical) is related to production and is very important for the

growth of the company and Director (Planning and Project) provides direct service to

production and plays a significant role in selecting a viable project which would be

capable of giving higher return. Director (Finance) is linked with all financial affairs of

the company and has special importance for the efficient management of the financial

activities for the growth and turnaround of the company. Though as per organizational

hierarchy the status of all functional directors are same, Director (Technical) and Director

(Planning and Project) have more responsibilities as survival of the company mostly

depends on production and successful completion of the project. Moreover, Chief

Vigilance Officer (CVO), Technical secretary to CMD (TS), GM (Internal Audit),

Commandant (CISF), and Company Secretary are in direct link with the CMD to give

him related information.

Again for streamlining the management, the administration is decentralized and mines are

grouped in 14 Areas /Projects. A hierarchy of a two tier system in the Areas is being

followed i.e. Agent/Manager in the Colliery and General Manager in the Area. 11 Areas/

Projects are in West Bengal and 3 Areas are in Jharkhand as stated in Table 4.2 under:

Table 4.2: Areas/Projects under ECL 10

State Areas / Projects

West Bengal Bankola, Kajora, Kenda, Kunustoria, Jhanjra, Pandaveswar,

Sonepurbazari, Satgram, Salanpur, Sodepur & Sripur

Jharkhand Rajmahal, S.P. Mines & Mugma


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4.4 Employment Provided by ECL since its Inception

Indian coal mining industry is an important area for industrial employment. The Eastern

Coalfields Limited (ECL) is the biggest subsidiary of Coal India Limited (CIL) which is

the largest corporate employer in India and abroad having manpower around 397138 as

on 31-03-2010. Thus, as a part of Coal India Limited and being a Public sector Enterprise

ECL has so far performed the role of a model employer and for that it is supposed to take

full care of the interest of the employees even though it fails to promote growth.

However, the company became overstaffed because at the time of nationalization the

company had to regularize a huge number of employees which were actually recruited

illegally by the private collieries just before the nationalization and it was the government

policy not to retrench the employees of private collieries to avoid severe strike so as to

continue production unaffected. Thus, improper planning and utilization of manpower has

not only hampered the productivity but also caused losses for the company since its

inception. The year wise manpower of Eastern Coalfields Limited since inception is

depicted in the Table 4.3 and a Comparative Manpower figure of all the Subsidiaries of

CIL as on March 31, 2010 is given in Table 4.4.

Table 4.3: Manpower vis-à-vis Annual Growth in Manpower of ECL since Inception

Year

Ended

Manpower

(Number)

Annual

Growth (%)

Year

Ended

Manpower

(Number)

Annual

Growth (%)

31-3-1975 1,85,141 --- 31-3-1993 1,73,550 -1.16

31-3-1976 1,86,646 + 0.81 31-3-1994 1,71,727 -1.05

31-3-1977 1,86,540 - 0.06 31-3-1995 1,63,805 -4.61

31-3-1978 1,86,243 -0.16 31-3-1996 1,61,675 -1.30

31-3-1979 1,85,676 -0.30 31-3-1997 1,58,251 -2.12

31-3-1980 1,85,230 -0.24 31-3-1998 1,53,154 -3.22

31-3-1981 1,88,156 1.58 31-3-1999 1,42,746 -6.80

31-3-1982 1,90,839 1.43 31-3-2000 1,33,383 -6.56

31-3-1983 1,91,411 0.30 31-3-2001 1,27,452 -4.45

31-3-1984 1,91,683 0.14 31-3-2002 1,19,712 -6.07

31-3-1985 1,90,830 -0.45 31-3-2003 1,14,582 -4.29

31-3-1986 1,90,752 -0.04 31-3-2004 1,10,132 -3.88

31-3-1987 1,88,411 -1.23 31-3-2005 1,05,692 -4.03

31-3-1988 1,86,232 -1.16 31-3-2006 1,01,474 -3.99

31-3-1989 1,84,102 -1.14 31-3-2007 98,780 -2.65

31-3-1990 1,78,704 -2.93 31-3-2008 94,943 -3.88

31-3-1991 1,77,889 -0.46 31-3-2009 90,470 -4.71

31-3-1992 1,75,595 -1.29 31-3-2010 85,617 -5.36

Source: Annual Report & Accounts of ECL


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Table 4.4: Comparative Manpower of all Subsidiaries and CIL as on 31-03-2010

Companies ECL BCCL CCL NCL WCL SECL MCL CIL

Manpower 85,617 71,838 54,057 16,373 60,870 79,781 20,978 3,97,138

Source: Annual Report & Accounts of CIL 2010-11, p. 63

We observe from the Table 4.3 that just before the inception of the ECL on November 1,

1975 the manpower of the then Eastern Division of CMAL, which was latter incorporated

as Eastern Coalfields Ltd (ECL), was 1, 85,141. It increased to 1, 86,646 in the year

ended on 31-03-76, i.e. just after the incorporation of the company. After that, manpower

started decreasing slightly up to 31-03-80 and again it increased up to the year ended 31-

03-84. The highest growth (1.58%) took place in the year ended 31-03-81 whereas the

highest negative growth (--6.80 %) took place in the year ended 31-03-1999. The

manpower reached to the peak in the year ended 31-03-84, which were 1,91,683. This

was mainly due to compensation for land acquisition and expansion of operations and

recruitment of some skilled labour. But after that manpower started decreasing regularly.

The company since then has been trying to optimize and rationalize its manpower by

several means like voluntary retirement, inter colliery transfer etc. Table 4.4 shows ECL

still now has the highest manpower as compared to other subsidiaries which is one of the

main causes for poor productivity and losses.

4.5 Production and Contribution of ECL to the total Production of CIL since

Inception

ECL operates two types of mines such as underground (UG) mines and opencast (OC)

mines. Underground mining is the main type of mining common in India where coal

seams exist very deep under the ground which is to be reached by shafts. Every such mine

must have two shafts to provide fresh air. In UG mining coal is loaded under the ground

into the tubs fitted with locomotive diesel engines. These loaded tubs are brought up

through the tub wind shaft on the surface and carried to the dump through mechanical

conveyers. The shaft and some portion of the roadways are well lit by electricity but the

actual working field is dark. The miners are statutorily required to put a helmet on the

head and a pair of miner’s boots as a protective wears and carry safety lamps. This is

costly and more risky mining and needs more manpower as compared to OC mines and

hence productivity is less resulting higher cost of production.


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There are two main methods of extracting coal from UG mines. One is Room & Pillar

system and the other Long Wall System. In the first case, coal deposits are mined by

cutting a network of ‘room’ into the coal seam and leaving behind ‘pillars’ of coal to

support the roof of the mine. These pillars can be up to 40 % of the total coal in the seam

and thus recovering up to 60% of coal. However, this coal may be recovered at a later

stage. In Longwall system coal from a particular section of the seam is fully extracted

using mechanical shearers. The coal seams can vary from 100m to 350m in length. Self-

advancing, hydraulically-powered supports temporarily hold up the roof while coal is

extracted. The roof is allowed to collapse at a later stage after extracting the coal from the

area. Over 75 % of the coal deposit can be extracted under this method. Technologically

advancements have made coal mining currently more productive than it has been earlier.

However, careful planning for the work and highly skilled and well- trained workforce is

very essential to use complex and state-of-the-art equipments.

Conversely, in opencast or open cut or surface mining, coal is cut from upward to down

into the seam. It is cut like quarry or trenches into the soil to obtain coal very near the

surface. It is safer for no possibility of gas accumulation or underground accidents by roof

fall etc. It is highly mechanized and requires little manual labour and thus is cheap as

compared to UG mines. OC mining uses large pieces of equipment like dragline, power

shovels, conveyors, large trucks, bucket wheel excavators etc. Naturally, productivity of

this mining is better than UG mines. This method recovers 90 % or more of the coal

deposit. However, main drawback of such mine is that it is difficult to operate in rainy

seasons. 11 Table 4.5 in the next page exhibits year-wise production of ECL since its

incorporation and its contribution to the total production of CIL.


