Document of The World Bank
FOR OFFICIAL USE ONLY Public Disclosure Authorized
Repot No. 5843-IN
STAFF APPRAISAL REPORT Public Disclosure Authorized INDIA
COAL MINING AND COAL QUALITY IMPROVEMENTPROJECT
March 25, 1987 Public Disclosure Authorized Public Disclosure Authorized
Industry Department
This dwoment has a restricted distribution and may be used by recipients only in the performance of their official duties. Its eontents may not otberwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS
Rs 1.00 - Paise 100 US$1.00 = Rs 13.0 Rs 1.00 - US$0.08 Rs 1 million - US$76,923
(Conversionsin the Staff Appraisal Report were made at US$1.00 to Rs 13.0)
FISCAL YEAR
April 1 - March 31
WEIGHTS AND MEASURES
1 British thermal unit (Btu) - 0.252 kilocalories 1 kilocalorie (kcal) m 3.97 British thermal units 1 gigacalorie (gigacal) - 1,000,000kcal I kilocalorie per kilogram - 1.805 British thermal uaits per (kcal/kg) pound 1 cubic meter (m3) = 1.308 cubic yards 1 kilowatt (kW) - 1,000 watts 1 megawatt (W) m 1,000 kilowatts 1 gigawatt hour (GWh)J 1,000,000 kilowatt hours 1 kilogram (kg) 2.205 pounds I ton of coal equivalent (tce) - 1 ton of coal containing 7,000,000 kcal 1 ton (t) = 1,000 kilograms
PRINCIPAL ABBREVIATIONSAND ACRONYHSUSED
BCCL - Bbarat Coking Coal Ltd. IISCO- Indian Iron and Steel Company BICP - Bureau of Industrial Costs and LCB - local Competitive Bidding Prices LIB - Limited International Bidding CCL - Central Coalfields Ltd. NCL - Northern Coalfields Ltd. CHP - Coal Handling Plant NEC - North-Eastern Coalfields Ltd. CIL - Coal IndiaLtd. NTPC - National Thermal Power Corporation CMPDI - Central Mine Planning and Design CM - Output per Manshift Institute SAIL - Steel Authority of India Ltd. CPRA - Coal PriceRetention Account SCL - Singareni Collieries Ltd. DOC - Department of Coal SECL - South Eastern Coalfields Ltd. ECL - Eastern Coalfields Ltd. TISCO - Tata Iron and Steel Company GOI - Government of India WCL - Western Coalfields Ltd. ICB - International Competitive Bidding FO OR0CIAL USE ONLY
INDIA
COAL MINING AND COALQUALITY IMPROVEMENTPROJECT
TABLE OF CONTENTS
Page
I. INTRODUCTION ...... I...... 1 II* THE SCTOR I II.THESECO ...... 1
A. Energy Resources ...... 1 B. The Coal Sub-sector ...... 2 C. Coal Development Prospects ...... D. Coal Sector Productivity and Efficiency ...... 5 E. Coal Marketing and Distribution ...... 7 F. Coal Quality Improvement Measures ...... 7 G. Coal Pricing ...... 10 H. Role of the Bank ...... 11
TII. THE BENEFICIARIES ...... 13
A. The Coal India Group ...... O.. 13 1. Organization and Management ...... 13 2. Operations . *...... * * ...... 15 3. Manpowerand Training *...... 16 4. Financial Position...... 17 B. South Eastern Coalfields Ltd ...... 19 C. Eastern Coalfields Ltd ...... 20
IV. THE PROJECT o...... 21
A. Project Objectives *...... 21 B. Project Description .u*...... 22 1. Gevra Mining Complex ...... 22 2. Sonepur-Bazari Mining Complex ...... 25 3. EnvironmentalProtection, Safety and Resettlement.. 29 4. Coking Coal Imports o...... o 30 C. Project Execution and Implementation ...o ...... 31
V. CAPITAL COSTS, FINANCING AND PROCUREMENT ...... 33
A. Capital Cost Estimates ...... 33 B. Financing Plan ...... 35 C. Procurement and Disbursement ...... 37
This report has been prepared by Messrs. J. E. Strongman,L. Maraboli, A. Covindassamy,and Mmes. H. Wu and M. Kutcher of the Industry Department. Word processing services were provided by Mrs. N. Nguyen.
This document has a rstrcted distribution and may be used by recipientsonly in the performance of their officid duties Its contentsmay not otherwise be disclosed without World Bank authorization. Page
VI. FINANCIAL ANALYSIS ...... 40
A. Coal India Ltd ...... *.....*...... 40 B. South Eastern Coalfields Ltd ...... 44 C. Eastern Coalfields Ltd ...... **...... 45 D. Gevra and Sonepur-Bazari Projects ...... 46
VII. ECONOMIC ANALYSIS ...... 48
A. Economic Rates of Return ...... 48 B. Resource Mobilization ...... see ...... 49 Co Otber Benefits ...... 50 D. Least Cost Development Program ...... 51 E. Project Risks ...... 52
VIII. AGREEMENT ...... 52
1. Energy Sector Owerview 2. Coal Demand and Supply 1984/85 - 1989/90 3. ECL and SECL Investment Portfolio 4. Fazal Coumittee Report-Summaryof Recommendations 5. Measures to LmproveCoal Quality 6. Coal Price Schecdule 7. Scope of Work for Assistance on Workshop Design 8. Scope of Work for Assistance on Manpower Planning and Training 9. CIL Financial Statements 1980/81-1985/86 10. Scope of Work for Assistance on Training InstituteDesign and Development 11. Resettlement Arrangements 12. Project Management Organization 13. ImplementationSchedules 14. Equipment Cost Estimates 15. Procurement Schedule and List of Bank Financed Goods 16. DisbursementSchedule for Bank Loan 17. Assumptions Usel in the Financial Projections 18. Pro Forma Financial Statements for CIL 1986/87-1993/94 19. Medium Term Efficiency Improvement Program and Performance Targets (1986-1990) 20. Pro Forma Income Statements for CIL Subsidiaries 1986/87 to 1993/94 21. Financial and Economic Rates of Return - Assumptions and Calculations 22. Documents Available in the Project File
CHARTS
I Gevra Mining Complex 2 Sonepur-Bazari Mining Complex
MAP
IBIRDNo. 19279R -iii-
INDIA
COAL HINING AND COAL QUALITY IDPROVEMENTPROJECT Loan and Project Summary
Borrower: India, acting by its President
Beneficiary: Coal India Ltd. (CIL)
Amount: US$340 million equivalent
Terms: Payable in 20 years, including 5 years of grace at the Bank 2tandard variable interest rate.
On-Lending Terms: US$180 million equivalent from GOI to CIL for a period of 15 years, including 5 years grace, at an effective interest rate of not less than 13.75Z per annum. CIL to Eastern Coalfields Ltd. (ECL) and to South Eastern Coalfields Ltd. (SECL) for a period of 15 years, including 5 years of grace, at an effective interest rate of not less than 13.75% per annum.
Project Description: The main objectives of the project are to increase the supply of thermal coal (to the power and industrial sectors) and coking coal (to the steel sector) and to improve the quality of coal available to consumers. The project is also designed to support CIL in its efforts to develop and implement efficiency improvementsand, thereby, improve its financial performance. The project will support the institutionaldevelopment of CIL by strengtheningits manpower planning and organization, by improving training, and by improving the maintenance of equipment through modernization of workshops. The project consists of the development of (i) the second phase of the Gevra mining complex to reach an output of 10 million tons per year (tpy) of low grade thermal coal to feed the Korba power plant; (ii) the construction of the Sonepur-Bazari mining complex to produce 3 million tpy of intermediateand superior grade thermal coal; and (iii) the importationof about 3.0 million tons of coking coal. By developing large-scale open-pit mines, India is pursuing a strategy of increasing coal supplies at least-cost while promoting diversification of mining technologies and improvements in productivity in the coal sector. By importing coking coal India is making-up for a shortfall in domestic supplies as well as improving the average quality of coking coal by blending low-ash imports with higher ash domestic -iv-
coals. The project faces minimal technical and marketing risks. Any possible financial risks are mitigated by (a) CIL's efforts to improve its efficiency and financial performance, (b) GOI's commitment to preparing a program that would assure CIL's future financial viability and (c) the high priority GOI places on developing India's coal resources in a timely and efficient manner.
Project Cost Estimate: (US$ mllion) -- Local Foreign Total (a) Mining Component Equipment & Spares 82.6 113.0 195.6 Coal Handling Plant 34.8 3.7 38.5 Land & Civil Works 63.3 - 63.3 Engineering 1.7 - 1.7 Pre-OperatingExpenditure 10.1 0.9 11.0 Technical Assistance - 3.0 3.0 Duties and Taxes 65.6 - 65.6 Base Cost 258.1 120.6 378.7
Physical Contingencies 14.3 6.3 20.6 Price Escalation 36.9 26.6 63.5 Working Capital 14.0 0.7 14.7 Total Project Cost 323.3 154.2 477.5
Interest During Construction 1.4 4.3 5.7
(b) Coking Coal Imports Component - 160.0 160.0
Total Financing Required 324.7 318.5 643.2
Financing Plan: (a) Mining Component Equity Government of India 188.6 - 188.5 CIL Cash Generation 53.1 - 53.1 Total Equity 241.6 - 241.6
Long-Term Debt Government of India 61.6 - 61.6 IBRD 21.5 158.5 180.0 Total Debt 83.1 158.5 241.6
Sub-total 324.7 158.5 483.2
(b) Coking Coal Imports Component Long-Term Debt IBRD - 160.0 160.0
Total Financing Required 324.7 318.5 643.2 __ _-_ Estiuated Disbursements:
-(US$ million) Bank FY 1988 1989 1990 1991 1992 1993 1994
Annual 91.8 110.8 36.6 37.2 32.2 26.8 4.6 Cumulative 91.8 202.6 239.2 276.4 308.6 335.4 340.0
Economic Rate of Return:
Gevra 32Z Sonepur-Bazari 19Z
Map: IBRD No. 19279R I. INTRODUCTION
1.01 The Government of India (GOI) has requested a Bank loan of US$340 million to assist in the financing of a Coal Mining and Coal Quality Improvement Project. The project has three main components: (i) the Gevra mining complex which comprises a 10 million tons per year (tpy) open-pit mine and associated infrastructure in the state of Madbya Pradesh, which will be constructed and operated by South Eastern Coalfields Ltd. (SECL); (ii) the Sonepur-Bazari mining complex, which consists of a 3.0 million tpy open-pit mine and associated infrastructure in the state of West Bengal to be operated by Eastern Coalfields Ltd (ECL); and (iii) the import of about 3.0 millicon tons of coking coal. Both SECLand ECL are subsidiaries of Coal India Ltd. (CIL), a GOI undertaking. The project fonsspart of the Government strategy to ensure timely supplies of adequate quality coal for consumers in India. In particular, the project will provide for improvement in the quality of both thermal and coking coal supplies. The project will also support GOI's strategy to develop large-scale economically efficient mining operations, as well as efficiency improvements in CIL and efforts by both CIL and GOI to reestablish CIL's financial viability. The proposed project was submitted by GOI to the Bank in September 1984. It was appraised in March 1985 and post-appraised in June 1985.
II. THE SECTOR
A. Energy Resources
2.01 India is well endowed with coal resources and has moderate hydropower potential; hydrocarbon reserves are only modest (Annex 1). Total coal resources (excluding lignite) are estimated at over 127 billion tons, of which 60 billion tons are considered technically and economically recoverable at present. Coal productionin 1985/86was 153.0 million tons. Exploitablehydropower potential is estimatedat 89,930MW, against a 1985/86generation from all sourcesof 166.6TWh. Recoverablereserves of oil are estimatedat 187 milliontons on-shoreand 324 milliontons off-shore. Associated and non-associated gas reserves are estimated at about 478 billioncubic meters (equivalentto 397 milliontons of oil). Productionin 1985/86was about 29 milliontons of oil and about 7.2 millioncubic metersof gas.
2.02 Energyuse in India is among the lowestin the world. Per capita consumptionof energyaverages 210 kg (coal equivalent),compared with 680 kg in China and about7,500 kg in industrializedcountries. Over the past three decades, the composition of fuel consumption has increasingly shifted from the use of non-commercial fuels, such as vegetable and animal waste, to commercial energy resources. At present, non-commercial fuel accounts for less than 40% of total energy consumption, while coal accounts for 32Z, oil and gas about 20% and primary electricityfor 8Z.
2.03 The increasing reliance on commercial fuels has stretched the capabilityof the energysector to meet the energyneeds of the economyand has placeda heavy burdenon the balance of payment. Recognizing the -2-
importance of the energy sector to India's ongoing economic development, the Government has established three main objectives, namely: to fully develop indigenous energy resources, to improve the efficiency of energy utilization and to limit the use of oil products to end-uses in which economic substitution by other forms of energy, particularly coal, is not possible. In line with this policy the Government places particular emphasis on the development of the coal industry and the exploration for oil and gas. Through pricing policies and rationing, the Government has reduced the use of oil products, where this has been technically and economically feasible, and has encouraged the use of coal. To reduce power shortages which have been prevalent for many years and to overcome, at least in part, the transportationproblem associated with the greater use of coal, the Government has also embarked upon a major construction program for coal based thermal power plants located near the mines.
B. The Coal Sub-sector 1;
2.04 Coal is and will continue to be India's most abundant domestic energy resource. In 1985/86 coal production reached 153 million tons making India the 6th largest coal producer in the world. Coal presently accounts for about 60Z of all commercial energy produced in India and even allowing for good progress in new oil and gas discoveries,coal's contributionis expected to remain at more than 50% over the next decade. India's vast coal reserves will be sufficient to meet the country's needs for the next 100 to 150 years at least.
2.05 India is a low-cost coal producer. Operating costs average US$13 per ton, while capital costs for mine development are in the range US$20 to $60 per ton of annual output for new open-pit coal mines (includingmine-related infrastructure but excluding other infrastructure, such as rail trunk lines). There is considerablevariation in mining conditions and costs among regions. The older coalfields in Bihar and West Bengal, which contribute 55% of coal production including all of the prime coking coal, have mostly deep underground mines in difficult geological conditions and high operating costs (in the order of US$18-20 per ton). Operating costs are generally lower for newer mines in other states such as Madhya Pradesh, Orissa and Maharashtra.where mining conditions tend to be easier; operating costs are in the order of US$10-12 per ton for undergroundmines and as low as US$6-8 per ton for large-scale open-pit mines. Overall, only China, South Africa and Western US mines are competitivewith India regarding average minehead coal production costs.
2.06 Coal accounts for more than half of commercial energy consumption in India. Roughly 70% of the annual coal production are consumed by power stations, steel, cement and fertilizer plants and the Indian Railways. The number of consuming units is small and the relationship between them and
1/ Fuller background details on the sector and on the CIL group of companies is provided in India Coal Sector Report (3601-IN, September 1982), Dudhichua Coal Project SAR (4714-IN, February 1984) and Jharia Coking Coal Project SAR (5336-IN,February 1985). -3-
the coal producers is close. The remaining 30Z of coal output are consumed by a large number of small industrial plants, such as jute mills, paper mills, textile mills and chemical plants, and countless buyers of soft coke for domestic use.
2.07 The northern, western and southern states of India account for significant share of coal consumption resulting in substantial coal transportation from coalfields in West Bengal and Bihar to consumers in Delhi, Haryana, Uttar Pradesh and Punjab and from coalfields in Madhya Pradesh and Bihar to consumers in Gujarat, Maharashtra and Rajasthan. This regional imbalance in coal production and demand places great stress on the railways. Coal makes up more than 35% of the railway's total freight traffic and more than 75Z of coal output is shipped to consumers by rail. Road transport and, to a very limited extent, coastal barges and ropeways account for the remaining 25%. Given the projected growth in supply and demand, the regional imbalance is expected to become more acute by the end of the Seventh Plan. Under the Dudhichua Coal Project (Loan 2393-IN, February 1984), a coal transportationstudy has been undertaken to address the capabilitiesof the rail system for meeting the growing transportation requirementsof coal. The study addresses the issue of how to introduce state of the art rail technology for coal movement and how to improve the operationalefficiency and capacity of the existing coal transportation system and the adequacy of present management and coordinationpolicies regarding coal movement. The results of the study include specific recommendations regarding the improvement of (i) procedures and lineside facilities for loading and unloading coal railway wagons, (ii) railway motive power and rolling stock for coal movement, (iii) certain sections of railway line and marshalling yards, and (iv) coal linkage and distribution arrangements. The recommendationsare now being considered by the various Ministries and organizations involved following which implementation decisions will be taken.
2.08 The coal industry is intensifyingits exploration efforts in southern and western areas, where reserves are explored in response to the rapid growth of demand by consumers in western India, particularlyin the Bombay area, and in Gujarat. To meet the need for new coal developments in adjacent locations, coal explorationpriorities have been shifted to the states of Maharashtra and western Madhya Pradesh. This is a sound approach because it is expected to make more readily available, in the coming decade, coal supplies for western markets without the long transportation linkages from the distant eastern coalfields. However, the quality of coal reserves varies widely and both reserves and supplies of high quality thermal and coking coals are limited and tend to be concentratedin eastern India. For the most part, therefore,new coalfields will tend to be of lower grade coal.