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Table 4.5: Production and Contribution of ECL since Inception (Prodn. in MT)

Source: Annual Report & Accounts and Official Records of ECL

Table 4.5 exhibits that in the year 1975-76, i.e. just after the birth of ECL, the total

production of ECL was 26.18 Million Tonnes, of which 23.56 M.T. from underground

mines and 2.62 M.T. from open cast mines. Even if production increased in the next year

i.e. in1976-77, it decreased up to the year 1986-87. Production again increased in 1987-88

and 1988-89 but started decreasing up to 1993-94. However, production again improved

from 1994-95 with exceptions in 1999-2000 and in 2007-08. In 2007-08 production

drastically declined. This is because of decrease in production from opencast mines which

happened mainly due to delay in acquisition of land and forest clearance at Rajmahal OC

Year UG Mines OC Mines ECL (Total) CIL (Total) ECL’s production

as % of CIL

1975-76 23.56 2.62 26.18 88.98 29.42

1976-77 22.87 3.59 26.46 89.48 29.57

1977-78 21.60 3.63 25.23 88.96 28.36

1978-79 18.83 3.22 22.05 90.05 24.49

1979-80 17.09 3.43 20.52 91.44 22.44

1980-81 17.49 5.12 22.61 100.86 22.42

1981-82 17.82 6.73 24.55 108.94 22.54

1982-83 16.30 6.38 22.68 114.68 19.78

1983-84 16.76 6.11 22.87 121.41 18.84

1984-85 16.46 6.65 23.11 130.81 17.67

1985-86 16.30 7.73 24.03 134.11 17.92

1986-87 16.40 9.22 25.62 144.74 17.70

1987-88 15.55 12.44 27.99 159.02 17.60

1988-89 16.32 13.81 30.13 171.50 17.57

1989-90 14.39 10.10 24.49 178.60 13.71

1990-91 13.39 10.08 23.47 189.68 12.37

1991-92 14.65 9.87 24.51 204.16 12.01

1992-93 14.90 9.14 24.04 211.22 11.38

1993-94 14.17 8.44 22.61 216.10 10.46

1994-95 13.61 11.24 24.85 223.06 11.14

1995-96 13.70 14.10 27.80 237.27 11.72

1996-97 13.88 15.77 29.65 250.62 11.83

1997-98 12.65 14.79 27.44 260.55 10.53

1998-99 12.94 14.23 27.17 256.48 10.59

1999-00 11.91 13.21 25.12 260.58 9.64

2000-01 11.77 16.26 28.03 268.14 10.45

2001-02 11.66 16.89 28.55 279.65 10.21

2002-03 10.95 16.23 27.18 290.69 9.35

2003-04 9.91 18.09 28.00 306.36 9.14

2004-05 9.46 17.80 27.26 323.57 8.42

2005-06 9.34 21.78 31.12 343.39 9.06

2006-07 8.27 22.20 30.47 360.91 8.44

2007-08 8.32 15.74 24.06 379.46 6.34

2008-09 8.39 19.74 28.13 403.73 6.97

2009-10 8.23 21.83 30.06 431.32 6.97


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Project. 12 Table 4.5 also exhibits that from 1999-2000 productions from UG mines have

consistently decreased and further reduced to a low from 2006-07 whereas production

from OC mines has followed increasing trend since its inception with little exceptions in

1991-92 to 1993-94. However, OC mines have remarkable improvement from the year

1995-96 apart from the year 2007-08. The reason is already discussed. We also observe

that the year 1975-76 has given the highest production (23.56 MT) and the year 2009-10

has given the lowest production (8.23 MT) from UG mines whereas production from OC

mine reached to the highest (22.20 MT) in the year 2006-07 and to the lowest (2.62 MT)

in the year 1975-76.

Further we observe that during the first year of its inception in1975-76, when ECL has

contributed 29.42 % (26.18 MT) to the total coal production of CIL (88.98 MT), it has

contributed only 6.34 % in the year 2007-08 and 6.97 % in the year 2008-09 and 2009-10.

Although, ECL has retained its original geographical configuration and further increased

production, its share in total production of CIL has reduced drastically because of

formation of new subsidiaries of CIL, viz. Northern Coalfields Limited (NCL), Mahanadi

Coalfields Limited (MCL) and South Eastern Coalfields Limited (SECL), which are

largely based on opencast mines and are more mechanized as compared to existing mines

like ECL. They are jointly producing a lion’s share of production for CIL at the present

milieu. This can be understood from the Table 4.6 where we observe that only two

subsidiaries, SECL and MCL have jointly produced virtually 50 % of total production of

CIL in 2009-10. We also observe position of ECL with respect to other subsidiaries of

CIL. This fact further confirms one of the reasons for loss of the ECL. We see when ECL

absorbs the highest number of manpower as compared to the other subsidiaries; its

production and productivity are usually less as compared to especially WCL, SECL, and

MCL because of its less mechanized system and excess manpower. This fact is also clear

from the Table 4.6 and Table 4.4.

Table 4.6: Comparative figure of Production of all the Subsidiaries and CIL for the

Year 2009-10 (Production in MT)


UG 8.23 3.90 1.47 0.00 9.62 17.83 2.20 43.25

OC 21.83 23.61 45.61 67.67 36.12 90.18 101.88 388.01

Total 30.06 27.51 47.08 67.67 45.74 108.01 104.08 431.26



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4.6 Productivity of ECL since Inception:

Productivity is the ratio between the output produced and the input of resources used up

in the process of production. However, productivity of coal mines depends on efficient

utilization of manpower and machine driven by workers and thus formula of productivity

for coal mines is labour based. Here ‘output per manshift (OMS)’ formula is accepted as a

measure of productivity. Manshift means the total manshift in millions per year. Thus, the

formula of ‘Output per Manshift’ is: OMS = Total output in million tonnes per year /

Total manshift in million per year. The year wise total productivity as well as productivity

from underground (UG) mines and opencast (OC) mines of ECL since inception is shown

in Table 4.7 whereas a comparative figure of productivity of all the subsidiaries is shown

in Table 4.8 in the next page.

Table 4.7 exhibits that though productivity of UG mines has been more or less in a

static level, productivity of OC mines has been increasing at a faster rate and as a result

overall productivity have started increasing which is one of the best indicators for the

revival of the company. This is because when large number of underground mines having

multiple opening of small diameter shaft leads to low unit production and dismal level of

productivity, opening of Greenfield mechanized OC projects as well as introduction of

advanced techniques and more machines in the earlier OC mines have improved the

productivity of OC mines. In the year 1975-76, i.e. just after inception of ECL, the

productivity of OC mines was just 0.47 tonnes per manshift which has reached 7.29

tonnes per manshift at the end of 2009-10. Particularly, from the year 2000-01 there has

been remarkable improvement in productivity of OC mines. However, as compared to the

industry ECL is still lagging behind. This is clear from the Table 4.8 where we observe

industry average (CIL) is 9.51 tonnes per manshift and even productivity (10.76 tonnes

per manshift) of Singareni Collieries Company Limited (SCCL), another independent

coal company of India, is far better than ECL. Further, some subsidiaries of CIL, like

NCL (13.19 tonnes per manshift), MCL (18.89 tonnes per manshift) and SECL (18.89

tonnes per manshift) are having better productivity from OC mines than ECL.

However, main factors presently contributing to the higher production and productivity

are: 13

1) Opencast mining dominated coal production due to number of favourable factors like

economic viability, better safety, higher conservation of coal, ease in mass production

etc.


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2) Introduction of new technologies like SDL/LHD and Continuous Miners in UG

mines.

3) Introduction of Powered Support Long Wall (PSLW) technologies in UG mines.

4) Introduction of Blasting Gallery technique for extraction of coal locked up in pillars

in thick seam which are developed by Board & Pillar system in some mines.

Table 4.7: Productivity (OMS) of ECL since Inception (Tonnes per manshift)

Year UG (OMS ) OC (OMS ) Total (OMS)

1975-76 0.59 0.47 0.58

1976-77 0.59 0.70 0.60

1977-78 0.56 0.75 0.58

1978-79 0.49 0.64 0.51

1979-80 0.45 0.69 0.48

1980-81 0.45 0.95 0.51

1981-82 0.45 1.02 0.52

1982-83 0.43 0.97 0.50

1983-84 0.44 0.94 0.51

1984-85 0.44 1.95 0.52

1985-86 0.45 1.14 0.56

1986-87 0.46 1.45 0.61

1987-88 0.46 1.87 0.69

1988-89 0.48 1.99 0.73

1989-90 0.43 1.51 0.61

1990-91 0.41 1.57 0.61

1991-92 0.44 1.58 0.61

1992-93 0.44 1.80 0.62

1993-94 0.42 1.73 0.59

1994-95 0.43 2.49 0.69

1995-96 0.44 3.30 0.78

1996-97 0.44 3.62 0.83

1997-98 0.42 3.39 0.80

1998-99 0.46 3.64 0.85

1999-00 0.45 3.48 0.83

2000-01 0.47 4.52 0.98

2001-02 0.48 4.92 1.04

2002-03 0.48 4.89 1.03

2003-04 0.45 5.30 1.10

2004-05 0.43 5.30 1.07

2005-06 0.45 6.61 1.29

2006-07 0.42 7.03 1.34

2007-08 0.43 5.04 1.07

2008-09 0.46 6.42 1.33

2009-10 0.47 7.29 1.46



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Table 4.8: Comparative Productivity of all Subsidiaries of CIL, CIL and SCCL for the Year 2009-10

Companies ECL BCCL CCL NCL WCL SECL MCL CIL SCCL

OMS (UG) 0.47 0.39 0.35 0.00 1.12 1.33 1.29 0.78 1.08

OMS (OC) 7.29 4.85 5.24 13.19 4.12 18.89 18.89 9.51 10.62

OMS (Total) 1.46 1.85 3.66 13.19 2.64 5.96 14.66 4.47 3.35

Source: Annual Report & Accounts of CIL 2010-11, p. 43 and Provisional Coal Statistics 2009-

10, Government of India , Min istry of coal, Coal controller’s Organization, Kolkata

4.7 Financial Performance of ECL since Inception:

The Profit or Loss figures of different years since inception and just before inception are

given in Table 4.9 in the next page. A close scrutiny of the Table reveals that just before

the inception of the ECL the overall loss of Eastern Division of earlier CMAL, which was

later, incorporated as Eastern Coalfields Ltd (ECL) was Rs. 32.04 crores. The loss

reduced immediately after incorporation of the company. However, analysis of financial

performance of ECL since nationalization clearly shows that up to the year 2004-05, it

sustained loss every year. The Path-breaking performance of the year 2005-06 gave a

historical breakthrough to the life of the company. This was the first time since its

inception, company made profit (Rs.363.86 crores) from its operation. Thus, this was

possible mainly due to the growth in coal production. During 2005-06, ECL surpassed all

the previous records in terms of production, over burden removal, dispatch, productivity,

capacity utilization and profit. The company has again earned profits in the years 2006-07

(Rs. 110.60 crores) and in 2009-10 (Rs.333.40 crores). It is also known that in the year

2011-12 the company has made highest ever profit of Rs. 962.13 crores since its inception

confirming its ability to make profits in the coming years. However, the company is still

under BIFR due to continuing losses in the earlier years for the following reasons: 14

a) Large number of underground mines with outdated production technologies.

Extensive manual loading of Coal at underground mines as well as working far away

from entry points requiring higher manpower leading to low production and

productivity.

b) Some of the Opencast Mines incurred losses due to disproportionate manpower on

roll, high stripping ratio and low capacity utilization.

c) Difficult geo-mining conditions like high degree of gassiness, seams susceptible to

spontaneous heating, presence of waterlogged workings in the upper seams etc.

d) Limited scope of opencast mining.

e) High rate of Cess charged by West Bengal Govt. compared to other States causing

higher landed cost of coal to the customers.


78

f) Resistance from Trade unions in transferring Surplus manpower from one mine to

another for gainful deployment.

g) From 1982-1983 to 1995-96, the losses incurred by the Subsidiary companies were

supported through subsidy as fixed by a mechanism called Coal Price Regulation

Account (CPRA). Thus, the abolition of CPRA from 1996-97 led to rise in losses and

the company became a sick company immediately thereafter. Financial Performance

of Eastern Coalfields Limited is exhibited in Table 4.9.

Table 4.9: Financial Performance of ECL since Inception (Rs. in crores)

Year Net Profit before

Adjustments.

Subsidy from

CPRA

Prior Period

Adjustments

Fringe

Benefit Tax

Net Profit after

Adjustments

1974-75 -32.04 -32.04

1975-76 -21.48 -21.48

1976-77 -29.93 -3.40 -33.33

1977-78 -53.24 -0.96 -54.20

1978-79 -102.22 -1.95 -104.17

1979-80 -81.17 -2.31 -83.48

1980-81 -91.20 8.99 -82.21

1981-82 -87.85 -4.30 -92.15

1982-83 -97.21 Not Available -97.21

1983-84 -161.24 Not Available -161.24

1984-85 -93.95 Not Available -93.95

1985-86 -125.23 Not Available -125.23

1986-87 -181.14 Not Available -7.78 -188.92

1987-88 -159.17 Not Available -159.17

1988-89 -105.37 163.33 -24.21 33.75

1989-90 -232.66 310.95 -1.86 76.43

1990-91 -340.20 282.09 15.36 -42.75

1991-92 -319.80 365.29 -9.59 38.90

1992-93 -346.35 337.08 -7.93 -17.20

1993-94 -471.62 407.58 -6.36 -70.40

1994-95 -571.75 467.07 -3.79 -108.47

1995-96 -390.76 545.89 -0.45 154.68

1996-97 -338.23 -2.92 -341.15

1997-98 -533.77 -8.12 -541.89

1998-99 -464.23 -8.24 -472.47

1999-00 -732.04 3.81 -728.23

2000-01 -917.64 -0.45 -917.19

2001-02 -29525 1761 -277.64

2002-03 -291.67 - 47.11 -338.78

2003-04 -320.35 -6.03 -326.38

2004-05 -649.31 -29.89 -679.20

2005-06 374.85 -2.89 -8.10 363.86

2006-07 115.22 2.90 -7.52 110.60

2007-08 -1013.74 -12.92 -3.27 -1029.93

2008-09 -2109.92 -2.78 -3.39 -2109.09

2009-10 335.02 -1.62 333.40

Source: Annual Report & Accounts of ECL 2004-05 & 2009-10 and Official Records


79

In Table 4.9 in the previous page, prior period adjustments indicate some adjustments

which are made for the last year to arrive at the net profit of the current year whereas

fringe benefit tax indicates the tax paid on perquisites that are offered to the company

executives. These are adjusted before arriving at the net profit of the current year of the

company.

Table 4.10 shows a comparative statement of profit and loss of different subsidiaries of

CIL for the year 2009-10, where we see ECL has contributed a profit of Rs. 333.40 crores

even if it is still under BIFR with a sick company status. This is no doubt a good sign for

the company.

Table 4.10: Comparative Financial Performances of all Subsidiaries and CIL for the

Year 2009-10


Profit / (Loss) 333.40 793.93 1533.05 3766.30 931.02 3063.57 2953.90 13,964.33


4. 8 Deregulation of Coal Price, a New Era in Price Policy of Coal

Since nationalization of coal mines in 1973 coal price has been fixed following

Administered Pricing System of Govt. of India. In the year 1982, the Government of

India appointed the ‘Bureau of Industrial Costs and Prices’ (BICP) to study the situation

for increase in the price of coal in India. As per the proposal of the committee the price of

coal was first revised by Govt. of India in 1984 and then revised many times to make this

industry financially sound. Even from 1982-83 to 1995-96, the losses incurred by the

Subsidiary companies were supported through subsidy as fixed by a mechanism called

Coal Price Regulation Account (CPRA).