2.09 Over 90% of coal productionin India is in the hands of Coal India Ltd. (CIL), which is wholly owned by GOI. CIL has seven subsidiaries,of which six are producing companies, Eastern Coalfields Ltd. (ECL), Bharat Coking Coal Ltd. (BCCL), Central Coalfields Ltd. (CCL), Western CoalfieldsLtd. (WCL), Northern Coalfields Ltd. (NCL), South Eastern Coalfields Ltd. (SECL), and one is a mine planning concern--Central Mine Planning and Design Institute (CMPDI). Four of these subsidiaries -4-
(namely ECL, BCCL, CCL and WCL) were establishedin 1975. The other two (SECL and NCL) were established in 1986 (see para. 3.05). Coal production also takes place at North Eastern Coalfields (NEC) in Assam which is an operating division of the CIL holding company. In addition to CIL, there are three other coal producers and one major lignite producer. The coal producers are Singareni Collieries Company Ltd. (SCL) which is jointly owned by the Central Government and the State Government of Andhra Pradesh, and captive coking coal mines of the privately-ownedTata Iron and Steel Company (TISCO) and the Government-owned Indian Iron and Steel Company (IISCO). Lignite production in India is in the hands of the Government-owned Neyveli Lignite Corporation (which produced nearly 7 million Lons in 1985/86), and lignite production has recently started by a state-owned company in Gujarat. The Department of Coal (DOC), Ministry of Energy, is in charge of policy making in the coal and lignite sector and of monitoring and coordinatingproduction, distributionand prices of coal, including the production targets, annual investment and operating budgets of the Government-ownedcoal companies. The Planning Commission reviews the various production and consumption targets and investment programs. It also approves linkages between new mines and major consumers.
C. Coal Development Prospects
2.10 GOI's coal development strategy emphasizes the need to ensure timely and adequate supply of satisfactoryquality coal with economically efficient mining and transportationsystems. Specifically,GOI is now concentrating on a multi-track coal development strategy:
(i) rapid expansion of lot-cost thermal coal production through developing large coal fields with shallow deposits, using increasinglyefficient surface mining technologiesand equipment while paying due regard to coal quality, safety and environmental protection;
(ii) increasing the supply of coking coal (and thereby reducing the need for imports) through rehabilitatingand mechanizing deep underground prime coking coal collieries and, where possible, developing mechanized, open-pit coking coal mines;
(ii-) lowering production cost and improving the productivityof underground mining operations by new initiatives to improve labor productivityand reduce surplus employment in older, labor- intensive underground mines; by acceleratingthe introduction of mechanized mining approaches, where appropriate;and by debottleneckingefforts including improving mine transport systems to match increased production capacities;
(iv) improving coal quality to consme-rs by establishingstricter quality controls, of more coal handling plants (for thermal coals), improved washery operations (for coking coals), as well ae improved adherence to mine-consumer linkages; -5-
(v) improving the supply of coal from existing coalfields (as well as reducing its cost) to distant consumers through rationalizing mine-consumer linkages, streamlining coal transportation systems and emphasizing coal exploration and development in western and southern India to reduce the average hauling distance and introducing mechanization,where appropriate;and
(vi) refining the current methods used in assessing the coal requirements of both major and minor coal users to reduce the costly build-up of pithead stocks.
2.11 Coal supply and demand are projected to increase at an annual growth rate of about 9Z during the Seventh Plan (compared with 5.6Z per year during the Sixth Plan2/) which will result in a total productionand consumption of about 225 million tons and 232 million tons respectivelyin 1989/90 (Annex 2). The gap between supply and demand will be provided by coking coal imports (3-4 million tons of imported coking coal with 10 ash being approximately equivalent to 5-7 million tons of domestic coking coal with 21X ash). During the period of the Seventh Plan (1985/86 to 1989/90), CIL expects to implement an investment program of about Rs 53 billion (US$4.0 billion) in 1986/87 terms, of which about 20% would be foreign exchange requirements.This represents an expansion, in real terms, of 30% over investment expendituresin the Sixth Plan and is due to increases in the numbers and scale of projects ana in their implementationcosts. The program is very ambitious but can be achieved provided CIL continues improving its project implementationprocedures and, once improvements are demonstrated,ensures their dissemination throughout the CIL Group. The program consistent with GOI's budgetary allocations for the sector. An earlier review of CIL's overall investment program revealed that with a few exceptions,the investment program is following the least cost development path. That finding has been verified by a detailed review of the investmentportfolios of the project executing agencies, ECL and SECL (Annex 3).
D. Coal Sector Productivity and Efficiency
2.12 At the time of nationalization CIL inherited a very large labor force, with low productivity. CIL's original strategy had been to improve its efficiency through (a) the extensive reconstructionof the old undergroundoperations including the introductionof highly mechanized mining techniques and (b) the selective development, wherever possible, of large-scale open-pit mines. CIL is presently undertaking a program to rationalize its underground production through the reorganization of small mines into larger units including the introduction of some degree of mechanization for both coal extraction and transportation. This program is a sound strategy and is expected to contribute to reducing unit production costs, as well as providing increases in production. There are presently 24 such reorganization/mechanization projects in different stages of implementationthroughout the CIL Group. Underground production from mechanized mines is expected to increase to about 35% in the early 1990s
2/ By comparison GDP growth was almost 5% per year. -6-
from 5Z at present. A program to improve the design, management and operating procedures of highly mechanized underground mines is being undertaken by BCCL urder the Jharia Coking Coal project.
2.13 While the program to improve efficiency by mechanizing underground operations offers much promise for the future, a more immediate problem is that labor productivity as measured by output per manshift (OMS) in existing underground mines has been declining (from 0.57 in 1978/79 to 0.5_ in 1985/86 for CIL) partly due to a lack of efforts to improve efficiency in the unmechanized undergroundmines. In order to rectify this situation, CIL has implemented a number of initiativesincluding (i) a hiring freeze for existing undergroundoperations, (ii) disciplinary measures (including firing workers) to reduce absenteeism among key workers such as loaders, (iii) no longer providing jobs to near relatives of retirees, (iv) debottleneckinginvestments to increase production in a particular colliery from the same workforce, (v) reduced hiring of resettled land owners, (vi) transfer of underutilized labor from old mines to new projects, and (vii) training and upgrading of skills. A program of measures to improve the performance of loss-makingmines for ECL hE been agreed with the Bank (para. 3.18) and a Medium Term Efficiency Improvement Program was prepared in December 1986 and is just starting to be implemented by CIL (para. 6.10). In addition, new measures to improve work practices and encourage voluntary retirement of workers are also under preparation and other measures are recommendedin a recent report by the Committee on Eastern Coalfields (see para. 3.18).
2.14 CIL also has a number of initiatives to improve the efficiency of it6 open-pit mining operations. CIL has progressivelymoved to larger equipment sizes and is now using 85-ton dump trucks and 10 yd3 shovels in many operations and is introducing 120-ton and 170-ton dump trucks and 20 yd3 shovels at selected projects. For large-scale open-pit mines, output per manshift is not a meaningful measure of productivitybecause it can vary widely from mine to mine depending on many factors including, importantly, the stripping ratio (i.e. the amount of overburden to be removed to produce one ton of coal) and the distance from the point of excavation to where the overburden is dumped or the coal unloaded. Instead, efficiency is generally measured in terms of the availability and utilization of equipment. Equipment availabilityreflects the amount of out-of-servicetime due to repair and maintenance. Equipment utilization reflects the amount of time that available equipment"is not in use due to shift changes, safety checks, queueing for fuel, tea-breaks etc. In the past few years CIL has taken several steps to improve its open-pit efficiency. Even so, CIL's equipment availabilityand utilization are presently still below internationalstandards due to poor maintenance procedures, spare part shortages, inadequate workshop facilities and ineffective work practices. CIL is giving high priority to improving its open-pit efficiency including using foreign technical assistance to improve maintenance and operating procedures (which is financed under the Dudhichua project), introducing -hot seat' changes for major equipment and using overlapping shifts to improve utilization, and arranging for suppliers to -7-
open spare parts depots in major coalfields. In addition, new initiatives are being prepared to improve the availability of imported spare parts and to deal with the problem of equipuent which is out of commission due to the backlog of repairs.
E. Coal Marketing and Distribution
2.15 The distribution of coal in India takes place within a set of administrati-onprocedures which are set by the Government. Under these procedures, each major coal consumer (thermal power stations, cement, fertilizer and steel plants, as well as the railways) is linked to one or more collieries. These linkages, as well as the allocation of coal supplies, are then reviewed in quarterly meetings of the Special Linkage Committee and in monthly operational meetings between consumers, the railways and the coal companies. While these linkages do attempt to match new coal consumers with new mines, steadily rising pithead stocks and persistent complaints from major consumers about inadequate coal qualities or late shipments have led to growing concern within the Government about the efficiency of this system. In its review of the Sixth Five Year Plan, the Planning Commission proposed the adoption of a systems approach' in determining coal production, transport, consumption and stocks. Since the increase in pithead stocks (which reached a peak of 30 million tons in March 1985), was to a large extent due to overly optimistic demand projectionsfor several large consuming sectors, the Planning Commission emphasized the need for irnprovements in the demand forecasting technology that is currently used. Under the Dudhichua Coal Project, the DOC has commissioneda study to review the current practice of establishing consumer-producerlinkages, identify weaknesses in the current system and suggest improvements with the help of a linear programming model that would cover the entire system of existing linkages. The linkage study will use data and results from the coal transport study (para. 2.07). Data collection is now complete and various moduilesare operational. Initial runs of the complete model are being made and the identificationof sub-optimal linkages and initial proposals to realign linkages are expected by May 1987.
F. Coal Quality Improvement Measures
2.16 A major issue facing the coal industry is the unreliable and deteriorating quality of its coal. This leads to major additional operational and maintenance expenditures by its major consumers (the steel industry, the power sector, cement and fertilizer plants), due to increased system inefficienciesand plant downtime as well as higher transport cost (since consumers need to ship greater quantities of coal to make up for lower coal quality). For coking coal supplies, CIL is implementing a set of short and medium term measures established under the Jharia Coking Coal Project to improve the quality of prime coking coal supplies and, in particular, to lower the ash content. The short term initiatives include (i) testing of certain disputed coals by Central Fuel Research Institute; (ii) elimination of substandard coals and more intensive picking arrangements;(iii) deployment of more experienced and qualified personnel for washery operation; (iv) a technical assistance effort to improve the -8-
performance of the prime coking coal washeries; and (v) utilization of premium quality Assam coal for blending purposes. Medium term measures include (i) increased capital expenditure for washery improvements, (ii) installation of rotary breakers at certain washeries; (iii) upgrading of slurry by froth flotation at Dugda I and II; (iv) modification to Patheridih Washery; (v) trials with prescreening jigs at Barora Washery; and (vi) development of new areas of superior quality prime coking coals.
2.17 Projections prepared at the time of the Jharia Coking Coal Project indicated that coking coal imports of about 1.8 million tpy would be required to make up an expected shortfall between the availability of and requirement for prime coking coal between 1986/87 and 1989/90. As part of the efforts noted in para 2.16, certain seams of substandard coking coal have been recently excluded from feed to the washeries with the result that the shortfall is now expected to be about 3 million tpy of prime coking coal. By comparison, actual imports averaged about 1.5 million tpy in 1984 and 1985. The imported coal has an average ash content of about 10Z compared with about 21% for domestic prime coking coal, thus the imports also assist in improving the average quality of washed coal feed to the steel plants. A monitoring program is being established at each of the blast furnaces using the imported coal to quantify the benefits in order to optimize the blend.
2.18 With regard to thermal coals, the most frequent complaints refer to (i) the supply of oversized coal, (ii) the presence of extraneous material, such as shale and stone, and (iii) the increasing ash content _' both raw thermal coal and washed coking coal. While part of the deterioration of thermal coal quality is due to the development of new coalfields with low grade coal, it is also affected by (i) the shift towards open cast mining, (ii) the increased mechanization of coal mining, Ciii) the lack of coal handling plants, (iv) the comparatively poor performance of the two coal companies (ECL and BCCL)P *hich are the major suppliers of superior quality coking and non-coking coal, and (v) at times poor coordination between the mining companies, the transport companies, mainly the Indian Railways, and the power sector which results in coal shipments being diverted to unlinked users. &
2.19 In July 1982, GOI set up a high level committee (the Fazal Committee), representing the mining, railways and power sectors, to study these and related issues in the power sector. The committee submitted its report in late 1983 and its major recommendations which relate to the railway and power sectors, as well as the coal industry, have been accepted by the Government (Annex 4). GOI has agreed to provide the Bank with a detailed implementation schedule for the Fazal Committee recommendations by March 31, 1988. In the meantime, a number of the recommendations, which are directly under the control of CIL, have been implemented by CIL who is making a concerted effort to eliminate consumer dissatisfaction with the dispatch and quality of both thermal and coking coals (Annex 5). In line with the recommendations of the Fazal Committee, CEL has developed a two -9-
track product improvement program concentrating on (i) increasing quality control through greater supervision of mining operations; and (ii) increasing the proportion of coal that passes through coal handling plants 3 / (CHPs), where it is screened, crushed and sized and then is subject to weighing on dispatch (through weighbridges).4/ A critical element in the quality control program is the linkage of the performance evaluation of each colliery manager to consumer complaints that are attributable to his colliery. The program also established a Quality Control Department in each subsidiary of CIL to coordinate the monitoring of coal quality of each mine under its jurisdiction, to advise mine management on how to respond to consumer complaints and to report weekly to top management on its actions. Under its CHP and weighbridge program, CIL has a staged plan and budget to eventually have all its product handled and weighed on site. Power stations complaints regarding unsatisfactorycoal quality declined from an average of 50 per month in 1984/85 to 12 per month in 1985/86 but increased to 28 per month in 1986/87 (of which three per month are complaints at the loading point and 25 at the destination).
CIL - Complaints Recei'ed from Power Stations Regarding Coal Quality (Average l,imberof Complaints per Month)
1984/85 1985/86 1986/87
50 11 28
Source: CIL.
2.20 Traditionally, coal producers have supplied coal to consumers without specific supply contracts. In the first half of 1985 CIL concluded bulk supply contracts with almost all State ElectricityBoards (SEB) and with the National Thermal Power Corporation (NTPC). In the years ahead CIL intends to conclude such contra.ts with major buyers in other sectors. These contracts provide for (i) payments to be based on the results of joint sampling, (ii) bonuses or penalties in case the quality of the coal shipment differs from the grade stipulated in the contract, and (iii) invoicing of customerson dispatch of each consignment (with the SEBs) or on a daily basis with NTPC. The contracts provide for joint sampling of the coal (by CIL and the concerned power house) and for penalty/bonuses to apply if the coal quality moves into a different grade than that specified in the linkage. Certain improvements to these contracts are being contemplated;the most important are (i) the use of automatic joint sampling at the delivery point, considering that coal shipments are
3/ In 1985/86, 58Z of India's total coal production was processed by 50 major and 100 mini-coal handling plants operating in the subsidiaries of CIL. The Government plans to increase the share of coal being processed in CHPs to 75% by 1986/87, 85% by 1987/88 and about 90% by the end of the Seventh Plan period. 4/ CIL is currently carrying out a test program to determine the most cost-effective technology for de-shaling raw coal. -10-
frequently diverted from their originally intended destinations; (ii) the use of analytical procedures for the determination of the moisture content of coal as delivered based on its -free moisture content' rather than on its 'equilibrium moisture content- 5 /; (iii) the introduction of alternative formulations of the current bonus/penalty pricing structure, such as smaller quality ranges or bonuses/penalties using a sliding scale, and (iv) the provision of price incentives for beneficiation of non-coking coal. The joint sampling arrangements in the contracts have been an important element in identifying unsatisfactory coal quality and in monitoring CIL's progress in improvinig coal quality. CIL has confirmed that it will review the usefulness of the coal contracts by October 1, 1987 and will exchange views with the Bank shortly thereafter on possible improvement to the contracts.
G. Coal Pricing
2.21 Coal prices are set by the Government on a pithead basis. The Government's basic pricing policy for public enterprises is to ensure financial viability and to provide for a reasonable rate of return on capital employed under conditions of efficient operation. GOI has agreed to review coal pr-ces periodically in line with the above pricing approach and with agreements made under the Dudhichua and Jharia projects to ensure the financial viability of CIL and provide increasing resource mobilization in the sector. The present coal price schedule is for seven grades of thermal coal based on useful heat value and eight grades of coking coal based on coking qualities and ash content as shown in Annex 6. Consumers also pay certain statutory levies and sales taxes, which :verage 12-30% of the pithead price (Annex 6) as well as transportation costs to the point of consumption. Coking coal prices receive a premium over thermal coal which takes account of the relative scarcity and higher costs of production for coking coal as compared with thermal coal. The differentials for higher grades of both coking and thermal coal have been substantially increased compared with lowr- grades of coal in the recent price increases. This is an important imp. ;ement as it brings the relatively scarce better grades of coal more in liae with their opportunity cost. A separate schedule is also provided for high grade thermal coals from the coalfields of ECL reflecting its better quality.
2.22 Recognizing that mining costs are relatively higher in West Bengal and Bihar (where the coalfieldsoperated by BCCL and ECL are located) than in other regions due to difficult mirlng conditions, infrastructureconstraints and other factors beyond the producer's control, in March 1983 the Government introduced a retentioq pricing system for the CIL group.6/ Under this system, each CIL subsidiary is annually assigned an internal accounting price based on estimated production costs and
5/ The -equilibriummoisture content- refers to the intrinsic moisture contained in coal and does not reflect increases in the moisture content due to careless use of water sprays to reduce coal dust or exposure to rain during stocking, loading or transport. 6/ This pricing change, which is implemented through the Coal Price Retention Account (CPRA), was 'n line with the recommendationin the Coal Sector Report (3601-IN), September 1982. -11-
efficiency standards for that subsidiary. These production and costs standards are revised each year assuming improvements in operating performance. They are, therefore, designed to induce more cost efficient operations. So far, the retention pricing system has been partially successful in stimulating the management of ECL and BCCL to improve performance and reduce losses. However, the year-to-year adjustments in retention prices appear to be made somewhat on an ad-hoc and arbitrary basis. Further work presently being undertaken by the Bureau of Industrial Costs and Prices (BICP) on the coal industry's cost structure (see para. 2.23) should provide the basis for improving the retention pricing system.
2.23 Since nationalization of the coal industry in 1975, coal prices have been revised on seven occasions including the most recent price revision, which took place in January 1986. As a result of these increases, average coal prices approach long-run marginal cost for non-coking coals and import parity for coking coals (after allowing for adjustments for port handling, inland freight and quality differentials). Therefore they seem to be at an appropriate level in terms of economic efficiency. The last two increases (in January 1984 and January 1986) were based on the recommendationsof reviews carried out by the Bureau of Industrial Costs and Prices (BICP) and led to price levels broadly In line with efficiency pricing criteria. More recently the Government has again requested the BICP to undertake a detailed study of coal pricing. BICP's basic tasks included examining the efficiency of various coal mining operations to derive production cost standards, and reviewing alternative principles and procedures for setting minehead coal prices and producer retention prices. The results of this work are expected in mid 1987. In addition, the Department of Coal is considering possible improvements in the approach to prices for washed coking coal which are presently negotiated between CIL and SAIL based on raw coal prices and normalized washing costs.
H. Role of the Bank
2.24 Since energy will continue to be a critical factor in India's economic development, and since coal will continue to provide about half of India's incremental commercial energy products to the year 2000 and beyond, GOI has requested the Bank to include a series of coal projects in the lending program. The strategy so far has been to concentrate on the CIL group of companies given their importance to the sector and to undertake at least one lending operation to develop a new highly mechanized mine in a major coalfield with each of CIL's coal producing subsidiaries. Such projects are considered to have high payoffs since they involve important improvements in efficiency through the transfer of state-of-the-art mining technology to CIL, as well as relatively large increases in production. In the context of these lending operations, the Bank group addresses institutional improvementsin the coal industry, as well as sector-wide issues (such as coal pricing) and sector coordinationissues regarding coal transport and the quality of coal, which are closely linked to the performanceof other sectors (railways, power and industry) and the economy as a whole. More specifically,the Bank group's assistance in the coal sector is focused on: -12-
(a) operational efficiency-to improve the efficiency of coal mining operations through the introduction of state-of-the art technology for the development of new large-scale open-nit and underground mines, as well as upgrade existing labor-intensive underground mines through the introduction of efficient work practices and appropriate intermediate technology;
(b) institution building-the aim is to strengthen the management and financesof the coal industry and ensure the long-term financial viability of CIL by the introduction of improved management and cost control practices and by greater emphasis on internal resource mobilization, appropriate pricing policies and investment allocations based on the principle of least cost development;and
(c) intersectoralcoordination-to achieve greater efficiency in the distributionand use of coal resources through the introduction of measures to (i) enhance coal quality, (ii) reduce the cost of coal transport, (iii) increase the reliability of coal shipments and (iv) ensure the availability of adequatecoal transport capacity.
2.25 The Bank group's involvement in the coal sector began with a loan for a coking coal project to the Indian Iron and Steel Company (IISCO) for US$35 million (Loan 290-P-IN, dated August 9, 1961). The Bank group resi'ed its activity in 1980 with a review of India's coal sector (India Coal Sector Report No. 3601 IN). This review addressed issues related to coal marketing, pricing, investment and financing. It also facilitated the policy dialogue with GOI on coal pricing and resource mobilization issues, the results of which are detailed in the Country Economic Report (No. 4395-IN, dated April 11, 1983). Specific measures affecting coal pricing and coal transportation were included in the Dudhichua Coal Project (Loan 2393). This project also provides for the institutional support of CIL in the operation of large scale open cast mines, project management and budgeting and cost control. The project is being implemented on schedule. The Jharia Coking Coal Project (Loan 2498) supports a sectoral program a*med at improving the quality of domestic coking coal supplies to the steel industry, as well as for further institutional strengthening of CIL in the design, management and operating procedures of highly mechanized underground mines and in addressing specific issues in shaft sinking and stowing to prevent surface subsidences. Delays have occurred in project implementation due to slippage in land acquisition and in shaft sinking. The shaft sinking difficulties are largely resolved but land acquisition progress is slow. CIL is working with state and local officials to find ways of expediting the land acquisition.
2.26 GOI has proposed further Bank group financing of projects to increase the production of both thermal and coking coals over the next several years. The Coal Mining and Coal Quality Improvement Project is the third of these operations which are designed to support GOI's development -13-
strategy and CIL's efforts to increase production, improve efficiency and reestablish its financial viability. This project brings the Bank's involvement to two more of CIL's operating subsidiaries (SECL and ECL) as well as to two more major coalfields (Korba and Raniganj). The project provides for sector-wide improvements in thermal coal quality and for improvement of coking coal supplies to the steel industry by blending high quality imported coking coal with lower quality domestic supplies. The project also provides for institutional development for the CIL group in training and manpower planning and to ECL regarding the introductionof highly mechanized open-pit mining (ECL presently has little mechanized open-pit mining). The project supports efficiency improvements in CIL (including, in particular, ECL's old), underground mining operations where labor productivity is extremely low with a view to improving CIL's financial performance. Future lending is expected to comprise further projects to develop large highly mechanized mines in important new coalfields (such as Talcher or Karanpura) as well as to help rehabilitate old, inefficient underground mining operations (especiallyin ECL and BCCL) to improve efficiency and reduce costs. It is also planned to progressively update the earlier coal sector study which may lead to sector-related lending. Lending operations, together with sector work, will strengthen the policy dialogue that has been established regarding sectoral issues such as coal pricing, transportation, distribution, and coal quality and will also support the implemen.ation of the results of studies undertaken under earlier projects to provide institutional improvements within CIL.
III. THE BENEFICIARIES
A. The Coal India Group
1. Organization and Management
3.01 The Coal India group was established in 1975, as a holding company (CIL) with five subsidiaries. CIL operates -:emi-autonomously under the direction of an 11-member Board of Directors which is headed by a Chairman-ManagingDirector appointed by the President of India. CIL's senior management is appointed by GOI. In addition to setting general policies for its subsidiaries and undertaking other managerial functions typical of a holding company, CIL directly manages the financial resources of the Group overseeing the investment program and arranging for all long-term financing. CIL handles procurement of major capital equipment for its subsidiaries as well as all foreign procurement. It is also responsiblefor administeringthe coal retention price system for the purpose of internal accounting. For these reasons, CIL was designated as a primary beneficiary of the previous two Bank loans and the same arrangement is recommended for the proposed Project.
3.02 CIL subsidaries operate under the direction of a Board of Directors, headed by a Chairman-Managing Director, appointed by the President of India. The subsidiaries' senior management down to the -14-
Director level is appointed directly by 'OI. Within the subsidiaries, mining is organized into small regional areas, each one under the supervision of an area manager. Presently the subsidiaries operate nearly 400 mines organized in about 50 areas with an average production of nearly 3.0 million tons per year (mtpy) per area. A more detailed description of SECL and ECL is provided below (paras. 3.14 to 3.18).
3.03 CIL is the largest coal company in the world, and has a vast and complex organization. Nevertheless, the coal sector is still highly centralized and highly controlled. The actual autonomy of CIL and the subsidiaries is limited by price control, investment control and staffing policy control (wages, terms of employment, appointment of senior staff) by the Government. The effect on the coal sector productivityhas tended to be adverse. Recently, the Government has embarked on a cautious decentralization,with the setting of operational objectives for each of the subsidiaries,and holding the management responsible for achieving these objectives. The trend toward more managerial autonomy and decentralizationis expected to be strengthenedby the establishment of a new budgetary system. As part of its efforts to improve management performance,and in particular financial discipline and control, CNPDI and the Indian Institute of Management (Ahmedabad)have undertaken studies of the budgetary and cost control systems of CIL and its subsidiariesfor the purpose of strengtheningthe accountabilityof senior staff to the upper management, and allowing more decentralizationin decision making. The results of the studies, which address the definition of cost and profit centers, basic procedures, reporting formats, budget formulation,control mechanisms and corrective actions are now being implemented on a trial basis at selective mines.
3.04 In order to improve the delivery of its large investment and expansion program CIL has taken measures to strengthen its project management practices by upgrading the status of project managers and by establishing a project function within each subsidiary reporting to a Froject Technical Director. Since its inception, CIL has made progress in strengthening its managerial capabilities. However, there has been a continuous change in CIL senior management with a consequent effect of changing priorities and strategies. While some management changes are both necessary and desirable, there is a need to improve management continuity to ensure that past progress is maintained and that the potential benefits of initiatives presently being undertaken are fully realized. The rapid expansiceiof the sector in the past decade has also stretched the availabilityof qualified, experienced engineers and managers. CIL is concerned that too many managers are concentrated in headquarter positions to the detriment of field operation,and is reviewing its management structure with the aim of reducing the number of managers in headquarters of each subsidiary vis-a-is the number of management positions in the field. -15-
2. Operations
3.05 In order to meet the demand for coal, CIL has succeeded in increasing production from 101 million tons in 1980/81 to 134 million tons in 1985/86. As part of its strategy CIL has emphasized the development of new open-pit mines and the proportion of open-pit coal production has risen from 37% to 55% in the same period. Until April 1986, CIL had four coal producing subsidiaries-BCCL, ECL, CCL and WCL. Since CIL's creation in 1975, production has increased strongly in WCL and CCL which jointly accou-ted for 66% of coal production in 1985/86 and also have a predL inance of open-pit production. By comparison production has scarcely increased at all in BCCL and ECL (21 million and 24 million tons production respectivelyin 1985/86), both of which are still predominantlyunderground mining companies. The rapid growth of CCL has resulted in part from the development of the Singrauli Coalfield which is located about three hundred km west from CCL's headquartersin Ranchi (Bihar). Similarly, the rapid growth of WCL has been due in part to the development of the Korba Coalfield in the region of Bilaspur (M.P.) which is located over 200 km east from WCL's headquarters in Nagpur (Maharashtra). For several years, the Singrauli coalfield has been a separate operating area of CCL with its own Director-in-chargeand Bilaspur has been a separate operating area of WCL also with its own Director-in-charge. Recognizing that the operations at Singrauli and Bilaspur are becoming large enough for them to become independententities and that the relative geographicalisolation from their respectiveheadquarters can be detrimental to effective management, CIL and GOI decided, effective April 1, 1986, to establish two separate new subsidiaries: Northern Coalfields (NCL), consisting of the Singrauli division of CCL, with an expected annual production of 13 million tons saleable coal in 1986/87, and South Eastern Coalfield Ltd. (SECL), consisting mainly of the Korba, Sohagpur, Jamuna-Kotwa divisions of WCL, plus the Orissa area of CCL, with an expected annual production of 35 million tons saleable coal in 1986/87. As such SECL will have the largest production of the individualCIL subsidiaries. Henceforth, CIL will have six operating subsidiaries rather than four as previously. The Bank has supported this reorganization.
3.06 Given the increasing importance of open-pit mining operations, CIL has contracted under the Dudhichua loan the services of Metchem (Canada) to provide technical assistance regarding operational efficiency and operating practices in open-pit mines. Metchem completed its field assignment and submitted a final report to CIL in 1986. CIL is proposing to extend the Metchem contract to cover implementation of their recommendationfor NCL and SECL. CIL has also commissioned a study of the design, construction, maintenance of haul roads in open-pit mines for which a draft report has been submitted by the Central Road Research Institute and is presently being reviewed. In order to introduce some standardization into its open-pit operations, CIL has adopted a series of .standard' truck! shovel combinations. While most of the combinations seem sound, there may be scope for improvement and CIL is undertaking a review of the standard combinations to see if improvementis warranted. -16-
3.07 The rapid development of open-pit mining within CIL has placed new requirements on CIL's materials management system and workshops as well as on the power system. In the past, CIL was able to establish its parts inventory requirements on the basis of experience with the equipment they were generally using. However, as new larger and more complex pieces of equipment are introduced at a rapid rate, CIL's materials management system is faced with the twin problem of both a major expansion in the amount of spare parts which must be carried plus difficulties of estimating what would be an appropriate level of spare parts for equipment with which they have relatively little experience. At present, CIL's material inventory records are maintained in the form of a cardex system at central and regional depots. While the system is reasonably accurate, it is relatively ineffective for identifying a spare part which may be in shortage at one location but available at another; furthermore, with the proliferationof spare parts, the maintenance of the recording system itself becomes an increasingly difficult task. CIL recognizes that such an outmoded system can no longer support the needs of their rapidly expanding equipment fleet. CIL has commissioneda study by consultants,for designing and implementinga computerizedmaterials management system. In addition, given the importance of reliable power supplies for the operation of its equipment, CIL is preparing an overall plan of its power requirements on a coalfield-by-coalfieldbasis. This will be completed in mid-1987 and will provide the basis for CIL to plan adequate power supplies for its needs in conjunction with the power utilities.
3.08 CIL also recognizes that their equipment fleet has outgrown workshop capabilities. Presently even the most advanced workshop within CIL is not fully capable of dealing with the latest equipment. During negotiations, agreement was reached that CIL would retain technical assistance, by December 31, 1987, to help design state-of-the-artworkshops to fully meet the requirements of their open-pit mining equipment. These consultants would be selected in accordance with Bank procedures and would have terms of reference, qualifications,and experience satisfactoryto the Bank. An outline of the scope of work for this assistance is provided in Annex 7.
3. Manpower and Training
3.09 The efficient management and deployment of its labor force is critical to CIL's performance. CIL is the second largest employer in India, after Indian Railways. At year-end 1986, CIL provided employment to about 670,000 personnel of which nearly 2% were managers, about 16% were supervisors and specialized staff, 15% were skilled workers and 67% were unskilled/manual workers. Employment distribution among the six producing subsidiaries was as follows: ECL (28%), CCL (15X), WCL (12%), SECL (15Z), NCL (2%) and BCCL (26%). The balance (2%) is in CMPDI, NEC and CIL Headquarters. Employment was proportionatelyhigher than production in ECL and BCCL because of the predominanceof labor intensive underground mining operations. As a result, the output in tons per manshift was much lower in these two companies (0.57 and 0.64, respectively)compared with the other -17-
subsidiaries (CCL - 1.06, 1CL - 1.10, SECL - 1.50 and NCL - 7.00). As noted in para. 2.13, CIL is addressing this problem and is taking measures to control employment and increase labor productivity. With these measures and better administration, CIL manpower is expected to increase to about 690,000 personnel in 1989/90 (a 1.1% per annum increase), while production is expected to increase by 11% per annum. While manpower inventories and records are available at each mining area, CIL does not have a consolidated inventory of its manpower on an overall basis. Over the past two years, CIL has initiated a program at CIL headquarters in Calcutta of establishing a computerized manpower inventory base. While this represents a first step, CIL recognizes the information is very rudimentary and that the present process is rather slow. At negotiations, CIL agreed to retain technical assistance by December 31, 1987, to help design and Implement a manpower inventory system suited to its needs, employing consultants under terms of reference and with qualifications, experience and selection method satisfactory to the Bank. A scope of work for the manpower assistance is attached as Annex 8.
3.10 The supply of suitably trained, skilled manpower will be one of the major constraints to CIL meeting its investment program's production targets over the next five years. CIL directly operates seven central training centers specialized in management, open-pit and underground mining technologies and coal beneficiation. In addition, the subsidiary companies operate 16 regional training centers covering managerial, technical and vocational training activities plus about 50 area training centers for statutory, vocational safety courses. During 1984/85, the training programs in these centers comprised about 5,000 courses given to 110,000 participants of which about 88Z were workers and the rest managerial and supervisory staff. The rapid development of open-pit mining within CJL has stretched the limits of CIL's training capabilities, and the availability of adequate training facilities for both operations and maintenance staff is becoming axlimiting factor on the on-going development of majo- coalfields, such as Singrauli, Korba and Raniganj. Furthermore, while CIL has endeavored to strengthen its training activities over the past years through a program of foreign collaboration, especially with the British coal industry, training activities are largely undertaken on a pieceteal basis and there is no comprehensive overview of training needs or how they should be met. Further, the training function is badly understaffed and has only rudimentary facilities. In order to strengthen the organization of its training function and to develop a satisfactory training action program, CIL will retain consultants under terms of reference and with qualifications, experience and selection procedures satisfactory to the Bank. This program would complement the assistance for manpower planning (para. 3.09). The scope of work is outlined in Annex 8.
4. Financial Position
3.11 The financial performance of CIL over the last five-year period is summarized below and given in fuller detail in Annex 9. -18-
CIL - Summary of Financial Performance 1980/81 to 1985/86 (Rs million)
1980/81 1981/82 1982/83 1983/84 1984/85 1985/86
nm Sale (milliontons) 94 102 109 116 126 129 NetRevenues 11,3W 14,209 17,063 18,624 23,690 24,594 OperaticgEermWs 10,273 12,138 14,240 18,480 20,668 23,540 Dcepration 738 951 1,344 1,716 2,069 2,497 interest 626 778 1,110 1,324 1,733 2,158
NetT.ncame (tos) (337) 342 369 (2,469) (780) (3,557)
Internal Cash Gemeratimn 401 1,276 1,713 (753) 1,289 (1,060) Capital zeminditus 3,412 5,809 7,142 8,390 7,877 8,427 Log-Tem DEbt 12,557 13,196 17,461 19,273 21,737 25,284 Acmulated Losses (8,461) (8,119) (7,370) (9,765) (10,533) (14,422) NetEquity 2,385 5,483 9,542 11,534 15,034 15,701
Net Tne (Ioss)/Revemaes % (3.0) 2.3 2.2 (13.3) (3.3) (15.1) Oraent Ratio 1.1 1.3 1.3 1.2 1.3 1.2 LT Debt/Equity Ratio 84:16 71:29 65:35 63:37 59:41 62:38 Debt Serice Couerage 0.9 1.4 1.4 0.3 1.04 0.5
Smrce: CT.