The price of the administered grades of coal was last revised on June 17, 1994. Following

the recommendations of BICP, a decision was taken by the Government to deregulate the

prices of all grades of coking coal and A, B, & C grades of non-coking coal and this

decision was implemented w.e.f. March 22, 1996. Subsequently in consideration with a

proposal of the Committee on Integrated Coal Policy, the Government decided to de-

regulate the prices of soft coke, hard coke and D grade of non-coking coal and that

decision was implemented with effect from March 12, 1997. The Government also

decided to allow CIL and SCCL to fix prices of E, F and G grades of non-coking coal

once in every six months by updating the cost indices as per the escalation formula


80

contained in the 1987 report of the BICP and necessary instructions to this effect were

issued to CIL and SCCL on March 13, 1997. However, the pricing of coal has been fully

deregulated with effect from January 1, 2000 after the Colliery Control Order, 2000 was

notified in supersession of the Colliery Control Order, 1945. Under the Colliery Control

Order, 2000 now the Central Government has no power to fix the prices of coal. 15

Since January 1, 2000 CIL has revised its prices five times and the latest revision is in

February 2011. The coal price is revised considering the escalation in input cost, inflation

and landed cost of imported coal. The final customer price includes freight and other

charges (e.g. royalties, sales tax etc.). Coal is mostly sold under the long-term fuel supply

agreements that set the price of coal over the term of the contract, which is periodically

revised and adjusted. In addition, coal is also sold pursuant to the e-auction scheme

introduced in accordance with the New Coal Distribution Policy (NCDP) issued in 2007.

E-auction has been started by CIL and its subsidiaries to sell coal in the open market with

a view to provide the fossil fuel to consumers unable to source it through the available

institutional mechanisms for reasons like seasonality of coal requirement, limited

requirement of coal etc. Under the New Distribution Policy, CIL is allowed to sell 10% of

its production under the e-auction process. Further, CIL plans to revise prices for washed

coal after setting up coal washeries. It proposes to set up 20 washeries in different

subsidiaries in the next few years and increase the proportion of washed coal to 55% of

total sales volumes by FY17. 16

For ECL, a new chapter is opened through MoU with DVC, WBPDCL, NTPC & other

power utilities where coal will be supplied at mutually agreed price considering the cost

of production & imported price of coal. ECL has been supplying coal from the year 2008-

09 under MoU prices, which is close to import parity prices and making some extra gain.

4.9 Social Responsibility of ECL

According to H. E. Bowen “Social Responsibility is an obligation to pursue those policies

to make those decisions or to follow those lines of action which are desirable in terms of

objectives and values of our society.” Thus, it emphasizes the obligations which a

business-house owes towards the society. Every business has a prime responsibility to

make the fullest possible use of its resources, both human and material, as has each

individual. 17 A socially responsible enterprise has to conduct its business in such a way

as to earn recognition as a constructive and honourable citizen to all stakeholders. In fact,


81

the major social responsibility of a company is to run its activities profitably and use

resources at its disposal efficiently.

For ECL, it is decided that policy of Coal India Limited (CIL) on Corporate Social

Responsibility would be implemented from 2010-11 onwards. As we know from the

Annual Report & Accounts of ECL that as per the policy the fund for CSR should be

allocated on 5 % of retained earnings of previous year subject to a minimum of Rs. 5 per

tonne of coal production of the previous year.

We observe that ECL is mindful for the welfare of its workforce, a must in the era of

resurgence of human relations doctrine. It is observed from the past records that since its

inception, ECL has been taking up various activities for the welfare of its workers as well

as development of people or communities living in the surrounding areas of the mines. A

lot of activities have been attended for the development of infrastructure, roads and

railway sidings, residential buildings, water supply, education facilities, medical and

health care facilities, banking, social uplift to its workforce and dependents thereof and

other welfare activities which are beneficial to the community as a whole. 18 A brief and

cumulative description of these facilities up to 31-03-2011 is given below: 19

i) Residential Buildings: Nearly 1,04,507 numbers of residential buildings are

constructed for the employees, out of which 63,904 numbers are standard quarters and

40,603 numbers are non-standard houses. Repairing and maintenance of these buildings

are being attended regularly. During 2010-11 the company has incurred capital

expenditure of Rs. 3.28 crores and revenue expenditure of Rs. 28.16 crores for this

purpose.

ii) Welfare Buildings and other Development Works: These include 54 Community

centers, 82 canteens, 3 adult education centers, 137 rest shelters, 12 multiple institutes

and 95 schools. During 2010-11 the company has incurred capital expenditure of Rs. 1.18

crores and revenue expenditure of Rs. 2.27 crores for welfare buildings and development

works. In addition to the welfare buildings, Rs. 6.93 crores is also spent under capital

head for the Service Buildings.

iii) Water Supply: The Company has always given special attention to the improvement

of potable water supply to the residential houses of its own employees as well as to the

people of nearby communities. In addition to this the company has participated in water

supply schemes of West Bengal government and Chirkunda water supply scheme of

Jharkhand Govt. for augmenting the source of water. Water supply service has covered


82

nearly 4,83,980 numbers of people. During 2010-11 the company has incurred capital

expenditure of Rs. 2.03 crores and revenue expenditure of Rs. 5.96 for this service.

iv) Construction of Road, Culverts and Railway Sidings: Dispatch of coal is mainly done

by the mode of road ways and for this ECL has taken necessary steps for the construction

of proper roads and culverts for smooth carriage of coal. It has also incurred capital and

revenue expenses for the construction and maintenance of colony roads. Moreover, ECL

has provided sufficient funds for railway siding works. During 2010-11 the company has

incurred capital expenditure of Rs. 1.64 crores and revenue expenditure of Rs. 2.90 crores

for roads and culverts and a capital expenditure of Rs. 3.15 crores for railway siding

works.

v) Mine Development Activities: ECL has done a lot of works and is spending on capital

and revenue expenses for the development of the mines. During 2010-11 it has incurred

nearly Rs. 10.57 crores for the capital expenditure.

vi) Providing Medical Amenities: The Company has provided 12 hospitals with a total

bed capacity of 1275 to the employees and their wards/ dependents, 128 dispensaries, 130

ambulances to the hospitals. In addition, the company has been spending sufficient money

for the reimbursement of medical expenditure of its employees treated in India and for the

treatment of the employees who are referred to outside. The company is also providing

medical services to nearby villages through Mobile Dispensary. During the year 2010-11

the company has reimbursed medical expenditure of Rs. 12.83 crores, referred 933

patients to outside for first visit and 1359 patients for revisit and spent Rs. 7.68 crores for

their treatment. It has covered 1244 beneficiaries under Health & Welfare program and

22,981 beneficiaries through Mobile Dispensary services.

vii) In addition, financial assistance by way of grants-in-aid is also provided to certain

privately managed schools functioning in and around coalfield areas.

4.10 Contribution to the Government Exchequer

Table 4.11 and Figure 4.3 exhibit that total contribution of ECL to the Exchequer in the

form of Royalty, Cess and other Taxes, on an average, is around Rs 1000 crores per

annum in the recent years. Royalty on coal and lignite is payable under Section 9 (1) of

the Mines and Minerals (Development and Regulation) Act, 1957, the excise duty is the

main source of revenue for the central government; cess is a kind of indirect tax collected

by the state government at the beginning of any financial year on the basis of estimated

production of coal, central sales tax is payable to the central government on inter-state


83

sales but collected by the state government. Thus, this fact reminds us the value of the

company to the national economy even if it is sick and under the ambit of BIFR.

Table 4.11: Contribution of ECL to the Government Exchequer (Rs. in crores)

Items 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Royalty on Coal 79.07 73.35 82.23 94.04 90.43 90.83 94.17 102.68 137.93 156.77

Cess on Coal 353.93 606.25 466.17 764.44 874.44 598.96 642.42 621.48 709.62 599.97

Sales Tax 113.12 121.93 122.81 121.57 131.47 167.25 174.07 136.22 159.70 197.95

Stowing Excise duty 9.64 9.79 9.46 17.61 27.76 27.87 29.00 26.04 26.86 28.93

Total 555.76 811.32 680.67 997.66 1124.1 884.91 939.66 886.42 1034.1

1

983.62


Figure 4.3: Contribution of ECL to the Government Exchequer

4.11 Technological Upgradation, Adopting better Mining Methods and Taking up

New Projects for Increasing Production

Right now mechanized opencast mining in India is the most prevalent technology as the

percentage recovery by this method in our country is up to 90% of the in-situ coal

reserves. It is observed that the coal production from opencast method is around 88% of

total production and this trend is likely to continue in near future. Thus, most of the coal

companies these days are trying to adopt more opencast mines to get more coal at

comparatively less cost. Further, to increase production from under ground mines coal

companies are adopting different technologies viz. Powered Support Longwall (PSLW),

Blasting Gallery (BG), Continuous Miners (CM), Side Discharge Loaders (SDLs), Load

Haul Dumpers (LHDs) etc. from conservation point of view.