3.12 Up to 1980/81, CIL had been increasing losses constantly as a result of a low level of coal prices and an emphasis on increasing production without due regard to cost effectiveness. This trend was reversed in 1981/82 when CIL showed for the first time a positive net income with an adequate level of internal cash generation, long-term debt service coverage and current ratio. The financial position improved further during 1982/83. However, during 1983/84 CIL showed a financial loss and a deterioration of the main financial indicators due to the back-dating of a national wage and salary settlement associated with a new four year collective bargaining contract. The wage settlement was back-dated to January 1983 and an offsetting price increase was only made in January 1984 causing a large loss for CIL which forced delaying debt repayments to GOI. CIL was able to reduce its losses to Rs 780 million in 1984/85 following the January 1984 coal price adjustment (which increased CIL's sales realization per ton by 17%). However, CIL's financial performance deteriorated again in 1985/86 and losses reached Rs 3,557 million.
3.13 The accounts of CIL, as well as its subsidiaries, are audited annually by statutory auditors (a partnership of independent chartered accountants) appointed by the Government of India in consultation with the Comptroller and Auditor General of India. These arrangements are satisfactory. Statutory auditors are appointed for a period of three years at the end of which they must be changed. At the completion of their audit, the statutory auditors express their opinion on the fairness of the financial statements, which is included in the Company's annual report. -19-
Although the auditing standards and procedures followed are those laid down by the Indian Institute of Chartered Accountants, higher standards regarding the audit of internal control procedures are advisable. An additional audit is conducted by the Audit Board of the Office of the Comptroller and Auditor General of India. This is both a financial and a management audit and the comments of the Audit Board are also published with the financial statements of CIL.
B. South Eastern Coalfields Ltd. (SECL)
3.14 SECL is the subsidiary of CIL responsible for the development and implementationof the Gevra mine. As noted in para. 3.05, SECL was formed in April 1986 and is the outgrowtb of the old WCL. SECL's first year of operation will be completed on March 31, 1987. In 1985/86, WCL produced about 49 million tons of saleable coal of which about 30 million tons were from the Bilaspur region (which was split off to become SECL) and about 19 million tons from the Nagpur region (which remains under the control of WCL). SECL, has its headquarters at Bilaspur, and operates coalfields in Korba, Sohagpur, Jamuna, Kotma, Chirimini Baikuntpur, Jhagrakhand plus the Ib River coalfield in Orissa. All of SECL's production is thermal coal.
3.15 Open-pit mining comprises about 55Z of SECL's production, mainly from large-scale highly mechanized operations centered on the Korba coalfield. Underground mining accounts for 45% of SECL's production. SECL's underground mines are newer, shallower operations with much easier mining conditions than those of BCCL and ECL. The output per manshift of SECL's underground mines is about 0.80 compared with 0.45 and 0.53 for the undergroundmines of ECL and BCCL respectively.
3.16 SECL is in a relatively sound financial position. WCL, the forerunner of SECL, has been able to earn moderate profits since 1979/80. In 1985/86, WCL/SECL's total production costs (includingdepreciation and interest charges) were is 171 per ton of saleable coal, which is about 78% of the average for the CIL group (Rs 219 per ton of saleable coal). The financial position of WCL from 1982/83 to 1985/86, is summarized below:
SECL and WCL - Summary of Financial Performance (Rs million)
WCL WCL WCL WCL/SECL Fiscal Year 1982/83 1983/84 1984/85 1985/86
Coal Sales (million tons) 32.6 38.3 44.1 46.7
Sales Revenues 4,632 5,591 7,659 8,017 Operating Expenses 3,380 4,663 5,334 6,518 Contribution to CPRA 524 11 1,137 1,009 Net Income a/ 142 121 69 (991) Internal Cash Generation a/ 472 590 715 (20)
Investment 1,965 2,779 2,759 2,847
a! axter contribution to Coal Price Retention Account (CPRA). -20-
C. Eastern Coalfields Ltd. (ECL)
3.17 ECL will be undertaking the development and future operation of the Sonepur-Bazari mine. ECL has its headquarters at Sanctoria, West Bengal and operates about 100 mines in the Raniganj coalfields in West Bengal and MugmaRajmahal coalfields in Bihar. These are older, deep minefields which are the main source of superior quality thermal (Grades A-C) coal in India. Superior quality thermal coal is in short supply in India and is sought after by industrial consumers. ECL is therefore attempting, to the extent it can, to Increase the supply of such coal. However, the coal seams are found in very difficult, mining conditions. During 1985/86, ECL produced 24.0 million tons of saleable coal of which 23.6 million tons were thermal coals (96Z) and the balance, 0.4 million tons coking coals (2Z). Underground mining accounted for 68% of ECL's production, which is substantially higher than the average for CIL overall (45Z).
3.18 ECL has much higher production costs than the average for CIL mining operations and has incurred heavy losses in the past. Surplus labor and low labor rroductivity are the most critical elements in ECL's high production costs which derive from a number of factors some external to ECL and others under ECL's control. The factors largely outside of ECL's control include geological conditions which result in deep, difficult mining conditions; power outages which cause production interruption and cutbacks in pumping capabilities (necessary to keep the deeper mines operating during the monsoon season); and a government-sanctioned national mine-workers agreement which constrains ECL's ability to layoff surplus labor. Within ECL, however, attempts to increase production were made with little,if any, regardfor cost control and for many years, there appears to have been littleconcerted effort by either the managementor the labor force to improveECL's performance.Some effortshave been made to improve the labor situationin the past two years including severe restrictions on new hiringand on overtimework. In 1985, the "ChariCommittee' was appointedto study ECL and make recommendationon measuresto establish ECL's viability within a given time period. The Committee's report which is presently under consideration by the Government containe a wide ranging set of innovative measures to improve ECL performance, several of which are already being implemented by ECL. Management has taken a number of steps in an immediate effort to improveefficiency and cost consciousnessin its operations. New hiringof skilledworkers needed for new projectshas been strictly limited to no more than 50% of retireesand ECL expectsa net reduction of 1,700 workers in 1986/87. ECL is undertaking technical audits of twenty underground mines which are incurring the largest losses which are the basis for rehabilitation plans to improve the performance of these mines. ECL will implement these rehabilitation measures under a timetable satisfactory to the Bank and will submit progress reports on a regular basis for the Bank to review. In addition, ECL will conduct technical audits of a further twenty mines with large losses. These wasures should help improve ECL's performance in future years. In 1985/86, ECL's total productioncosts (includingdepreciation and interestcharges) were Rs 307 per ton of saleable coal, which is about 40% higherthan the averagefor the CIL group (Rs 219 per ton of saleablecoal). -21-
ECL - Summary of Financial Performance (Rs million)
Fiscal Year 1982/83 1983/84 1984/85 1985186
Coal Sales (million tons) 21.3 21.5 21.8 22.7
Sales Revenues 3,589 4,142 5,305 5,719 Operating Expenses 4,034 5,110 5,509 6,013 Contribution from CPRA 419 334 803 553 Net Income a/ (553) (1,279) (137) (700) Internal Cash Generation a/ (244) (902) 396 141
Investment 994 1,159 1,273 1,372 a/ After contribution from Coal Price Retention Account (CPRA).
IV. THE PROJECT
A. Project Objectives
4.01 The main objectives of the project are to improve the quality of coal available to consumers and to increase the supply of thermal coal (to the power and industrial sectors) and coking coal (to the steel sector). The project will help meet the demand for thermal coal through the development of two large-scale open-pit mines in Gevra and Sonepur-Bazari -with an ultilmate combined capacity of 13 million tons per year. The project will help improve the quality of coking coal supplies to the steel sector by supporting the importation of low ash-coking coal (average 10O ash). The imported coal will be blended with indigenous supplies (average 21Z ash) thereby lowering the average ash of the blended mix which will contribute to improving blast furnace productivity and efficiency in the steel industry. The project is alac designed to improve sector management through the implementation of a number of coal mining, handling and transportation measures which should also contribute to improved coal quality. In addition, the project will improve the efficiency of existing coal mining operations and strengthen the managerial, commercial and financial practices of both CIL and two of its four producing subsidiaries, ECL and SECL, through the implementation of a series of efficiency improvement and institutional development measures. By including training programs and training institute design in the project and by introducing state-of-the-art mining technology, the Bank will contribute to CIL's efforts to improve the efficiency of its mining operations. The inclusion of various efficiency-related and institutional development measures are aimed particularly at containing production costs in existing labor-intensive operations as well as strengthening the supply of skilled workers and managers to meet the needs of the industry's development program. Through its involvement in the project, the Bank will support GOI's objectives of maximizing the development of indigenous energy resources; of alleviating power shortages by expanding the country's -22-
thermal power generating capacity; and of providing power plants with the required coal supplies through the accelerated development of large-scale open-pit mines.
B. Project Description
1. Gevra Mining Complex
a. Scope
4.02 The scope of the proposed Gevra mining component consists of implementing the second stage of development of the Gevra open-cast coal complex. This will complement components already included in the first stage: coal handling plant, train loading facilities, and a railway link to the Korba power station. The second stage will increase output to 10 mtpy of raw coal, from a designed capacity of 5 mtpy in the first stage, for which construction and actual coal productionwere started in 1980 and 1981 respectively. The complex will include additional mining equipment, an in-pit conveyor for coal transport and crushing, a marginal expansion of service facilities, a training center and a township as its main components.
b. Location, Geology and Reserves
4.03 The Gevra open-cast mine is located in the center of the Korba coalfield, on the western bank of the Hasdeo river. This coalfield is in the Madhya Pradesh state, about 90 km east-northeast of Bilaspur (Map 19279R). The altitude of the area is about 300 m above the sea level, and the topography is fairly flat. Drainage is towards the northeast-east during the rainy season, mainly by the Ahinar and Hasdeo rivers. The infrastructureprovided during the first stage is well developed, and the coalfield is situated at a distance of about 10 km from the main Bombay/Calcutta railway in a region only sparsely populated with Korba being the major town.
4.04 The climate of the Korba coalfield is tropical, with very hot summer months (March-June)during which temperatures reach 46°C (115'F). The average annual precipitationis about 1,040 mm, which fall mostly during the monsoon season (June-September).
4.05 The Korba coalfield extends over an area of about 520 sq km, of which Gevra and the project site cover 42 and 10.8 sq km, respectively. Coal bearing strata occur in the Permian stratigraphic formations, locally called Gondwama. Typically, they contain sub-bituminous and bituminous coals, with low contents of sulphur (maximum 0.7%) and phosphorous (about 0.01%), and high ash contents (20-35%). The strike of the formation is generally east-west and the dip about 5-10O towards the south.
4.06 Although the Korba region has been geologicallyexamined since the late 1800s, systematic investigationswere only initiated by the Indian Bureau of Mines in 1955. These were followed by drilling campaignsunder -23-
the supervision of the National Coal Development Corporation (NCDC)in 1963-65 and 1972-74, and by CMPDI that completed over 140 holes with a total lengthof about 16,000 m since 1977. Total mineable reserves are estimated at 589 million tons of coal broken down by main seam structures in table below:
Gevra Project - Mineable Reserves
Mineable Reserves a/ Seam (million tons)
Upper Kusmunda 59 Lower Kusmunda (top split) 378 Parting 50 Lower Kusmunda (bottom split) 102 Total 589
a/ In situ mineable reserves less mining losses.
The project areas are tectonically faulted. However, the available geological and hydrogeologicalinformation derived from geological mapping and drilling, and from operation of the adjacent Kusmunda mine is considered sufficient for the purpose of reserve calculation and mine design. At the proposed miningrate of 10 million tpy, reserves already delineated allow for about 60 years of mining.
c. Mining
4.07 The general characteristicsof the area and of existing open-pit mine designsfor the proposed project are very favorable. The first 30 years of mining will have a very low stripping ratio of only 0.9 m3 per ton of coal, reaching a depth of 180 m with final pit slopes of about 450, which is satisfactory to deal with the hydrogeological conditions of the area, assuming an adequate safety factor. The mine has been designed to produce 10 million tpy of raw coal with ash content and heating values ranging between 26.5-44.5%ash and 2,110-4,236 kcal/kg on a useful heat basis, indicating coal grade ranges from D to G.
4.08 Waste strata and coal will be drilled, blasted, and subsequently removed by different material handling systems. The overburden will be loaded and hauled with four 10 m3 electric rope-shovels and a fleet of thirty- four 120/85-ton trucks. If suitable, 20 m3 shovels may also be used. The coal will be loaded with 2.3 m3 hydraulic shovels, and hauled by 35 t trucks to two conveyors. These will be equipped with feeder breakers, and will transport crushed coal to a coal handling plant, which is presently under construction, with a storage bunker of 30,000 t capacity, which will feed two train loading silos of 2,600 t capacity each. Coal release has already started under the first stage of the project with an output of 50,000 t in 1981/82. It has increased to a present level of about 3 million tons, and is planned to reach the designed capacity of 10 million tpy during 1991/92. Mine planning has been done in sufficient detail for feasibilitypurposes and equipment selection. The selection of main equipment for mining of coal and waste rock material is basically -24-
sound. Also, the selection of hydraulic shovels for coal is satisfactory given the presence of partings, shale bands and geological faulting. Adequate training and maintenance programs have been prepared to support operations of the mining equipment. On the other hand, further design refinements will be undertaken to delineate a more detailed short- and long-term sequence of plans, and to determine fluctuations in coal and waste material release, as well as changes required by materials handling systems and equipment. further complementary work will also be executed in respect of geotechnical aspects, for more detailed analysis of assumed slope stability and safety factors of strata and hydrogeological conditions. This work should be complete and ready for Bank review not later than December 31, 1989, and will not affect activities concerning procurement, mine development, and establishment of ancillary installations.
4.09 Mine developmentwork and in-pit road maintenance will be performed by a fleet of dozers, wheel loaders and graders. A main sump and associated installations will be established for adequate pit drainage during the monsoon season. Pumping capacity appears adequately estimated, on the basis of information from the adjacent Kusmunda mine. A dragline will be provided to clean the sump.
4.10 The mine and related facilities will work 300 days per year, 3 shifts per day and 8 hours per shift. The total manpower requirementsat full production of 10 million tpy are summarized in the table below:
Gevra Mine-Manpower Requirements
Senior Management 68 Junior Management/Supervisors 419 Workers 3,453 Total 3,940
A preliminary training program has been prepared for the Gevra complex. However, the training facilities at Gevra are presently inadequate to fulfill the training program. Furthermore, even the most advanced CIL training facilities (at Singrauli) are insufficientfor CIL's rapidly advancing needs. CIL will retain technical assistance under procedures satisfactory to the Bank for the design and development of a training center for the Korba coalfield (Annex 10) by December 31, 1987. SECL have confirmedthat they will provide the Bank with a training program for the Gevra project by January 1, 1988 and with annual training reports for the Gevra project on July 1 of each year, addressing the previous fiscal year's training results compared with the program.
d. Infrastructure
4.11 Infrastructure facilities such as warehouse, unit maintenance and eervice installations of adequate size and capacity will be constructed north of the open-pit, adjacent to the main road which connects Gevra with the Kusmunda mine and the town of Korba. However, since workshop plans -25-
were considered insufficient, SECL will, provide adequate unit and central workshop facilities to meet requirements from the project based on the findings of the workshop Technical Assistance (Annex '0). A new road bridge will be built across the Hasdeo river to improve access during the monsoon season. Its completion is estimated for 1988/89. Water requirements, installed electrical load, annual power consumption and specific power consumption are summarized in the table below:
Gevra Mine - Water and Power Requirements
Industrial Water (m3 per day) 1,735 Potable Water (m3 per day) 2,240 InstalledElectrical Load (NW) 25.7 Power Consumption per ton of Coal (kWh) 4.4
4.12 The Gevra complex will receive power from MPEB by means of two overhead 33 KV transmission lines and four sub-stations. Industrial and potable water requirements will be met from the Hasdeo river at about 10 km from the project site. To the extent possible, additional water required for dust suppressing in mine roads will be taken from the main in-pit sump. These arrangements are satisfactory. GOI will ensure adequate electric power and SECL will ensure adequate potable water supply to the project.
4.13 Provision of housing and service facilities for the work force will follow CIL's existing policies and guidelines. Accordingly, a new township will be constructed for the complex. It will consist of 2,674 houses and apartments, and will include schools, shops, a 22-bed hospital, community center and clubs. These arrangementsare considered satisfactory. SECL will provide the Bank with satisfactory schedules for the construction of housing and service facilities for the Gevra project by January 1, 1988 and imp]ement them as part of the project.
2. Sonepur-Bazari Mining Complex
a. Scope
4.14 The scope of the proposed Sonepur-Bazarimine component comprises the development of an open-pit mining complex with a designed capacity of 3 million tpy, inciuding a coal handling plant and surface infrastructure consisting of a railway spur, power lines, repair and maintenance shops, warehouses, training facilities, offices and a townsite.
b. Location, Geology and Reserves
4.15 The Sonepur-Bazari open-pit mine will be located in West Bengal, in the north-eastern part of the Ranigani c,alfield. The mine will have an ultimate capacity of 3.0 million tpy saleabVe coal of which about 1.5 million tpy will be Grade D coal to feed the Kologhat power station and the balance (1.5 million tpy) will be Grade C coal for industrial users. This coalfield is at about 35 km and 14 km from the townships of Durgapur and Ranigani. The area is about 84-108 m above the sea level, and is mostly flat. Drainage is from west to east dui ..ng the rainy season, mainly by the -26-
Bonbahal Jore and the Kumarkhala streams. The infrastructure is well developed, and the coalfield is only sparsely populated with the village of Bazari located adjacent to the project site.
4.16 The area has a tropical climate with maximum temperatures averaging between 34-47 0 C (93°-117°F) during summer (March-June), and 25-28-C (77-82°F) during winter (November-February). The difference between day and night temperaturesduring December is about 10-14°C (18-25°F). The annual average rainfall is about 1,180 mm, with about 90% falling during the monsoon season (June-September).
4.17 The Raniganj coalfield extends over an area of about 1,550 sq km, of which the project site covers 19 sq km. The rock types are in broad manner classified in two main groups, i.e., the basement Archaean granite/gneiss/schistcomplex, and the Quaternary and more recent sediments with coal bearing strata and waste rock, mainly consisting of sandstone, shale and conglomerates. The strata in the Sonepur-Bazariarea dips only 1-5° towards the south, but steeper dips are observed in the vicinity of major faults and near the splits of thick seams. Typically, these seams contour coal of C and D quality, with moisture, ash and calorific values ranging between 6.2-8.7% H20, 17.0-26.9% ash, and 4,940-5,675 Kcal/kg on a useful heat basis, respectively. The Sonepur-Bazarideposit was discovered on the basis of geological studies started in 1976 by CMPDI, which were followed by successful drilling of 10 explorationholes between 1977/78, under the supervision of the GSI. Subsequently,a total of 67 boreholes with overall length of about 10,000 m were drilled, resulting in a density of 7.2 boreholes per sq km, which is satisfactory. Total mineable reserves are estimated at 186 million tons of coal. The project area is disturbed by faults and split of seams. However, the available geological and hydrogeological information, derived from geological investigations and from operation of the adjacent Kumarkhela small open-pit, is sufficient for the purpose of coal reserve calculations and preparation of mine designs. At the proposed mining rates the existing reserves could support operations during a period of over 60 years.
c. Mining
4.18 The Sonepur-Bazari open-pit will have an overall stripping ratio of 5.13 m3 of waste per ton of coal and a depth of 270 m after the first 25 years of mining. Its final pit slopes are planned at 37e, which is satisfactoryto deal with the hydrogeologicalconditions of the area, assuming an adequate safety factor. The mine has been designed to produce 3 million tpy of raw coal of types C and D. ECL is planning to blend a small amount of marginal quality Grade C coal with the Grade D coal. ECL will undertake certain tests when production is initiated to confirm that such blending is an economic proposition.
4.19 Overburden will be drilled with seven 250 mm rotary drills, and blasted using aluminized slurry explosive. Removal of material will be executed with one 24 m3 dragline, six 10 m3 electric rope-shovelsand about thirty-five 120-ton trucks as main handling equipment. Coal and thinner waste rock partings after drilling and blasting will be loaded with seven -27-
2.5-3.2 m3 hydraulic shovels operating with a fleet of about fifty 50/35-ton rear dumpers and 32-ton bottom dumpers. Coal will be transported to rotary breakers,from where the -200/ +50 mm portion of superior quality material will be sent to a 10,000 ton storage bunker of grade C steam coal for supply to industrial consumers. On the other hand, due to expected impurities, the -50 mm portion of this same material will be sent to a separate 10,000 ton storage bunker of grade D slack coal, where it will join inferior quality material, which will be sized under 200 mm for shipment to the linked power plant. The bunkers will feed two train loading points using reclaim and wagon loading conveyors.
4.20 Coal release from the area already started with development in 1982 of the Kumarkhela small open-pit, which is located in the north-western corner of the Sonepur-Bazarideposit. Its production reached about 0.3 million tons of coal during 1985/86. On the other hand, coal release from the Sonepur-Bazari project will not start until 1989/90, increasing slowly to reach the designed capacity of 3 million tpy only seven years later in 1996/97. Mine planning has been done in adequate manner for feasibility purposes. Additional work will be done to further optimize the mining sequence, to detail the fluctuations in the output of coal and waste materialand the possible changes in the materials handling system and equipment. Additional geotechnical testing will be executed for more detailed analysis of assumed slope stability parameters and safety factors. ECL will complete this testing and analysis, and provide the Bani. with its geotechnical reports not later than December 31, 1989.
4.21 The selection of main equipment for mining of coal and waste rock material is satisfactory. Specific mairtenance and training programs to support this equipment will be prepared.
4.22 Mine preparatory works and in-pit road maintenance will be performed by a fleet of dozers, wheel loaders and graders. For drainage, a main sump located in the bottom of the pit, and associated installations, will operate with a 2,600 m3/hr pumping system, consisting of nine units. In addition, slurry pumps will be used to deal with muddy water and clean the sump. This is satisfactory since estimated pumping requirement are for 1,656m 3/hr. The larger capacity has been selected because of insufficient hydrogeologicaldata. However, assumptions made for calculatingwater inflow are conservativeand realistic.
4.23 The mine and coal handling facilities will work 300 days per year, 3 shifts per day, and 8 hours per shift. Manpower requirements at full production of 3 million tpy are summarized in the table below:
Sonepur-Bazari - Manpower Requirements
Senior Management 81 Junior Management/Supervisors 314 Workers 904 Total 1,299 -28-
4.24 ECL has the intention of implementing a substantial training program for the project. Although specific plans have not yet beer. formulated, this effort will include establishment of training facilities, assistance from ECL's Central Training Centre, visits to other mines, and execution management and operator training courses. CIL will retain technical assistance by January 1, 1988 for the design and development of a training center for the Raniganj coalfield (Annex 10). ECL have confirmed that they will provide the Bank with a satisfactory training program and training reports for the Sonepur-Bazari project. The training program should be prepared and completed for Bank review not later than January 1, 1988. In addition, ECL confirmed that it would submit annual training reports to the Bank on July 1 of each year comparing training results with the program including respective targets for the previous fiscal year.
d. Infrastructure
4.2c Infrastructure facilities, such as warehouse and unit repair and maintenance workshops will be established adjacent to the pit. ECL will provide adequate unit and central workshop facilities, taking into account the results of the workshop Technical Assistance (Annex 8), to meet requirements from the project. At present, power is received at the nearby Bankola sub-station, which has an installed transformer capacity of 3 MVA. Provision of additional power for the project is planned in two stages. First, further power supply will be increased progressively to meet a demand of 6 NVA by 1988/89. For this purpose, an additional transformer will be installed at Bankola, and a new transmission line will connect this sub-station with the project site. In the second stage, additional connections will be provided to meet a demand of 17.2 NVA by 1999. The design has been completed satisfactorily for the first stage, and is still in progress for the second stage. GOI will ensure adequate electric power supply to the project and ECL wlll ensure the timely development of the new transmission lines and substations.
4.26 ECL plans to construct a new railway spur of approximately 11 km, to the northern part of the deposit, for the transport of coal from Sonepur-Bazari. Despite the existence of an old rail spur in the south of the proposed mine, this approach will permit transporting coal from adjacent deposits and will eliminate a difficulty with adverse gradients in the existing spur. Finally, potable and industrial requirements of water for the project are estimated at 0.63 and 0.67 million liters per day. Additional water for haulage ramps will be obtained from the nine sump. These arrangements are satisfactory. ECL will ensure adequate potable water supply to the project.
4.27 Provision for housing and service facilities will be made for 784 workers. The location for these residences coincide with the location for an integrated township being proposed for workers of ECL, adjacent to housing for Kumarkhala. Other buildings included for the project are offices, training center, and welfare and community services. All buildings have been located in barren areas to avoid blocking mining activities. These arrangements are considered satisfactory. ECL will -29-
provide the Bank by January 1, 1988 with satisfactory schedules for the construction of housing and service facilities for the Sonepur-Bazari project and implement them as part of the project.
3. Environmental Protection, Safety and Resettlement
4.28 The planning of environmental protection measures to be undertaken is vested in CMPDI and guided mainly by the Water (Prevention and Control of Pollution) Act of 1974 and the Air (Preventionand Control of Pollution) Act of 1481. Both Acts prescribe measures and tolerance limits that are in line with acceptable standards in the industry. Environmentalmanagement is the responsibilityof CIL through its subsidiaries. CIL, SECL (for Gevra) and ECL (for Sonepur-Bazari)will ensure that design, construction and operation of their project components are carried out with due regard to ecological and environmental standards, as well as adequate safety standards (para. 4.30). Environmental arrangements are considered satisfactory. In general, water and air pollution problems are not expected to be severe. Their quality will be monitored regularly. Dust, which is considered the major pollution hazard, will be controlled by sprinkling haulage roads with water, and using suppression and extraction equipment at silos and railway loading facilities.
4.29 Both of the areas where the Gevra and Sonepur-Bazari mines are located have relatively gently undulating terrain with rather thin vegetation, and only small quantities of topsoil. Soil conservation will be done whenever feasible. For this purpose, at Gevra a survey is being executed by the Soil Survey Organization of India. Reforestation activities were started in March 1985. About 110,000 trees have been planted to create 'green-belts- along main roads and between industrial facilities and residential areas. Both mines will have equipment for land reclamation. While the general approach to reclamation is satisfactory detailed plans are still being finalized. ECL and SECL have confirmed that final plans will be submitted to the Bank by January 1, 1988. Erosion control and prevention measures, such as placing of rip rap, turfing and re-vegetation will be undertaken on waste dumps and exposed slopes. This will also assist in reducing surface water run-off. In addition, the dumps will be set in benches to avoid spills. This is satisfactory.
4.30 Mine safety, operational practices, and design criteria are laid down in the Mine Act of 1952 and the Coal Mines Regulations of 1956, and supported by monthly circulars from the Director General of Mine Safety (Ministry of Energy) as well as by Acts regulating human health and mine rescue work. They are considered adequate. The responsibility to follow the regulations is vested in the safety organization within each CIL subsidiary. On a corporate level, a "Safety Board- chaired by the Chairman of CIL is meeting quarterly to review adequacy of current safety practices and to introduce corrective actions, whenever necessary. Safety procedures and practices proposed for Gevra and Sonepur-Bazari are already used by CIL in other open-pit operations, where safety performance is adequate. This aspect has been extensively assessed and is being improved With input of foreign consultants during the execution of technical assistance programs funded by the Bank. -30-
4.31 The overall accident rate in CIL has greatly improved since CIL was formed (fatality rate and serious injuries decreased 35% and 51Z respectively between 1974/75 and 1985/86). However, the rates in CIL are still relatively high when compared with other major international coal producers. This is mainly attributable to most of its underground mining operations being very labor intensive, and using multi seam mining methods with a low degree of support from modern mechanical and electrical systems. Further, the large number of mine working faces and of workers makes proper safety supervision/management cumbersome, particularly during periods of rapid expansions. The accident rate is expected to decrease further over time, as CIL's production share from open-pit mines Increases. In order to satisfy the Bank of the adequacy of safety measures and the incidence of occupational disease, CIL will provide the Bank with statistics on mine-related accidents and occupational diseases, every year beginning July 1, 1988.
4.32 The mining complexes are to be developed on land that is generally sparsely populated. About 1,370 families will need to be resettled at Gevra and 740 families at Sonepur Bazari as a result of the mining operations. The resettlement is being undertaken in three phases at Gevra, where it will be complete in 1991, and two phases in Sonepur Bazari where it will be complete in 1993. In addition to cash compensation, ECL and SECL are providing assistance to the resettled families in terms of land, housing and shipment of household effects. Resettlement is most advanced at Gevra where up to now 500 families have already been settled in a new village with satisfactory facilities. CIL will undertake resettlement of the people affected by the project in accordance with resettlement plans agreed with the Bank. SECL and ECL will each appoint a community development officer and will coordinate the resettlement activities with the respective State Government officials. It is expected that jobs will be available to the resettled families associated with the mining development. At Gevra (where there are large mining operations already in existence), employment has already been provided to over 800 of the people involved in resettlement. In addition, other employment opportunities will be generated in mine construction, ancilliary small-scale industries and agriculture. Further details are provided in Annex 11.
4. Coking Coal Imports
4.33 The loan will provide finantcingfor importing about half of India's coking coal requirements over the next two years. Procurement of the imported coking coal will be carried out by GOI. The importation of coking coal will: (i) fill the existing gap between the projected demand of the local steel industry and domestic supply of prime coking coal. (This gap, now estimated at about 3 million tpy between 1986/87 and 1989/90, is about 100% higher than the previous two years due to improved quality control of raw coking coal production including the exclusion of some substandard coals as feed for washeries); and (ii) support the efficient utilization of the steel industry's existing plant and equipment, by preventing shortages of coke, which would result in a reduced blast furnace capacity utilization. In addition, the imported coal will improve -31-
the average quality of coking coal supplies because the imported coal has a lower ash content (10Z average) than the local product (21% average). This improvement in coking coal feed, and hence in coke production,will result in increased blast furnace productivityand utilization.
C. Project Execution and Implementation
4.34 The Gevra project component will be implemented by SECL under the direction of a Project General Manager reporting to the Project Director of SECL. The Project Management Unit consists of staff from SECL and CMPDI, organized as shown in Annex 12. The Project General Manager is supported by managers responsible for (i) general engineering and mining; (ii) scheduling and cost control; and (iii) administration. Responsibility for project implementationis direclty under a Deputy Project General Manager. The total project organization comprises about 200 positions, already staffed and mobilized. The Project General Manager has been appointed and is adequately qualified and experienced. SECL will establish a Project Management Unit, and that it will ensure that organizational structure, staffing, powers and responsibilities of the Project Management Unit shall be such as necessary for timely and efficient implementationof the project. Moreover, in accordance with standard practice adopted within CIL after the first coal project with Bank financing, SECL is preparing a project implementation manual following terms of reference already agreed with the Bank. SECL will exchange views with the Bank on this manual, and will adopt it by January 1, 1988.
4.35 Similar arrangements are being made for the execution of the Sonepur-Bazari project component (Annex 11), which will be implemented by ECL. While the project organization of this component has not yet been officially approved, several of its main officials are already assigned to the project. Such is the case of its Project Officer who is expected to be appointed as Project General Manager, and principal staff concerning finance, personnel, and mine operations and maintenance. A preliminary project manual for implementation of this project was prepared by CMPDI in July 1984. ECL will revise it. By January 1, 1988 ECL will establish a Project Management Unit similar to that for Gevra (para. 4.34), and it will finalize, exchange views with the Bank and adopt a project implementation manual.
4.36 Each Project Management Unit will be directly responsible for all activities related to detailed engineering, procurement of local goods (excluding mining equipment) and services, equipment erection and commissioning, and construction and mine development. Procurement of mining equipment and other imported plant and equipment will be carried out by the CIL Central Procurement Organization, in direct. collaboration with the respective Project General Managers, who will provide progress reports to the Project Directors of the subsidiaries and to the CIL Project Monitoring Unit. A detailed and satisfactory schedule for procurement actions has been prepared, and procurement documents have been reviewed by the Bank. To minimize the risk of delays the GOI will promptly grant authorization to import foreign goods required for the project, and will promptly make available the foreign exchange required. -32-
4.37 The implementation schedules for the Gevra and Sonepur-Bazari components of the project are given in Annex 13. They are based on detailed analysis of different critical activities, and on-going construction work at Gevra. They are realistic. For the Gevra mine, procurement of main mine equipment for delivery in 1987/88 is on the critical path. Status of main activities are summarized as follows: (a) all required land is presently in possession of SECL; (b) overburden removal started in 1981; (c) access roads and some residential and office/servicebuildings have been constructed;and (d) constructionof the coal handling plant is well advanced, and one of the two train loading systems is fully operational. Finally, during 1984/85 about 2.6 million m3 of overburden and 2.5 million tons of coal were mined. Project activities are at an earlier stage for the Sonepur-Bazari mine, where initiation of procurement of electric rope-shovels and 120-ton trucks are on the critical path. No implementation work has yet started. Arrangements for land acquisition for the project are well advanced. ECL has acquired 208 hectares (ha) of land, required for the infrastructure and the first five years of mining. However, ECL does not yet have possession of about 68 ha of that land which remains in the hands of the local authorities awaiting final processing and handover to ECL. Handover of the remaining Land is a condition of disbursementfor the Sonepur-Bazaricomponent of the project. Disbursement for the Sonepur-Bazari component is limited to a maximum of US$8 million until ECL confirms that it has taken possession of the 68 ha of land. Additionally,ECL gave assurances that it will ensure the timely availability of land for the railway siding by December 31, 1988, and land for mining operations beyond 1995/96 by December 31, 1992.
4.38 Coal release and waste rock output are summarized in the following tables. -33-
Production Schedule and StripPing Ratio
Coxd Waste Pb& Stc#*Euightio Project Coui1et Year l(dJl M3) () v PE tu of coal)
* 1981/82 0.05 0.27 5.4 * 1982/83 0.32 0.66 2.1 * 1983/84 1.44 1.76 1.2 * 1984/85 2.52 2.60 1.0 * 1985/86 2.73 3.50 1.4 1986/87 3.10 5.00 1.6 1987/88 4.25 6.50 1.5 1988/89 5.50 7.20 1.3 1989/9D 7.20 8.50 1.2 1M0/91 8.50 9.00 1.1 1991/92 10.00 9.00 0.9 onwrds 10.00 9.00 0.9
1986/87 1987/88 - 1988/89 3.0 1989/90 0.4 4.02 10.0 1990/91 1.1 4.02 3.7 1991/92 1.5 6.27 4.2 1992/93 1.5 6.27 4.2 1993/94 1.5 6.27 4.2 1994/95 1.5 8.04 5.4 1995/96 2.5 13.73 5.4 196/97 3.0 16.39 5.5 & oammds
4.39 Productivity indicators for the mining complexes will include not only total quantities of coal and waste material removed but also utilization and availability for all major pieces of equipment, consumption of explosives, fuel, lubricants and other constmables.