In order to increase production ECL has also taken the following steps for modernization

of the mines: 20

i) In order to sustain and augment the underground production from ongoing and future

projects a road map has been formulated envisaging mechanization of manual mines

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

total 555.76 811.32 680.67 997.66 1124.1 884.91 939.66 886.42 1034.11 983.62

0

200

400

600

800

1000

1200

Rs.

in

Cro

res

Figure 4.3: Overall Contribution to the Govt. Exchequer


84

by way of introduction of SDLs / LHDs in loading operation covering more mines

wherever practically feasible. As on 31-03-2010, 154 nos. of SDLs and 24 nos. of

LHDs, 3 nos. of PSLWs were on roll in different UG mines. Further, 40 nos. of SDLs

was procured and commissioned at the end of 2009-10. Major development activities

like drift diverges, sinking and deepening of shafts, new stowing installation, drilling

of borehole for stowing and dewatering of dip side of workings etc. had been

indentified and time bound action plan is being drawn for completion of activities in

time for sustenance and augmentation of production from underground mines.

ii) Apart from this, for augmentation of underground production three mines have been

identified for introduction of Mass production technology by way of deployment of

Continuous Miner with shuttle Car on risk / gain sharing basis. At the first instance,

Continuous Miners Package was introduced at Jhanjra Project and production achieved

in 2009-10 from Continuous Miner was 0.458 MT. Second set of Continuous Miners at

Sarpi UG mine of Bankola area was ready to start production from the year 2010-11.

For introduction of 2nd set of Continuous miner at Jhanjra, project report has been

approved by ECL Board and approved by CIL Board in Feb 2009 and now is under

process. Moreover, High Power PSLW set is also proposed to be introduced at R-VI

seam of Jhanjra for mechanized production from Long wall operatio n. In addition to

the above other potential mines viz. Bansra, Haripur, Khottadih, Narainkuri had been

identified for introduction of Mass production technology by deploying Continuous

Miners or Low cost Continuous miner with shuttle car.

iii) For increase in production from Open Cast mines as well as Underground mines

Heavy Earth Moving Machinery (HEMM) viz. Dragline, Dumpers, Dozers, Shovels,

Drills etc. are being procured and used. As on 31-03-2010, one Dragline, 245 Dumpers,

72 Dozers, 58 Shovels, 44 Drills were in use.

iv) Approval of new Opencast Projects and expansion of exiting viable OC Projects:

a) Expansion of Rajmahal Opencast Project from 10.5 million tonnes to 17 million

tonnes has been approved by Ministry of Coal in September, 2009 with a capital

investment of Rs.153.82 crores under partial outsourcing option.

b) Project Report of Greenfields Project at Chuperbhita for 4 million tonnes per year

(MTY) and Hurra ‘C’ for 3 MTY were awaiting consideration from Coal India Ltd.

c) ECL Board has approved Project Report of Sonepur Bazari combined OCP from

3.40 MTY to 8 MTY with an investment of Rs. 995 crores and Simlong OCP of 2

MTY with an investment of Rs. 92.28 crores.


85

d) For Expansion of Chitra Project from 1.22 million tonnes to 2.5 million tonnes per

year Coal India Board has accorded its approval to the Project Report with capital

investment of Rs. 112.69 crores during August, 2007. Now it is under process.

e) Bonjemehari OC patch with a minable reserve of 1.32 Mte and Kalipahari (A) OC

patch with a minable reserve of 0.32 Mte are approved by ECL board during 2009-10.

vii) Outsourcing of patches: During 2009-10, company produced 4.336 million tonnes of

coal from outsourcing OC patches. Eight numbers of outsourcing patches were

expected to be operated in the year 2010-11. More number of patches has been

identified for operation in future like Narainkuri, Bonbahal, deep mining zone of

Rajmahal, Samla, Madhaipur etc.

viii) Ten numbers of new reorganized Underground Projects have been taken up for

implementation during Xth Plan. Out of 10 UG Projects, 3 projects have started

producing and rest of the Projects is in different stages of implementation. Project

Report of Tilaboni UG mines of 1.86 MTY with an investment of Rs. 716.69 crores

was expected to be approved in ECL Board in 2010-11.

4.12 Present Position of the Company

4.12.1 Declaration of ECL as a Sick Company and its Reference to BIFR

From 1982-1983 to 1995-96, the losses incurred by the Subsidiary companies were

supported through subsidy as fixed by a mechanism called Coal Price Regulation Account

(CPRA). The company received Rs. 3265.17 crores from 1982-83 to 1995-96 under

CPRA. The abolition of CPRA from 1996-97 led to rise in losses and the company

became sick instantly thereafter. It was referred to Board for Industrial and Financial

Reconstruction (BIFR) on March 31, 1997 when its accumulated loss exceeded its Net

worth. BIFR declared ECL a Sick Company u/s 3(1) (o) of Sick Industrial Companies

(Special Provisions) Act, 1985 (SICA) and appointed SBI as Operating Agency (OA) in

February, 2001. The Company is still under BIFR. 21

Major Reasons for sickness of the company 22

a. Large number of underground mines having low unit production and dismal

productivity.

b. Difficult geo-mining conditions like high degree of gassiness, seams susceptible to

spontaneous heating, presence of waterlogged workings in the upper seams etc.


86

c. Limited scope of open cast mining because of high density of population and

congested built-up area. Few OC mines incurred losses due to disproportionate man-

power on roll, high stripping ratio and low capacity utilization.

d. Extensive manual loading of coal at UG mines led to low production and productivity.

e. High rate of Cess charged by West Bengal Govt. as compared to other states causing

higher landed cost of coal to the customers as compared to the other subsidiaries.

f. Transfer of surplus manpower from one mine to another for gainful deployment was

resisted by Trade Unions.

g. Due to presence of adverse geo-mining conditions Hydraulic sand stowing had to be

done in many mines which led to increase in operational cost.

h. The abolition of Coal Price Regulation Account (CPRA) led to rise in losses.

4.12.2 Rehabilitation Schemes for Survival of ECL

4.12.2.1 First Draft Rehabilitation Scheme (June 2002), Prepared by SBI, Kolkata,

the Operating Agency as appointed by BIFR

At the beginning, revival plans for ECL were developed by ICICI, CGA (Controller

General of Accounts) & ECL. Draft Rehabilitation Scheme of June 2002 is the First Draft

for Rehabilitation Scheme, prepared by SBI, Kolkata, the Operating Agency, appointed

by BIFR. The Draft Rehabilitation Scheme is the result of an interactive study to

formulate a rehabilitation package for the long-term viability of the company based on

critical appraisal of earlier studies of ICICI, CGA, Ministry of Finance, and the proposal

mooted by ECL, besides several rounds of discussions with the top most officials of the

company and site visits to different mines of ECL. The draft outlines a proposal for

survival of ECL undertaken at the behest of SBI, Kolkata, which is the Operating Agency

appointed by BIFR. 23

A comprehensive package for the revival of ECL which was prepared by SBI, Kolkata,

focused on the following key areas: 24

1) Suspension of operation at identified unviable mines and gainful redeployment of

manpower elsewhere with no retrenchment of employees to reduce the losses.

2) Improving the cash profits by operating more large opencast mines like Rajmahal,

Sonepur Bazari & Chitra through enhanced production, improved fleet availability,

leveraging new technology, and outsourcing coal transportation from face to coal

handling plants (CHPs).


87

3) Additional production and profits had to be garnered from opencast mining of

identified blocks/patches of coal reserve having limited life of 1 to 5 years through

outsourcing. Considering the fund constraints, it was suggested that the generated

revenue through outsourcing would be utilized for replacement of machineries at both

UG mines and OC mines, for development of UG mines and for opening new OC

mines.

4) Incremental innovations, including reorganization of mines, upgrading of coal

clearance system etc. to improve the productivity and production per unit so as to

bring up mines that were marginally incurring losses to the status of profit-making

mines.

5) Joint ventures/loss and gains sharing contracts on Deferred Payment facilities with

equipment suppliers, both in India and abroad for introduction of new technology to

improve cash profits in underground and open cast projects.

6) Aggressive marketing for ECL coal and negotiation of better pricing for superior

grade coals of Raniganj coalfields to improve cash flow.

7) Downsizing manpower through VRS and special VRS for female employees and

inter-company transfer of clerical and other surplus non-productive employees,

regrouping of mines into fewer Area Offices, improving performances of workshops

by reducing outsourcing of equipment maintenance jobs.

8) Planning for suspension of operation of mines and social impact assessment.

9) Discontinuation of operations at loss making opencast projects & redeployment of

surplus equipment elsewhere for gainful purpose.

10) Re-skilling of workers from mines slated for suspension of operation through

integrated training programs.

11) Rationalization of wagon loading system through mechanization of wagon loading by

contractual means wherever feasible.

Based on the Revival Package prepared by the SBI, Kolkata, the management of ECL

initiated certain steps for cutting losses and restoring the financial health of the company.

Some of the major steps taken by the company in this regard were as follows: 25

1) Fulfillment of Production targets in 2000-01 and 2001-02.

2) Increase in Productivity from both Underground mines & Opencast mines.

3) Reduction in Manpower from 1.33 lakh in 1999-2000 to 1.20 lakh through VRS.


88

4) Start of Cost control measures in the areas like overtime, fall back wages, quality

deduction, under loading & demurrage charges, over loading & POL consumption etc.

5) Cost control by closing un-viable Area Offices and bringing collieries under these

areas to the control of adjacent areas.

6) Increase in average sales realization.

7) Implementation of special VRS for female employees for conversion of unproductive

workforce to productive one.

8) Identification of small patch reserves for outsourcing. However, work could not be

started due to objections from Trade Unions.

9) Identification of 22 non-viable mines for suspension based on either depletion of

reserves or safety or high cost of working.

10) Initiated program to increase production at Rajmahal OCP to meet the NTPC

requirement.

11) Commencement of negotiation for introduction of mechanized mining at selected

collieries like Jhanjra, Kottadih and Sarpi through gain/loss sharing basis with foreign

equipment suppliers.

12) Commencement of Expert Marketing for its Coal with a small order from Nepal.

However, though the company achieved some results, the company felt the need of

preparing a revised rehabilitation scheme of its own on the basis of the improved

scenario. Hence, a revised rehabilitation scheme was formulated in March 2004 which is

discussed below.

4.12.2.2 Revised Rehabilitation Scheme of March 2004:

Operating Agency (SBI, Kolkata) during June’2002 circulated the Draft Rehabilitation

Scheme to all the Stakeholders and a Joint Meeting was convened by it on October 8,

2002 with all the Stakeholders. However, a fully tied up Scheme could not be developed

in the meeting. Trade Unions did not agree with the proposal for suspension of mining in

unviable mines, outsourcing of small isolated opencast patches and exclusion of ECL

from the purview of NCWA VII.

Then as per BIFR direction, ECL called a joint meeting of all stakeholders on 23rd August

2003 and subsequently again on 9th September 2003 to discuss and prepare an alternative

rehabilitation proposal for submission to the Operating Agency. Based on the responses

received in the above meetings, a Revised Draft Rehabilitation Scheme was prepared by


89

ECL Management on January 31, 2004 which was submitted to SBI, the Operating

Agency. Then, SBI convened a Joint Meeting on March 3, 2004 where all the

Stakeholders supported the Scheme and jointly agreed to the reliefs and concessions

suggested in revised DRS. Consequently a fully tied up Draft Rehabilitation Scheme

(March’2004) was evolved.

BIFR heard the Draft Rehabilitation Scheme (March’2004) on 21st September 2004 and

directed the Company to submit the same to the Operating Agency. Company intimated

the Operating Agency on September 28, 2004, i.e. within the stipulated period, with a

copy to BIFR that more than 95 percent of the workers’ affiliated unions had given

consent to the Draft Rehabilitation Scheme o f ECL (March’2004). Operating Agency also

intimated the same to BIFR on the same date and recommended for the sanction of the

scheme. BIFR sanctioned the Rehabilitation Scheme (March’2004) on November 2,

2004 for execution in terms of Sec. 19(3) read with Sec. 18(4) of SICA. As per this

scheme, net worth of the company was slated to become positive in 2008-09.

Salient Features of the Revised Rehabilitation Scheme, March’2004

(i) Cut-off date of the scheme was to be maintained as 31.3.2002, which was originally

envisaged in the DRS prepared by the Operating Agency (SBI) and net worth slated to

turn positive during 2008-2009 i.e. 7th year from the cut-off date (31.03.2002).

(ii) Production targets as revised by ECL management considers extra production

through:

(a) Introduction of Continuous Miners at three places and Power Support Longwall

(PSL) Technology at Jhanjra underground mines.

(b) Expansion of Rajmahal OCP from 10.5 to 17.0 million tonnes per annum.

(c) Opening of new Greenfield OC projects at Chuperbhita for 4.0 million tonnes per

annum and at Hura-C for 3.0 million tonnes per annum.

(d) Improving production & productivity in UG mines amenable for mechanization

through increased deployment of Intermediate technology of SDLs & LHDs.

(iii) Improving production & productivity from OC mines through improved fleet

availability and outsourcing of coal transportation from face to coal handling plants

where necessary.

(iv) Generation of extra production of 23.25 million tonnes by operating 17 patch deposits

through outsourcing which would generate additional profits during 2003-04 to 2010-

11.


90

(v) Suspension of operations of such unviable mines, which were not considered safe or

where the reserves had depleted and would be exhausted within 2-3 years.

(vi) For the other mines, efforts would be made to reduce losses by increasing production

and productivity and through manpower rationalization.

(vii) Waiver of unsecured Loan of Rs. 519 crores and conversion of entire Current Account

Balance of Rs. 1532 crores as on 31.03.2003 into Equity Share Capital by CIL.

(viii) Investment of Rs. 2956.83 crores for a period of 10 years for augmentation of UG and

OC production through internally generated funds.

ix) CIL to provide fund to the extent of Rs. 304 crores to ECL to enable the company to

disburse an arrear Interim Relief (IR) wages for the period 01.07.2001 to 31.12.2003

as and once CIL decides to pay such arrear I.R. wages.

(ix) Downsizing of overall manpower through VRS.

(x) Rationalization of Wagon loading system through mechanism of wagon loading by

contractual means wherever feasible. 26

Second Phase of Actions taken by ECL management for revival:

1) Augmentation of Underground Production: During October 2005, company entered

into an agreement with M/S Joy Mining Machinery Limited, U.K., for introduction of one

continuous miner (CM) at Jhanjra Project on risk / gain sharing basis. For the left two

miners, a re-tendering was done. A global tender for introduction of Power Support

Longwall at Jhanjra was floated in February’ 2006. Company started procuring regularly

SDLs and LHDs for intermediate mechanization of mines and enhancing UG production.

Out of six UG projects envisaged during Xth Plan period, two projects started giving

production and three projects were at different stages of completion.

2) Augmentation of Opencast Production: Approval of Government of India was

obtained for Project Report for expansion of Rajmahal Project from 10.5 MT to 17 MT

per annum. A global tender was floated and two parties submitted their offers. For

Chuperbhita and Hura ‘C’ projects, approval of GOI was awaited. Project Report for

expansion of Sonepur Bazari from 3 MTY to 8 MTY was under preparation.

3) Operation of Outsourcing Patches: Company started operating seven outsourcing

patches in West Bengal and two in Jharkhand and produced 3.43 MT from these patches

which generated a profit of Rs. 327 crores during 2005-06.

4) Suspension of operation in unviable UG mines: At 7 places mining operation were

suspended during 2005-06 and at 2 places were expected to be suspended by 2006-07.


91

5) Waiver of unsecured loan and conversion of current account balance to Equity: CIL

Board approved waiver of Rs. 519 crores unsecured loan subject to ECL’s achieving all

other milestones as envisaged in Rehabilitation Scheme (March’2004). CIL Board also

recommended Government of India to infuse fund to the order of Rs. 1532 crores to

convert the current account balance of Rs. 1532 crores into Equity.