V. CAPITALCOSTS, FINANCINGAND PROCUREMENT
A. Capital Cost Estimates
5.01 The total financing requirements for the mining component (which consists of the Gevra and Sonepur-Bazari complexes) including physical contingencies, price escalation, working capital and interest during construction are estimated at US$483.2 million (Rs 6,282.6 million), of which about US$158.5 mill-ion is in foreign exchange. Detailed capital cost breakdown for major equipment and plant are given in Annex 14 and summarized below. -34-
qm - z ma
______-- _ __---- tA fOJt------I" fordo Ta fb=ll.. lb161k TBS 1 31.
Him s qmi a 8p _ 597.3 570.1 1,167A 31.5 753.5 1.145.0 938J 1,323.6 2,312A 76.1 101.9 1760 Qil Mdlki plot 35.6 3.4 4.0 86.3 9.3 95.6 451.9 46.7 SMA 34.8 3.7 3LS Lad &Cil1 P's 440.8 0 440.5 1M4.0 0 154.0 594. 0 MA 45.7 0 457 I'mP MP- aLdl lbt 61.0 0 61.0 1663 0 163 219.3 0 29.3 17.6 0 17.6 l_Ip3 hd4w 14.7 60.0 74.7 2.9 67.5 94. 41.6 127.5 1".1 3. 9.6 13.0 _m1nt 11.9 - 11.9 10.2 - 10.2 2L.1 - 22.1 1.7 - 1.7 ftrmla &1buu 31.3 1.7 33.0 10.0 10.0 110.0 131.3 11.7 143.0 10.1 0.9 11.0 1bduic.tidst - 19.3 19.5 - 19.5 19.5 - 39.0 39.0 - 3.0 3.0 1nkW E1dama 21.5 8.4 29.9 21.5 8.4 24.9 43.0 16.8 39. 3.3 1.3 4.6 1im& T_ 397.1 - 397.1 455.2 - 4SS.2 -523 - 85St3 65.6 - 65.6
arn Cr 1,941.2 699.1 2,640.3 1,413.9 5. 2,219 3,3551 1,7.3 4.922. 231t 1.6 378.7
FlyliMI 1 _pm 100.3 3S.7 137.0 O6.4 46.1 132.5 186.7 MA8 29.5 14.3 6.3 3.6 PFIM bInlM 292A 143.2 345.1 276.8 2.4 4792 479.7 345.6 62.3 36.9 2.6 63.5
mtaui am 2,243.9 879.0 3,122.9 1,77.1 1116.7 293.6 4PIl5 195.7 6,017.2 309.3 153.5 462.8
I4xh CqitaL 105.5 5.5 111.9 76.0 4.0 80. 181.5 9.5 1.0 1.0 0.7 14.7
FWJat Cot 2.349.4 884.5 3,233. 1,953. 11.7 2,973.8 4,203.0 24105.2 6,2.2 323.3 154.2 477.5
-zo*t dat snW uctm bf lIVA - 18.4 - 56.0 56.0 1. 56.0 74.4 1.4 4.3 5.7 F nt-dFd ai limi - - - - _ - _
Tmtal FII idzwi 2,67.7 8M.5 3.2. 1,5. 1,176.7 3,03.8 4,.A 2,061.2 66A 32.7 15. 63.2
_Wr! TW32.8 mai- (UsM2A wU ) ad P 111.3 n111k (USss.6ulil lumkgm mis md8 for (wm ad 9nw4mE1 1-laftlmly. b For _ ohm. ira.w a n qi.1p m ApwI 1. IM95ad um lnl wr. up to tiutdaf w in uomI auiay, t1itm. lmt & 5.02 The Project's base capital cost estimates were prepared by CHPDI and are based on cost information related to recent orders for similar equipment and actual cost data for on-going projects and are satisfactory. The original estimates as of 1982 were updated subsequently in September 1984 and most recently in December 1986. The cost for outside technical assistance including fees, travel and subsistence expenses, has been estimated on the basis of past experience for similar services in Bank funded projects. The accuracy of the base cost estimates at this stage is relatively high, particularly given the degree of design and specification for mining equipment. For this reason, physical contingencies were estimated at 5X over the base costs for mining equipment and IOX for otner cost item . Price escalation has been based on the phasing of expenditure consistent with the implementation schedule of the project and projected local and foreign inflation. Local inflation rates are projected at 6% for 1986/87 through 1993/94. International inflation rates are projected at 1.1% for 1987, 6.9% for 1988, 3.4% for 1989, -2.5% for 1990, and 2.3Z for 1991 and thereafter. -35- 5.03 Working capital requirements have been estimated at about US$14.7 million (Rs 191 million), using realistic assumptions on the level of current assets and current liabilities required by the project until each component reaches its rated capacity (1991/92 and 1996/97 for Gevra and Sonepur-Bazari,respectively). Interest during constructionhas been estimated at US$ 5.7 million (Rs. 74.4 million). This allows for capitalization of interest up to the end of 1982/83 for Gevra and 1989/90 for Sonepur-Bazari on loans disbursed during that period in line with CIL's accounting practices. 8 / 5.04 The capital cost for the Gevra mine (base cost plus physical contingency) is about US$21.3 per annual ton of run-of-minecoal and the capital cost for Sonepur-Bazariis about US$61.8 per annual ton of run-of-mine coal with the difference mainly accounted for by the wide disparity in stripping ratio. The unit investment costs of both mines compare favorably with comparable figures of around US$50 per ton of raw coal of annual capacity for low cost producers in Australia and South Africa. B. Financing Plan 5.05 The financing plan for the mining component of the project is summarized as follows: Mining Component - Financing Plan US$ million Z A. Equity Government 188.5 39.0 CIL Cash Generation 53.1 11.0 Total Equity 241.6 50.0 B. Long-Term Debt IRRD 180.0 37.3 Government of India 61.6 12.7 Total Debt 241.6 50.0 Total Financing 483.2 100.0 8/ According to CIL accounting practices, interest during construction is capitalized up to the establishmentof a revenue account for the project, i.e., two years after touching the coal seam, or when production reaching 40Z of designed capacity whichever comes first. Since the Gevra mine is already on revenue account, and since Sonepur-Bazari will probably transfer to revenue account in 1990 (since the coal seam in Sonepur-Bazari will be touched in 1988), the interest during construction is much lower than might have been anticipated for a project of this size. -36- 5.06 According to current Government policy, overall financing of project costs (including interest during construction, but excluding working capital) is provided in the ratio of 5kZ dobt and 50Z equity. Under this formula, the proposed Bank financing ot "S$180.0 million would supply about 37.3Z of the total financing provided tor the mining component of the project, with another US$61.6 million coming in the form of long-term debt from GOI, or from co-financing (if co-financing were to be used for this project). GOI's approach has been to link specific projects with individual financing sources rather than have different sources participating in each of several projects. To this effect, GOI is making considerable use of bilateral sources (from countries such as UK, FR Germany, France, Canada, Soviet Union and Poland) under governmental cooperation agreements to finance imports of equipment and technical assistance in areas of project preparation,training, etc. It is expected that CIL would be able to contribute about 11% of the funda required for its investment program from internal cash generation after debt repayment and provision of increase in working capital for the period of 1987/88 to 1993/94. This same proportion has been applied to the Project. Thus, CIL would provide about US$53.1 million equity out of its internally generated funds and the balance of about US$188.5 million would come from Government funds. 5.07 The proposed Bank loan of US$340 million equivalent would be made to GOI at the standard Bank interest rate for 20 years, including five years of grace. The sum of US$1S0 million equivalentwould be on-lent to CIL for the mining component of the project, the balance (US$160 million equivalent) being used by GOI for coking coal importation. The amount on-lent to CIL would represent about 100% of the foreign exchange and 6% of local costs requirements of the mining component. GOI's practice is to make loans to CIL for 15 years, at a nominal interest rate currently of 14% per year (resulting in an effective rate of 13.75% p.a.) and not to grant grace periods. Considering the project's requirementsin terms of its long implementationperiod and associated cash flow, it is desirable that a normal grace period be applied in this case, as has been the practice in other loans to the energy and industrial sectors. GOI has agreed to onlend the Bank funds to CIL with 5 years of grace and will assume the foreign exchange risk on the on-lent funds in line with present policy. 5.08 The balance of US$160 million which will be used by GOI for coking coal importation,will be released in two tranches. The first tranche (US$100 million) will be available for disbursementat loan effectiveness. The second tranche (US$60 maillion)would be released following receipt by the Bank of a satisfactoryprogram of measures designed to enable CIL to achieve certain financial performance targets in 1990/91 (see para. 6.11). The conclusion of an acceptable subsidiary loan agreement between GOI and CIL, and satisfactory financial arrangements between (i) CIL and SECL, and (ii) CIL and ECL, would be conditions of effectiveness. GOI has also agreed to provide, in a timely manner, the debt and equity financing requirements indicated above and whatever additional debt and equity funds which might be needed (in both local and foreign currpncy) to complete the Project promptly. -37- C. Procurement and Disbursement 5.09 Procurement arrangements are summarized in the following table: Procurement Arrangements (US$ millions) Procurement Method Project Element ICB LCB Other Total Cost Gevra Mining & Training Equipment & Spares 69.1 64.5 - 133.6 (48.6) (0.6) - (49.2) Coal Handling Plant - 45,4 _ 45*4 Land & Civil Works - 43.3 4.2 a/ 47,5 - (7.5) - (7.5) Workshop Equipment 7.0 - 1.7 8.7 (7.0) (7.0) Engineering - - 1.1 1.1 Pre-operatingExpenditure - - 2.5 2.5 Technical Assistance - - 1.5 1.5 - - (1.5) (1.5) Sub-total 76.1 153.2 11.0 240.3 (55.6) (8.1) (1.5) (65.2) Sonepur-Bazari Mining & Training Equipment & Spares 118.7 31.3 - 150.0 (79.9) (1.2) - (81.1) Coal Handling Plant 11.0 - - 11.0 (6.6) - - (6.6) Land & Civil Works - 36.4 3.2 a/ 39.6 - (16.5) - (16.5) Workshop Equipment 9.1 - 1.9 11.0 (9.1) - (9.1) Engineering - - 1.0 1.0 Pre-operating Expenditure - - 8.4 8.4 TechnicalAssistance - - 1.5 1.5 _ - (1.5) (1.5) Sub-total 138.8 67.7 16.0 222.5 (95.6) (17.7) (1.5) (114.8) Coking Coal Imports 160.0 - - 160.0 (160.0) (160.0) Grand Total 374.9 220.9 27.0 622.8 (311.2) (25.8) (3.0) (340.0) a/ Payment for land acquisition. Note: Figures in parentheses are the respective amounts financed by-the Baak. -38- 5.10 Out of a total of 62 packages to be financed by the Bank for the mining component of the project listed in Annex 15, the Bank will review all packages exceeding an estimated value of US$3 million, which comprise 17 packages that amount to about 74X of the Bank loan for the mining component, the balance being subject to post review. Eight of these packages are estimated to exceed US$7.5 million each and will require special review. Local manufacturers are expected to bid for Bank financed items under the project and a domestic preference of 15X, or the import duty, whichever is less, would be applied in bid evaluation for eligible equipment. Technical assistance services will be contracted in accordance with Bank guidelines. Thirteen mining equipment packages are on the critical path for mine implementation. Procurement of these packages, under intetnational competitive bidding procedures satisfactory to the Bank, is well under way (Annex 16) and it is possible that CIL may be ready to sign contracts and make initial payments for some of these packages before loan signing. With regard to coking coal imports GOI presently has commitments through June 1987. The procurement process for subsequent coking coal imports was initiated in March 1987. Provision for retroactive financing of up to US$20 million has been included in the loan for expenditures after April 1, 1987 associatedwith the initial equipment packages and with coking coal imports which follow procurement procedures satisfactory to the Bank. It is estimated that about US$5 million of the retroactive financingwould be for equipment and about US$15 million would be for coking coal imports. A procurement schedule is shown in Annex 15. 5.11 The Bank loan of US$340.0 million will finance goods and services as shown in the table overleaf. It is expected that for those items to be financed by the Bank, about US$28.4 million (approximately16% of the Bank loan allocation for the mining component) will be for contracts awarded to local suppliers following ICB, and about US$25.8 million (approximately14% of the Bank loan allocation for the mining component) will be for contracts awarded following Local Competitive Bidding (LCB) procedures satisfactory to the Bank. -39- Allocation of the Bank Loan (US$ million) Sonepur- % of Expenditure Gevra Bazari Total % to be inanced Category I. Coking Coal - - 160.0 47.1 100% of foreign expenditures II. Equipment a/ 46.7 77.0 123.7 36.4 100% of foreign 100% of local expenditure (ex- factory cost) and 90% of local expenditures for other items procured locally III. Coal Handling Plant, 13.8 30.6 44.4 13.0 100% of foreign Training Centers expenditure and and Workshops 70% of local expenditure IV. Technical Assis;ance 1.5 1.5 3.0 0.9 100% V. Unallocated 3.2 5.7 8.9 2.6 Total 65.2 114.8 340.0 100.0 ,- -__ _ a/ Including mining equipment, spare parts (estimated at 15% of CIF or 5% of ex-factory value of foreign and local supply respectively),and workshop equipment. 5.12 The LCB will be mainly for ten contracts, (value about US$24 million) to be executed in seven separate geographical locations for workshop buildings and related civil works and service contracts including pre-operatingexpenditures (for initial work in both project components). The value of these contracts i& expected to range between US$1-4 million each, which is insufficient to attract interest of experienced international contractors, who typically require larger contracts to justify their mobilization. The balance of the LCB (not to exceed US$1.8 million) would include packages of miscellaneous small tools and components for workshops and training centers (such as surface plates, electrical parts, heaters, repair stands, benches, racks). These have a maximum value of US$20,000 per package and are not suitable for combining into packages large enough to be of interest for international suppliers. Additionally, items procured locally costing less than US$10,000 could be purchased off the shelf. Disbursement shall be made using Statement of Expenditure (SOE) procedures for contracts of less than US$20,000. The Borrower shall have the SOE audited every fiscal year by independent auditors acceptable to the Bank, and in accordance with appropriate auditing principles consistently applied. The resulting audit report will be furnished to the Bank as soon as available, but in any case not later than nine months after the end of the fiscal year. so0- 5.13 The disbursement profile for the mining component (Annex 16) is somewhat slower than the historical country industrial sector profiles because of the long gestation period, particularly for the Sonepur-Bazari mine as a result of overburden configuration and high stripping ratio. The disbursement for the coking coal imports is expected to be completed in FY89. The Bank loan is expected to be fully disbursed by December 31, 1993 when all Bank financed items would have been commissioned. VI. FINANCIAL ANALYSIS A. Coal India Ltd. 6.01 The most critical factors affecting financial projections for CIL are forecasts of production and the related Investment program, structure of production costs and coal prices. Specific assumptioas are discussed in Annex 17. 6.02 The bulk of CIL's thermal coal project pipeline is to meet the incremental demand of the power sector. According to the 7th Five-Year Plan (1985/86-1989/90) the next several years will be a period of rapid growth for power generation and coal production. CIL will be required to increase production from 142.6 million tons in 1986/87 to 196.0 million tons in 1989/90. Thereafter, CIL's production is further expected to increase to nearly 250 million tons by 1993/94. Overall CIL is projected to achieve an increase of about 107 million tpy capacity in 7 year representing an average annual growth rate of 8.3Z. During this period open-pit coal production is expected to increase from 55% to 66% as shown in the table below: CIL - Production Forecast (million tons) Fiscal Year Open-Pit Underground Total 1986/87 78.8 63.8 142.6 1987/88 90.1 67.9 158.0 1988/89 103.4 71.9 175.3 1989/90 120.8 75.2 196.0 1990/91 131.7 76.5 208.2 1991/92 140.7 79.1 219.8 1992/93 152.8 81.6 234.4 1993/94 164.8 84.6 249.4 6.03 To support the growth of coal production, total coal sector investment requirements during the 7th Five-Year Plan (1985/86 to 1989/90) are projected at Rs 53 billion (US$4.0 billion) in 1986/87 terms. Financing to CIL has been provided entirely by GOI in the form of long-term debt and equity from GOI's general budgetary allocations for capital expenditure, with each covering about 50% of the required investment. It is expected that GOI will continue to finance 50% of the investment through long-term debt, and 50% from equity contributions. 6.04 CIL's average production costs per ton of raw coal are projected to decrease in real terms from an estimated Rs 222 per ton in 1986/87 to Rs 194 per ton in 1989/90 and to coutinue to decline slightly thereafter -41- as shown in the table below. This improvement reflects the benefits of measures included in a Medium Term Efficiency Improvement Program being implemented by CIL (para. 6.10). Compared with other major coal producing countries, CIL's average operating costs ore competitive with low cost producers in Australia and the United Stateb, though somewhat higher than those in South Africa, after accounting for differences in coal qualities. CIL-Production Costs Summary (Rs/ton 1986/87 terms) 1986/87 1989/90 1993/94 Rs/ton Z Rs/ton % Rs/ton Z Salaries & Wages 111.4 50.1 84.0 43.3 73.2 40.1 Stores 30.4 13.7 30.3 15.6 30.5 16.7 Power 14.8 6.7 14.7 7.6 14.4 7.9 Other Expenses 26.5 11.9 26.1 13.4 25.1 13.8 Operating Cost 183.1 82.4 155.1 79.9 143.2 78.5 Depreciation 21.1 9.5 21.4 11.0 21.9 12.0 Interest 18.1 8.1 17.7 9.1 17.4 9.5 Total Production Cost 222.3 100.0 194.2 100.0 182.5 100.0 __ - - 6.05 Salaries and wages constitute the largest component in the production cost structure and their movement has significant bearing on the overall production cost. In CIL, salaries and wages are fixed by the National Coal Wages Agreement which is renegotiated every four years between the unions and CIL management. So far the unions have been successful in securing wage increases in real terms but salaries and wages on a per ton basis have remained constant in real terms for the past 5 years indicating that improvements in labor productivity have more or less matched the real increase in wages and salaries. Increases in labor productivity and reductions in labor costs are now most important CIL priorities. CIL expect to be able to minimize future wage increases in real terms and CIL's efforts to improve efficiency (paras. 2.12-2.14) should result in a steady decrease in unit labor costs in real terms during the Seventh Plan period. If CIL achieves the production and productivity increases as projected, and if wage increases can be successfully controlled, labor costs will be reduced from 50% of production costs, at present, to 43% by 1989/90. CIL's efficiency efforts should also prevent any increases in other costs in real terms for the next few years. The share of depreciationand interest charges will increase due to the emphasis on capital intensive mines in the investment program. 