6) Continuing VRS to reduce overall manpower.

7) Starting e-Marketing: From May 2005 the company started e- auction, a customer

friendly system of sale of coal to meet the ever increasing demand of coal of new

industries, non- linked consumers, customers requiring coal above their permissible

quantity etc. 27

ECL management started implementing the sanctioned Rehabilitation scheme

(March’2004). During the year 2005-06, the company first time since its inception made

profit of Rs. 363.86 crores from its operations. That was possible due to the positive

growth in coal production of 14.18 %, the highest growth by any subsidiaries of Coal

India Limited during 2005-06. During 2005-06 the company surpassed all the previous

records in terms of production, productivity, capacity utilization, over burden removal,

dispatch and hence profit. 28

Again, for the first time, ECL made profits in two consecutive years by making operating

profits of Rs. 110.60 crores in 2006-07.

4.12.2.3 Latest Position

Different factors between 2004-05 and 2009-10 have affected the financial performances

of the company. The National Coal Wages Agreement (NCWA)-VII was signed on 15th

July’2005 and further NCWA-VIII was signed on January 24, 2009 for a period of 5

years from July 1, 2006 to June 30, 2011 for non-executive employees. Govt. of India

also announced revised salary for Board level and below Board level executives of

Central Public Sector Enterprises (CPSEs) from January 1, 2007 for a period of 10 years.

So the company informed the impact of the same to the Monitoring Agency, Board for

Reconstruction of Public Sector Enterprises (BRPSE), a newly formed Board created by

Sick Industrial Companies (Special Provisions) Act (SICA), 1985 for monitoring and

revival of sick industries, with a copy to BIFR. In response, BIFR, vide letter no.

18(4)/45/B-1/BIFR/ MON/ 04 dated June 25, 2009 advised the company to revise the


92

Draft Modified/ Revised Proposal (DMRP) submitted earlier on account of the passage of

time and changed industrial scenario.

Hence Revised Revival Plan was prepared. This was discussed in 230th Board Meeting of

ECL held on August 31, 2009 and September 1, 2009. However, in the mid-term

appraisal of 11th Plan meeting held at Planning Commission, production and investment

were revised. Further, coal prices were increased from October 16, 2009. Hence a revised

financial projection was made that was discussed in the Functional Directors’ (FD)

Meeting held on January 5, 2010. FDs advised to revise the UG production keeping in

view the safety and constraints of the mines. Hence a revised Draft Modified/Revised

Proposal (DMRP) (November, 2010) was prepared by the company for its much needed

revival taking into consideration certain strategies developed by it and the advice given

by the BRPSE. 29

Salient features of DMRP (November, 2010): 30

i) Cut-off date of the Scheme is 31.3.2010 and net worth of the company is slated to

become positive in 2016-17.

ii) Following strategic plans are envisaged in preparing the DMRP (November, 2010):

(a) Mining of coal blocked by departmental colonies by shifting existing workforce

from coal bearing area, to other areas in centralized colonies.

(b) All unviable underground working where there is no scope of mining in near

future and are within economic stripping ratio shall be mined by Open cast.

(c) Un-worked seams below the present big opencast workings shall be mined by

underground method through turnkey project possibly through outsourcing.

(d) Developing three more mega opencast projects of 5 to 7 million tones capacity.

(e) Augmenting underground production through intermediate technology and 100%

mechanization loading through SDL/LSD and Reducing working lead in UG

mines.

(f) Increasing evacuation and crushing capacity and improving grade mix.

(g) Fast execution of washeries construction.

iii) The revised production targets which provide for additional production through

introduction of Continuous Miners in identified UG mines, development of high

capacity UG mine and Powered Support Long wall on risk/gain sharing basis;

Expansion of potential OCPs, opening of two Greenfield Projects, augmentation of


93

UG production and productivity through SDLs and LHDs, improving production &

productivity from OC mines through proper fleet’s utilization and outsourcing.

ix) Suspension of operations of 10 loss making UG mines out of 26 identified, which are

not safe or where the reserves have depleted through manpower rationalization.

x) CIL’s waiver of Unsecured Loan of Rs. 519 crores and conversion of entire Current

Account Balance of Rs. 1532 crores as on 31.3.2003 to Equity Share Capital subject

to the fulfillment of physical and financial parameters set up for ECL etc.

4.13 Prospect of Turnaround of ECL

Whenever we talk about the prospect of turnaround of ECL, which is playing an

important role in meeting growing energy need of a country growing at a faster rate, we

can firmly believe that if the company performs in the way it is performing in the recent

years and if the path breaking strategies taken over by the company are properly

implemented, and full hearted support from all the stakeholders is timely availed, there is

no doubt that the company will make a turnaround in near future.

We have highlighted below some achievements and indicators which bolster the

possibility of turnaround of the company and to come out of BIFR 31

i) Path-breaking performance of the year 2005-06 giving a historical breakthrough to the

life of the company. This was the first time since its inception, company made profit

(Rs.363.86 crores) from its operation. It was possible mainly due to the growth in coal

production. During 2005-06, ECL surpassed all the previous records in terms of

production, over burden removal, dispatch, productivity, capacity utilization and profit.

ii) Performances of the year 2006-07 and 2009-10 again confirm the potentiality of the

company and its ability to make profits in the coming years. It is also known that the

company has earned profit of Rs. 249.38 crores in the year 2010-11 and Rs. 962.13 crores

in 2011-12, this is the highest ever profit since the inception of company.

iii) Improvement in the sale price of coal per tonne on account of the MoU with the

power sectors and e-marketing strategies. In the year 2009-10, sale price was Rs.1810 per

tonne of coal against cost price of Rs.1722 per tonne, i.e. 105.11% of the cost of

production. This trend also continued in the year 2010-11 and 2011-12. Sale price was

also higher in the year 2006-07. Actually initiatives for improvements in different areas

have started from the year 2005-06 themselves, which we have already discussed. A


94

graphical outlook is given below in Figure 4.4 which will reveal how sales price and cost

price have reacted during our study period. This trend also continued in the year 2010-11

and 2011-12.

iv) Reduction in manpower from 1,27,452 at the end of 2000-01 to 85,617 at the end of

2009-10, i.e. 67.18 % of the year 2000-01 is shown below in Figure 4.5. At the time of

inception of the company total manpower was 1,85,141.

v) Improvement in productivity (OMS) from 1.04 M.T. per man shift to 1.46 M.T. per

man shift in 2009-10, i.e. it has improved to 140.38 % of the year 2000-01. The OMS

during our study period can be observed in Figure 4.6 below. At the inception of the

company it was only 0.58 M.T. per man shift.

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

CPT 1271 1098 1151 1126 1415 1072 1174 1753 1964 1722

SPT 937 999 1024 1007 1161 1152 1184 1317 1385 1810

0

500

1000

1500

2000

2500

Rs.

per M

.T.

Figure 4.4: Overall CPT vs SPT during 2000-01 to 2009-10

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Manpower 127452 119712 114582 110132 105692 101474 98780 94943 90470 85617

0

20000

40000

60000

80000

100000

120000

140000

No o

f E

mp

loyee

s W

ork

ing

Figure 4.5: Decreasing Manpower

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

UG (OMS) 0.48 0.48 0.45 0.43 0.45 0.42 0.43 0.46 0.47

OCP (OMS) 4.92 4.89 5.3 5.3 6.61 7.03 5.04 6.42 7.29

Total (OMS) 1.04 1.03 1.1 1.07 1.29 1.34 1.07 1.33 1.46

0 1

2 3 4

5 6 7 8

Pro

du

ctiv

ity (

OM

S)

Figure 4.6: Improving Productivity


95

vi) Certain strategic plans adopted by the company which would boost up turnaround:

a) Maintaining current level of production by replacement of UG Loaders by small

loading equipment.

b) Use of Intermediate Technology by deploying SDLs/LHDs in more mines for

replacement of loaders and to meet the shortfall in loaders strength.

c) Introduction of Mass Production Technology, i.e. Continuous Miner at Sarpi,

Jhanjra, Bansra, Haripur, Khottadih, etc. on risk/gain sharing basis; and

development of high capacity UG mines at Tilaboni on risk/gain sharing basis.

d) Deployment of high productive Powered Support Longwall equipment at R-VI

seam of Jhanjra on risk/gain sharing basis.

e) Completion of development activities of identified projects for augmentation of

additional capacity from projects.

f) Expansion of Rajmahal Project from 10.50 Million Tonne (MT) per year to 17 MT

per year, Sonepur Bazari from 3.40 MT per year to 8 MT per year, Chitra from 1.22

MT to 2.50 MT per year, opening of Greenfield Projects at Chuperbhita for 4 MT

per year, Hura ‘C’ for 3 MT per year expansion of Mohanpur OC project from 0.45

MT per annum to 1 MT per annum, expansion of Khottadih OC project etc. and

improving productivity from other OC Mines by improving fleet availability and its

optimum utilization.

g) Additional production from small isolated outsourced patches.

h) Washed Coal Production from 2013-14 to increase profit by securing better sales

price, for which construction activities have already started.

i) Training and rationalization in manpower deployment considering its surplus.

j) Well planned strategy for acquisition of land and rehabilitation of villagers.

k) Concession from CIL in the form of waiver of Unsecured Loan of Rs. 519 crores

and conversion of Current Account Balance of Rs. 1532 crores into Equity Share

Capital.

l) Support from Government of West Bengal and Government of Jharkhand and

Support from various Trade Unions.

m) Enhancement of investment through internal accruals from 2010-11 to 2016-17.

n) Adherence to production target and implementation of various projects with

support from the Government.


96

vii) Other factors which bolsters the Revival process further:

a) Meeting NTPC’s huge requirement of coal for its Farakka and Kahalgoan Thermal

Projects through OC mines. Two more Greenfield projects at Rajmahal have been

earmarked for this purpose. From these projects, ECL will be able to supply 23

million tonne of coal per annum to NTPC in near future.

b) Identifying scope for reduction of costs in different areas. These are: cost of

overtime which amounts to 4-5% of total employment cost, free issue of coal to

employees, demurrage & undergrounding charges, Power & Fuel cost etc. ECL

Management has already undertaken some Energy Audit exercises, which have

shown some saving potential and it has also proposed to handover the distribution

system of Power at villages located close to the mines fully to the Govt. of West

Bengal to prevent Power theft. This would save power cost around Rs. 10 crores per

annum.

c) E-marketing: ECL has gained over notified price Rs. 153.67 crores from e-auction

during the year 2008-09, Rs. 112.25 crores in 2009-10. It is also known that ECL

has earned Rs. 131.57 crores in 2010-11 and Rs. 561.64 crores in 2011-12 (highest

since inception).

d) Exploration of CBM (coal bed methane) resources in ECL will be started to provide

an environmentally caring energy source to Eastern India.

e) Improvement has been observed in prevention of theft of coal and illegal mining.

f) Improvement in utilization of different equipments as compared to CMPDIL norms.

It is also known that ECL has prepared a roadmap for its revival. The roadmap has

envisaged that production would reach to 45.22 million tonne in 2016-17. The company

has already taken steps to sell high premium grade coal of Raniganj Underground mines

to power sector consumers at a price nearer to the imported price but more than e-auction

price. A MoU in this regard has already been prepared for selling of coal to different

power sectors. Further, as per National Coal Distribution Policy (NCDP), which has

introduced e-auction strategy, ECL will be able to sell coal at cost plus reasonable return

on investment or 100% above the notified price whichever is lower. This policy has a

great role in making profit of Rs. 333.40 crores in 2009-10 with a production of 30.06

million tonne of coal.


97

Thus, it is clear from the above facts that if the Company achieves its production

commitment as envisaged in the roadmap and succeeds in MoU sales to power houses,

there is no doubt that the company will be able to make its net worth positive to come out

of the ambit of BIFR and make it one of the model companies of Coal India Limited in

years to come. Further, in the current scenario of changing prices of coal it is not so far

that the company will bounce back to the glory, the process is already started which can

be visualized from the latest performances of the company. Of course, for that full co-

operation from Government of West Bengal and Jharkhand, Trade Unions, employees

and other stake holders are essential.

4.14 Conclusion

In this part of the study we have exclusively dealt with the historical background and the

profile of the Eastern Coalfields Limited i.e. our selected company for study and its role

as a model employer, its social services to the community, contribution to the Exchequer

and its role in generating electricity to the neglected development of the country. We have

highlighted strength and weakness of the company, its sickness and its untiring efforts to

come out of the BIFR. We have discussed different revival strategies time to time adopted

by the company for its survival and progress. Actions taken by the company in different

times for its survival and certain milestones achieved by the company are mentioned here

logically. We have also highlighted the Modified Draft / Revised Proposal (November,

2010) for the revival of the company and explained under what circumstances it is

prepared. At last we have discussed the prospect of turnaround of the company in near

future on the basis of our in-depth study and changing circumstances.


98

References:

1. http:// www.easterncoal.gov.in

2. Coal Directory of India (2007-08), Govt. of India, Ministry of Coal, Coal

Controller’s Organisation, Kolkata, p. I.5. and Glimpses of Coal India (2006), CIL,

Kolkata, p.1.

3. http:// www.easterncoal.gov.in and Draft Modified Revival Plan (Nov 2010), p. 5.

4. Centenary Directory (2007), A Ready Reckoner for Asansol-Durgapur Region,

Compiled and Published by Samir Ghosh, 1st ed. January, 2007, p.69 and http://

www.easterncoal.gov.in

5. Draft Modified Revival Plan (November 2010), p. 6 and http://



Compiled and Published by Samir Ghosh, 1st ed. January, 2007, p.69 and http://


7. Gupta, C.B. (1999): “Management and Organization”, S. Chand & Sons, New

Delhi, 4th Edition, p. 3.68.

8. Prakash, J., Rao, N. and Shukla, M. B. (2001): “Administration of Public

Enterprises in India”, Himalaya Publishing House, 6th Revised Edition, p. 108.

9. Draft Modified Revival Plan (November 2010), p. 5.

10. Ibid, p. 5-6.

11. http://www.worldcoal.org/coal/coal-mining/ Retrieved on 25-5-12

12. Annual Report & Accounts (2007-08), Eastern Coalfields Limited, p. 162.

13. Annual Report & Accounts of Eastern Coalfields Limited (Various Issues).

14. Centenary Directory ( 2007), a Ready Reckoner for Asansol-Durgapur Region,

Compiled and Published by Samir Ghosh, 1st ed. January 26, 2007, p.70.

15. Induction Material of CIL, COAL INDIA-induction08.pdf, Chap-1, p. 35.

16. Annual Report & Accounts of CIL 2010-11, p. 103.

17. Saksena, S. C. (2000): “Business Administration and Management”, Sahitya

Bhawan Publications, Agra, Revised and Enlarged ed., pp. 56-57.


Compiled and Published by Samir Ghosh, 1st ed. January 26, 2007, p. 74.

19. Annual Report of ECL for 2009-10, p. 33-34 and 2010-11, p. 28-31.

20. Annual Report & Accounts of ECL 2009-10 and Draft Modified Revival Plan (Nov,

2010)







99

21. Annual Report of ECL for 2009-10, p. 60-61.


Compiled and Published by Samir Ghosh, 1st ed. January 26, 2007, p.70. and Draft

Rehabilitation Scheme for ECL (June 2002), p. 24.

23. Draft Rehabilitation Scheme for ECL (June 2002), p. 30.

24. Ibid, p. 41.

25. Ibid, p. 98.

26. Draft Rehabilitation Scheme for ECL (June 2002), pp. 10-12

27. Annual Report & Accounts (2004-05 to 2009-10), Eastern Coalfields Limited.

28. Annual Report & Accounts (2005-06), Eastern Coalfields Limited, p. 3.

29. Draft Modified Revival Plan (November 2010), pp. 1-3, 17-18.

30. Ibid, pp. 18-19.

31. Annual Report & Accounts (2005-06 to 2011-12), ECL and

http://www.easterncoal.gov.in

32. Proceedings from “Workshop on Turnaround Stories of Coal Companies and Future

Strategies, 23rd September, 2006, Kolkata.


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