6.06 Based on the present coal price schedule effective as of January 8, 1986, and grade-wise productionmix of CIL, the average coal price for CIL in 1986/87 is about Rs 205/ton. Recent work by CIL on a detailed mine by mine production outlook has indicated that the grade mix for CIL will -42- tend to decline sharply in the next few years because the bulk of incremental production will be of lower grades of coal, especially grades E and F (which are expected to account for about 85Z of CIL's incremental production from 1986/87 to 1989/90). To offset the impact of expected deterioration of grade mix on CIL's average price realization and to enable CIL to achieve a debt service coverage of 1.3 in 1990/91 (para. 6.11), n 4.5% coal price increase in real terms is projected in 1990. For years preceding and after 1990, it is assumed that coal prices would generally follow the local inflation rate. The average coal price in current terms for CIL as a whole is projected below. CIL - Projected Average Coal Price (Rs/ton current term) Fiscal Year Average Price 1986/87 205 1987/88 212 1988/89 221 1989/90 228 1990/91 249 1991/92 264 1992/93 280 1993/94 296 6.07 Based on the above main assumptions, CIL financial projections have been prepared and are shown in Annex 18. The key financial data are summarized in the following table: CIL - Sumury of Financial Projections (Rs million - current terms) FiscalYear 1986/87 1987/88 1988/89 1989/90 1993/94 Coal Sales (lzlion tons) 137 151 167 187 238 SalesRevenues 27,953 32,077 36,813 42,737 70,172 OperatingExpenses 25,027 27,840 30,944 34,563 51,154 Net Income (2,402) (2,025) (1,466) (474) 4,761 InternalCash Generation 498 1,400 2,625 4,340 12,633 Investment 9,690 10,335 13,466 15,233 17,070 Net FixedAssets 31,822 37,389 45,012 53,451 81,344 Long-Term Debt 27,829 30,573 34,538 38,939 52,803 ShareholdersEquity 20,706 26,235 33,105 40,840 68,240 Ratios: CurrentRatio 1.26 1.27 1.29 1.31 1.34 LT Debt:Equity Ratio 57:43 54:46 51:49 49:51 44:56 LT Debt ServiceCoverage 0.58 0.71 0.87 1.05 1.67 -43- 6.08 CIL faces a difficult financial position for the next few years. An improvement over 1985/86 is expected in 1986/87, partly as a result of the January 1986 price increase and partly as the result of CIL's efforts to increase efficiency and, in particular, a cost cutting program adopted by CIL in February 1986. Even so, a loss of Rs 2,402 million is projected for 1986/87 and this could be higher if production increases are restrained by lower than anticipated off-take. Based on the coal price assumption as outlinedin para. 6.06, and assumingno adjustmentsto CIL's capital structure,CII. is unlikelyto reach a profitmaking position until 1990/91. For the next severalyears CIL will need additionalequity contributions(above 50% of the investmentprogram) to assistwith debt repaymentsincluding arrears and will not be able to generatefunds for its investmentsprogram until 1990/91. With regardto CIL's balancesheet, the currentratio is projectedto increaseslightly to 1.31 in 1989/90. Long-termdebt to equityratio is expectedto improveto a more conservativelevel of 49:51 in 1989/90and furtherto 44:56 in 1993/94. Debt servicecoverage is expectedsteadily to progressivelyimprove and reach 1.05 in 1989/90and 1.30 in 1990/91. This allows for the repayment of about Rs 3.9 billionin debt and interestarrears over a six year period. Excludingpayments on these arrears,the debt servicecoverage would be 1.15 in 1989/90and 1.39 in 1990/91. 6.09 Agreementshave been reachedwith GOI and CIL on financial covenantsthat will ensure that the financing for the project is adequate and that CIL will followprudent financial practices. Agreementson the project's financing plan are discussed in paras. 5.07-5.08. Regarding the financial position of CIL, it was agreed for the Dudhichua Project (Loan 2393) and Jharia Project (Loan 2498) that CIL will on a consolidatedbasis: (i) maintain a long-term debt to equity ratio not greater than 60:40; (ii) maintain at all times a current ratio of at least 1.2; and (iii) take all actionsnecessary to ensurea debt servicecoverage of at least 1.3. The first two above conditionswere also agreedfor this Project. 6.10 However,a modificationhas been made to the debt-service coverageprovision in view of the presentfinancial outlook for CIL. CIL has not been able to increaseproduction (due to demand risingmore slowly than forecast) and contain unit costs as well as previously anticipated. Rather than compensate by simply raising prices in real terms to cover costs, GOI has encouragedCIL to make efficiency improvements in order to improveits financialviability. CIL has put in place a short-termcost reductionprogram for 1986/87as a resultof which cost savings of about Rs 620 million have been achieved. CIL has also developed a Medium Term Efficiency Program which is being implemented by the subsidiaries. This program includes inter alia manpower control measures (to improve labor productivity), computerized spare parts systems and improved operating and maintenance capabilities (to increase availability and utilization of heavy mining equipment) and stringent cost controls (to contain increases in administrative,stores, power and transportcosts). More detailsare given in Annex 19 which also includescertain performance targets. -44- 6.11 The extent of CIL's financial difficulties in the next several years became apparent in late 1986 during the preparation of the Medium Term Efficiency Improvement Program. While the emphasis on efficiency improvement is a sound approach, the present measures identified and being impleuented by CIL will not be sufficient to enable CIL to reach the 1.3 debt service coverage without price adjustments and/or other measures. GOI and CIL are considering various options that will enable CIL to achieve a 1.3 debt service coverage by 1990/91. While these could include an increase in the present coal price schedule in real terms (as assumed in the financial projections - para 6.06), other options als o exist including identification of further efficiency improvement measures, financial restructuring steps (including capitalizing or writing c'f certain CIL arrears in interest and debt repayment to GOI) and possible new approaches to coal pricing (such as coalfield pricing or even sliding scale pricing). Further time is needed to formulate these options and develop a comprehensive strategy. GOI will, therefore, prepare and submit to the Bank by October 1, 1988 a program of specific measures which will enable CIL to achieve a debt service coverage of 1.3 by 1990/91. CIL has established a set of annual operating performance targets for the next four years (Annex 1S) and will review its annual operating performance with regard to these targets annually with the Bank. Based on these arrangements, it was agreed that CIL would take all actions to ensure a debt-servicecoverage of at least 1.3 in 1990/91 and thereafter. This agreement will subsequently be adopted for the Dudhichua and Jharia Projects also. Additionally, CIL will have its accounts audited by independent auditors acceptable to the Bank, and will submit certified copies of its consolidated financial statements (together with the auditor's report) as soon as available, but in any case not later than nine months after the end of each fiscal year. B. South Eastern Coalfields Ltd. 6.12 SECL's projected financial position is summarized below. Detailed financial projections for SECL, given in Annex 20, are based on the assumptions discussed in Annex 17. 9BM- &mmy of ProjectedFfmel positi a/ (Rs urfln) 1986/87 1987J88 1988/89 1989/90 1993/94 Gsol SR (nuUMIntons) 52 60 68 77 99 SalesRevemws 9,748 11,661 13,620 16,144 26,955 OperatinglEpues 7,222 8,217 9,87 10,808 16,714 NetInume beforeCPRA cmtr ibtimn 793 1,407 1,868 2,570 5,556 Net Ixcae afterCERA coltrbaimn (8D6) (689) (476) (75) 1,947 teTumtCSash Glemation 174 468 875 1,490 4,467 Investmzrt 2,830 2,862 3,147 3,454 4,211 a/ The projcXke iT-uidethe Nw'r operatioisand emcludethe Orissa operatlons. ' Aftereontibhutm to ML&. -45- 6.13 Due to locational advantages in relation to major coal consumers in western India, development of new coalfields in SECL has been given priority in CIL's investment program. SECL's production is expected to increase from 54 million tpy in 1986/87 to 103 million tpy by 1993/94, representing an average annual growth of 9.6Z. The emphasis of SECL's investment portfolio Is the development of new large-scale open-pit mines which would bring the share of open-pit production to 68 by 1993/94 from the current level of 51%. 6.1x. Mainly due to better mining conditions, less power shortages and less labor unrest, SECL is a low cost producer among all subsidiaries. In 1986/87 average operating cost per ton of saleable coal in SECL are expected to be Rs 138/ton, about 75Z of CIL's average of Rs 183/ton. Production cost in real terms is expected to decrease by about 17% by 1993/94. SECL is in a sound financial position. Its forerunner (WCL) has been able to earn moderate profits since 1979/80 and SECL is also expected to be profitable before CPRA contributions. Although the Impact of the retention price system results in substantial transfer from SECL to ECL and BCCL and will cause a negative net income (after CPRA adjustment) for several years for SECL, the ratio of internal cash generation to investment rewains positive and is projected to increase from the current level of 6Z to about 106% in 1993/94. C. Eastern Coalfields Ltd. 6.15 ECL's projected financial position is summarized below. Detailed financial projections are given in Annex 20. - SuurrY of Pzojected FinmialPbsiticx Bs.mwlUon) 1986/87 1987/88 1988/89 1989/90 1993/94 Coal Sales (mmillon tons) 24 26 29 33 38 Ss Reve_ues 6,335 7,155 8,408 9,798 14,697 Operating costs 6,377 6,976 7,702 8,503 11,305 Net lie before CERA justtent (1,185) (1,161) (871) (562) (340) Net I after CM Adjustiunt (455) (385) (294) (120) (754) InternalCash Genrationa/ 171 353 593 924 2,529 1nvesm.t 1,500 1,696 2,248 2,382 3,008 a/ hi g catributin frm CMM& 6.16 Due to difficult mining conditions, the labor-intensive nature of existing operations, and overstaffing, average cash operating cost of ECL is the highest among all subsidiaries (Rs 268/ton). ECL's investment program amounts to nearly Rs 2.0 billion per annum over the 1986/87 to 1989/90 time period. It consists of reconstructing its older, deep underground mines and developing certain new open-pit mines including the Raimahal mine to feed the Farraka super-thermal power station in northern BiIiar as well as Sonepur-Bazari. Because of the geological conditions and -46- the age of the workings, there is only limited opportunity for increasing production from the underground mines and the emphasis of the reconstruction program is therefore on efficiency improvements and cost reduction, as well as increased production. Since there are fewer undeveloped coal deposits in the regions operated by ECL, its incremental production program is such smaller than SECL. By 1993/94, ECL is expected to increase production to 40 million tons, with an average annual growth of 6.8% from 1986/87. Open-pit mining would only moderately increase its share from 33Z in 1986/87 to 45% in 1993/94. 6.17 As discussed earlier, given CIL's power and responsibilityfor decision-makingon financial and administrativematters, and because it borrows from GOI all long-term loans for the Group, CIL is considered the primary beneficiary for the proposed loan. For these reasons, no specific financial covenants are considered for SECL and ECL with the exception that SECL and ECL will have their accounts audited, by independent auditors acceptable to the Bank and will submit certified copies of their financial statements, togetherwith the auditor's report as soon as available but in any case not later than nine months after the end of each fiscal year. D. Gevra and Sonepur-BazariProjects 6.18 The operating cost estimates for Gevra and Sonepur-Bazariwere developed by CMPDI in 1979 and updated subsequentlyin September 1984 and December 1986 based on actual and comparable cost data. Due to excellent geological conditions, the operating costs of the Gevra mine compares extremely favorably not only with the companywiseaverages but also with the lowest cost coal producers in South Africa even after adjustment for coal quality differences as shown in the table below. The operating cost estimates of Sonepur-Bazari, while higher than Gevra due to a higher stripping ra-io, are also well below ECL average due to its capital-intensivenature. Inter-CompanyComparison of Cash Operating Costs (Rs per ton of Saleable Coal, 1986/87 terms) Sonepur- Gevra Bazari SECL ECL CIL Salaries & Wages 10.0 18.4 78.5 186.3 111.4 Stores 19.2 57.0 29.1 24.1 30.4 Power 1.8 9.7 13.7 18.1 14.8 Other Expenses 10.1 24.9 16.7 39.5 26.5 Total Operating Costs 41.1 110.0 138.0 268.0 183.1 InternationalComparison of Cash Operating Costs (US$ per ton of Coal Equivalent 1986/87 terms) Sonepur- Gevra Bazari South Africa Labor Cost 1.7 1.9 3-4 Other Costs 5.3 9.5 5-8 Total Operating Costs 7.0 11.4 8-12 -47- 6.19 The financial rate of return of Gevra mine is 22% and that of Sonepur-Bazari is 10%. The difference is due primarily to the higher stripping ratio for Sonepur-Bazari which is about five times that of Gevra, though coal from Sonepur-Bazari is of much better quality. However, considering the actual supply shortages of higher grades of thermal coal which is economic to transport over relatively long distance, the development of Sonepur-Bazari mine is of equal priority with Gevra. Detailed financial cost and benefit streams and the assumptions used, together with those of the economic analysis are given in Annex 21. The financialrates of return and sensitivity tests are summarized below. Switching values of coal price, capital and operating costs wich would reduce the return of the Gevra project to 10% are also presented. Gevra and Sonepur-BazariProjects - Financial Rates of Return (M) Gevra Sonepur-Bazari Base Case 22.4 9.7 Capital Cost Up 10% 20.0 8.4 Operating Cost Up 10% 20.9 8.4 Production Build-up Slippage 21.3 9.3 Capital Cost Up 10% and Production Build-up Slippage 16.7 6.1 Gevra - Switching Values Y'ieldi,g10% Financial Rate of Return Factor Percentage Change Coal Price -31 Operating Cost +79 Capital Cost +78 6.20 Of the various factors used in the sensitivitytest, the return stays sensitive to variations of coal price which is the least controllable by CIL. Although GOI has expressed basic commitment to adopt a rational coal pricing policy, risks exist that price adjustments may not take place in a timely manner. In anticipation of this and to ensure the financial viability of the project and CIL, the Bank will continue its pricing dialogue with GOI in the context of GOI's preparationof further measures to enable CIL to meet its financial targets (para. 6.11). Although ECL has limited experience with mechanized open-pit operations,the possibility of significant implementationdelays causing slippage in the production build-up is considered low given CIL's commitment to rationalize and strengthenECL's management as well as cross-fertilizationof benefits expected from technical assistance on open-pit mining operationsunder the Dudhichua project. In the case of Gevra, since the technology involved is already adopted by SECL in other open-pit operations, time overruns are unlikely except that production build-up is conditioned by the implementation progress of the Korba power plant being financed with Bank group assistance. Possibility of capital and operating cost overruns is relatively low because estimates are based on actual data for on-going projects. Further, the impact on the rate of return is not critical in either case. -48- VII. ECONOMICANALYSIS 7.01 The Gevra mine is a captive supplier of the Korba power station, one of the four large centralpower stations planned by GOI for the current decadeand being developedwith Bank Group assistance.Upon completion, the Korba powerstation will have 2,100MW generatingcapacity and will contributeabout 8% of total energysupply in the westernregion from 1991 onwards. In this context,the Gevra mine plays an important role in the provisionof necessaryincremental base load capacity of the requiredsize and reliability. As for Sonepur-Bazari, 50% of coal production is linked with the Kolaghat power station which is at present under construction with ultimate capacity of 6x210 MW. The project will help to alleviate the acute power shortages and associated losses in industrial output in West Bengal. The balance of Sonepur Bazari's production will help to alleviate shortages of higher grade coals for industrial consumers. 7.02 The importationof cokingcoal will assistGOI in filling the gap betweenthe presentavailability of domesticprime cokingcoal and the steel industry'srequirement for primecoking coal. The loan would finance approximately half of India'scoking coal requirementsduring the next two years. Without the imports, the production of steel would be constrained by raw materials shortages with a resultant decline in capacity utilization and, hence, inefficient use of the steel industry's existing plant and equipment. Since the imported coal will have a lower ash content (average 10% ash) than domestic supplies (average 21% ash) blast furnace productivity should be improved by a judicious blending of imported and domestic coal. The results of the program to monitorthe benefitsof the imports (para. 2.17) will be useful not only for optimizing the blend ratio in the next severalyears but also for assessingthe economicsof using importedcoal on a permanentbasis to sweetenthe India coking coal, since even under the best of conditions Indian prime coking coal will not be lower than 17% ash. A. Economic Rates of Return 7.03 The economic rates of return for the investments in the two mining complexes have been calculated based on the cost and benefit streams used for the financialrates of return except for (i) exclusionof all identifiabletaxes and duties;(ii) applicationof standardconversion factorof 0.8 to locallysupplied inputs and labor to reflecttheir opportunitycosts to the economy;(iii) the use of projecteddomestic sales pricespaid by consumers at mine-head (adjusted by the standard conversion factor) as proxies for the economic values of the relevant gradesof coal to calculate project revenues (para. 7.04). 7.04 In principle, coal is tradeable and should be priced at opportunitycost. However,the bulk of India'sthermal coal production is not expectedto be economically tradeable because of both its low quality and the heavy transportation costs involved. In these circumstances, the -49- efficiency price is the long run marginal cost. Given that the projected average thermal coal price for CIL is broadly in line with the long run marginal cost estimate, the projected domestic prices paid by consumers at mine-head for each grade, adjusted by the overall conversion factor, have been used in calculatiag project benefits for the purpose of economic evaluation. ?2 The mine-head consumer price for each grade comprises mine-head producer price plus various statutory levies and sales taxes collected by state and central governments. The prevailing rates of these levies effective as of January 1, 1987 are much higher in Bihar and West Bengal than in other coal-producing states. Presently, the differentials between producer and consumer prices at mine-head average about 30% of producer prices for ECL and BCCL, about 25% for CCL, and about 10 for SECL. 7.05 The economic rate of return thus calculated is 32Z for Gevra and 19% for Sonepur-Bazari. Sensitivity tests of adverse scenarios are summarized below and underlying assumptions and cost/benefit streams are detailed in Annex 21. It can be noted that the economic rate of return is about 10 points higher than the financial rate of return reflecting that substantial portion of the economic rent accrues, partly, to the central and state governments in the form of taxes and partly to the labor force which is paid high wage rates relative to wages in other occupations. Gevra and Sonepur-Bazari Projects - Economic Rates of Return (O) Gevra Sonepur-Bazari Base Case 32.0 19.3 Capital Cost up 10% 29.0 16.2 Operating Cost up 10% 30.4 16.7 Production Build-up Slippage 27.9 13.9 Capital Cost Up 10% and Production Build-up Slippage 25.2 12.7 B. Resource Mobilization 7.06 Substantial amounts of resources are generated by the coal sector in the forms of statutory leviee, sales tax, and custom duties on CIL's coal sales and equipment purchases. During 1986/87 - 1989/90, CIL's contribution to Government revenues is projected to average 70% of CIL's investment requirements, whereas CIL's projected internal cash generation averages 18% of CIL's investment before debt service and only becomes 9/ The question may arise whether consumers would be willing to pay higher prices, i.e., whether these prices clear the marilet and obviate any need for rationing. Although coal supply in India has been pressed at times to satisfy domestic demand at prevailing level of prices due to the structure of demand, it appears reasonable to assume that at the projected prices no scarcity will develop. -50- positive in the early 1990s, after debt service. Most part of the statutory levies on coal sales go to State Governments, although 10X of these are given back to CIL as subsidies for stowing operations, housing and medical facilities, etc. Considering that the Central Governme t intends to continue to finance CIL's investment program on 50X debt and 50X equity basis, this will impose a substantial burden on GOI's budget for capital expenditure if present arrangements remain in force. It is, therefore. desirable that measures be taken so that CIL can soon move to a position. where it is able to generate part of its investment requirements itself. It should be noted that the customs duty on imported equipment for govexmnment-sanctioned projects has been reduced from 65% to 45% of CIF cost staLting January 1, 1985, which is helping reduce CIL's investment requirements and is encouraging domestic suppliers to improve efficiency. CIL - Projected Resource Mobilization (Rs million - current terms) Fiscal Year 86/87 87/88 88/89 89/90 93/94 Internal Cash 498 1,400 2,625 4,340 12,633 Generation (ICG) a/ Contribution to Government Revenues (CGR): Duty & Taxes on Equipment 830 890 1,150 1,310 1,470 Levies on Coal Sales 5,990 6,800 7,780 8,970 14,560 Subtotal 6,820 7,690 8,930 10,280 16,030 CIL Investment 9,690 10,335 13,466 15,233 17,070 Debt Repayment b/ 2,583 3,143 3,488 3,936 5,145 ICG/Investment(X): Before Debt Service 5.1 13.5 19.5 28.5 74.0 After Debt Service neg. neg. neg. 2.7 43.9 CGR/Investment(X) 70.4 74.4 66.3 67.5 93.9 a/ Before servicing long-term debt to the Government. bJ Including arrears. C. Other Benefits 7.07 ,theproject should help to develop efficient operating practices in ECL through the demonstrationeffect of a modern, high-productivitymine and provide stimulus towards the efforts of rationalizationof existing operations. Furt.iermore,the selection of 120 t dump trucks for both mines represents a major step forward in exploiting the potentialof modern mining technology and will accelerate the collaboration between the domestic manufacturing industry and foreign suppliers to upgrade domestic manufacturing capabilities. The project will provide direct employment for about 4,000 persons at the Gevra mine and will open an avenue to alleviate the current over-staffing of ECL by providing required manpower for the -51- Sonepur-Bazarimine (of about 1,200 persons) partly from within the existing labor force. The project will also support CIL in its efforts to improve its overall efficiency through short-term cost reduction and medium-term efficiency measures. Finally, improvements in the quality of coal received by consumers should contribute to greater productivityin consuming sectors, in particular, power, steel and general industrial consumers. D. Least Cost Development Program 7.08 The econou#ic rate of return calculations presented above evaluate the marginal contribution that each mine is making to the economy, and thus enable a comparison with investments in other sectors. This is not sufficient, however, to rank projects within the coal industry, or a segment of it, according to their relative economic merits. Since transport costs are high compared to mining costs (and can even be higher than mining costs for long distances), the merits of a project meeting domestic demand in a particular location are of paramount importance, especially in the case of large scale thermal power plants. 7.09 In the case of the Gevra mine, it should be compared with other projects in the Korba field and with others in neighboring fields in Madhya Pradesh and Orissa. SECL and WCL have currently under implementation 15 underground and 11 open-pit major mines with economic costs 10/ at mine-mouth averaging Rs 23 per Gigacal (ranging from Rs 13 to 36 per Gigacal 11/). Apart from the expansion of Gevra, four other projects are presently being considered for investments in Korba or relatively near areas. Of these, the expansion of Gevra ranks second with an economic cost per Gigacal of Rs 24.8, fairly close to the average of projects under implementation. The only project with an economic cost lower than Gevra (Rs 20.9 per Gigacal) consists of the expansion of the existing open-pit mine Kurasia, which for technical reasons cannot be expanded by more than 1 million tpy. 7.10 ECL's investment program is geographically concentrated in a much smaller area and given the relatively higher grades of coal produced, the demand is considerably more dispersed throughout India. For these reasons, the analysis here has been focused on the overall investment program for ECL. There are at present 12 major projects under implementation with an average economic cost of RS 28 per Gigacal (ranging from 17 to 35). Some other thirteen projects have been formulated and in all cases the economic cost has been estimated at above Rs 28 per Gigacal, which is a clear indication of the rising trend in long-run marginal costs. The Sonepur-Bazari project with a cost of Rs 33.7 per Gigacal, ranks third in this program, satisfying the least-cost development criterion. 10/ The economic cost has been estimated as the ratio of the net present value (NPV) of capital plus operating cost streams (in early 1985 terms) to the NPV of the energy content of coal production (measured in Gigacals) discounted at the opportunity cost of capital, estimated at 12X. To express them in economic terms, the cost streams have been adjusted using the same criteria described in para. 7.02. 11/ Except for one project with an economic cost of Rs 49.9 per GigacF_. -52- E. Project Risks 7.11 The project faces minimal technical and marketing risks. There is a risk that the Sonepur-Bazari component may be delayed by land acquisition difficulties. The required land is in the hands of the Government of West Bengal and handover is expected within two to three months. If undue delays occur, disbursements will be limited to US$8 million for the Sonepur-Bazari mining equipment until the land is handed over. Any possible financial risks are mitigated (a) by CIL's efforts to improve its efficiency and financial performance;(b) by the Government's commitment to preparing a program, including price increases if appropriate, that would assure CIL's financial future viability;and (c) the high priority that GOI places on developing its critically needed coal resources in a timely and efficient manner. VIII - AGREEMENTS REACHED AND RECOMMENDATIONS 8.01 The following agreements have been reached: (a) With thc Government that it will: (i) prepare a detailed implementationschedule for measures to improve coal quality (para. 2.19); (ii) maintain coal prices that will ensure the financial viability of CIL and provide increased resource mobilization in the Sector (para. 2.21); (iii) ensure adequate power supply to the project (paras. 4.12 and 4.25); (iv) on-lend Bank funds to CIL on terms and conditions satisfactory to the Bank (para. 5.07); (v) provide in a timely manner the financing necessary to complete the project promptly (para. 5.08); and (vi) furnish the Bank with a program of measures that will enable CIL to achieve its agreed financial targets (para. 6.11). (b) With CIL that it will: (i) retain technical assistance by December 31, 1987, regarding the design of workshop facilities (para. 3.08); (ii) retain technical assistance by December 31, 1987, to improve manpower planning within CIL and the planning and organizationof training activities (paras. 3.09 and 3.10); (iii) retain technical assistance by December 31, 1987 for the design and development of training institutes (paras. 4.10 and 4.24); -53- (iv) undertake a resettlement program for people affected by the project (para. 4.32); (v) follow prudent financial practices; and maintain financial covenants as describtd in paras. 6.09 and 6.11; and (vi) review with the Bank its annual operating performance (para. 6.11). (c) With CIL and SECL (for Gevra) and ECL (for Sonepur-Bazari)that they will: (i) undeLtake additional geotechnical testing and prepare and submit to the Bank a repurt on detailed mine planning and slope stability for both components (para. 4.08 and 4.20); (ii) ensure the design, construction and operation of the project are carried out with die regard to ecological and environmental standards and ensure satisfactory arrangements for the supply of electric power and potable water to each component (paras. 4.12, 4.25, 4.26 and 4..2); and Ciii) prEpare and submit financial statementsand audited financial reports to the Bank (par-. ' 11 and 6.17). (d) With SECL and ECL (for Cevra and Sonepur-Bazarirespectively) that they will: (i) establish a satisfactoryProject Management Unit for each compenent (para. 4.34 and 4.35). (e) With ECL that it will (i) implement a rehabilitationprogram for twenty loss-making mines satisfactory to the Bank, submit progress reports for Bank review, and extend the program to another twenty mines as agreed with the Bank (para. 3.18). 8.02 The following are conditions of effectiveness: (i) the conclusion of a subsidiary loan agreement between GOI and CIL under terms and conditions satisfactory to the Bank '?ara. 5.07); and (ii) financial arrangements between (a) CIL and ECL, and (b) CIL and SECL, all under terms and conditions satisfactoryto the Bank (para. 5.08). -54- 8.03 As a condition of disbursement, disbursements on the Sonepur- Bazari component will be limited to a maximum of US$8 million until ECL has confirmed possession of 68 ha of land (part of the land needed for the firstfive years of mining-para. 4.37). In addition,the second tranche of the cokingcoal component(US$60 million) will be releasedon receiptof a satisfactoryprogram of measuresthat will enable CIL to reach its financialtargets in 1990/91(para. 5.08). 8.04 Given the precedingagreements and assurances, the projectis recommended as suitable for a Bank loan to GOI of US$340million for a periodof 20 years with 5 years of grace,at the standardinterest rate. IndustryDepartment March 1987 - 55 - ANNEXI Page 1 of 4 INDIA - COAL MINING AND COAL QUALITYIMPROVEMENT PROJECT ENERGYSECTOR OVERVIEW A. Energy Resources 1. Energy use in India is among the lowest in the world. In 1980 per capita consumption of energy averaged 210 kg (coal equivalent),i/ compared with 680 kg in China and 7500 kg in industrial countries. Over the past three decades the composition of fuel consumption has increasingly shifted from the use of non-commercial fuels, such as fuelwood, vegetable wastes and cow dung, to commercial energy resources. At present, non-commercial fuels account for less than 40% of total energy consumption, while coal accounts for 32%, oil and gas for about 20% and primary electricity for 8%. The bulk of the substitution of non-commercialfuels has been in the form of coal and oil products reflecting India's large coal resources and the rapid growth of road transport, where energy use in the form of petroleum products has almost doubled over the past decade. The increasing reliance on commercial fuels has strained the capability of the energy sector to meet the energy needs of the economy and has placed a heavy burden on the balance of payments. 2. Concerned about the adverse impact of energy shortages on economic growth, the government has continuouslystepped up investmentsin the energy sector. Since 1973/74 the share of total public investment in the energy sector has nearly doubled. While this reflects to a large extent the government'sresponse to the increase in internationaloil prices, it is also in line with the traditional perception that the energy sector must provide the Indian economy with the energy it requires to sustain growth. The relative shares of public investment in the major energy sub-sectors, coal, oil and gas, and electric power reflect the changing structure of energy demand, in particular the rapid growth in the demand for oil products, the need to minimize the burden energy imports place on the balance of payments and India's relative endowment with energy resources. 3. Coal is and will continue to be, India's most abundant domestic energy resource. Its contribution to the country's commercial energy requirementsis expected to remain more than 50% over the next decade. Total coal resources (excluding lignite) are estimated at over 127 billion tons, out of which 60 oillion tons are considered technically and economically recoverable under present conditions. Based on current projections of the growth of coal demand, these reserves would be sufficient to meet India's coal needs over the next 130 years. In contrast to the experience of many other countries, the share of coal in commercial energX production in India has declined only slightly over the years, and coal still accounts for about 60% of all commercial energy produced. In 1984/85 coal production reached 147.5 million tons, making India the sixth largest coal producer in the world. 1/ Internationally, coal is rated at 7,000 kcal/kg while in India, due to generally lower coal quality, coal is rated at 5,000 kcal/kg. - 56 - ANNEX1 Page 2 of 4 4. Oil, because of its rapidly growing demand that absorbs a large share of India's export earnings, will remain critical to the management of the Indian economy2 /, in particular lts balance of payments. While domestic oil output has increased from 0.5 million tons in 1961/62 to 29.0 million tons in 1984/85, mainly as a result of the discovery of the Bombay High off-shorefield, it currently provides only two-thirds of domestic consumption.Although the relianceon lmportedoil ls projectedto decline to about one-fourthtowards the end of the 1980D,it is expectedto rise again to about one-thirdby the mid-19909as domesticoil production(from currentlyknown fields) reaches a plateau of about 38-40 million tons. To avoid a significant increase in oil imports by 1995, new reserveswill have to be discoveredand broughtinto productionwithin the next decade. Total prognosticated resources of hydro-carbons have been estimated by ONGCin 1982 at 15 billion tons of oil equivalent of which about 75% is naturalgas and 251 is oil. Two-thirds of the resources are located off shore and one-third on shore. Of these resources, 511 million tons of oil and 478 blllion cubic meters of gas have been estimated as proved reserves as of January 1984. 5. Current geological knowledge of the country indicates that natural gas is likely to be India's predominant hydrocarbon resource. Up to now however, the role of natural gas has been small and limited to associated gas produced with crude oil. The situation will change, however, with the development of the large South Bassein gas field and the appraisaland provingof more recent discoveries in the western region. Currentnatural gas productionhas reached7.2 billioncubic meters (bcm) per year, or about 6.0 million tons of oil equivalent,of which 3.8 million tons of oil equivalentare used as fuel or feedstock,the remainderbeing flaredfor lack of compressionand dehydrationfacilities off-shore, transmissioninfrastructure or consuwmrsonshore. 6. India'seconomic growth depends to a large extenton the performanceand developmentof the power sector,since power shortages have an immediateimpact on virtuallyall other sectorsof the economy. Total installedpower generatingcapacity as of March 1985 was 46,680MW (includingnon-utility plants), of which about 672 was conventional thermal,312 hydro,and 22 nuclear. The CentralElectricity Authority (CEA) has recentlycompleted a systesaticreassessment of India's hydroelectricresources, and placedthe estimatedpotential at 89,830MW. At a load factorof 60% this potentialcapacity would yield an annualpower outputof 472.15twh, almostthree times the 1984/85level of power generationfrom all sources(166.6 twh). Of this potentialonly 14,314MW have been developedand 5,100 MN are under construction.GOI has given high priorityto the developmentof India'shydro potentialbut these projectshave very long gestationand implementationperiods. Most of the recentadditions to power generatingcapacity bas therefore been from thermalpower plants. The share of thermalpower generationhas increased to about 67% of total capacityin 1984/85from its lowestlevel of 54% duringthe secondhalf of the 1960s. With the increasein the share of 4/ India'stwo major nationaloil companies,the Oil and Natural Gas Commission (ONGC)and Oll IndiaLtd. (OIL)have emergedas the largest net contributors of resources to the public sector. - 57 - ANNEX I Page 3 of 4 thermalpower in total electricitygeneration, there has also been an increasein the share of coal used for power generation-fromless than 20% in the early 1970s to a currentshare of about 44Z. Duringthe same period the correspondingshare of petroleumproducts has remainedfairly constant at about 7% to 8%. 7. Over the years the Indian economy has been increasinglyplagued by power shortages. While power generation has kept pace with the demand for power during the 1950s and 1960s, since 1970 supply has fallen short of demand, mainly because of delays in the commissioning of new power projects, operatingand maintenanceproblems, and severe budget constraints which have limitedinvestments in the power sector. The situationhas been aggravated by unreliable coal supplies caused by inadequate transport and the declining quality of coal. In 1980 a high-level commission carried out an analysis of the situation and submitted its findings (Report of the Committee on Power) to the Government. As a result of this report the Government has introducedseveral measures to improvethe efficiencyof thermal power plants, including: (a) improved preventive and planned maintenance;(b) betteravailability of spare parts;(c) improved training; (d) adequate coal supplies of acceptable quality; and (e) more effective management of both State Electricity Boards and power plants. Despite these measures the supply of power is expected to remain inadequate for some years to come, particularly in areas where coal is not available nearby. B. Energy Consumption 8. While households account for a small share of commercial energy- about 7% of coal, 19% of petroleum and 10% of electricity-their cousumptionof non-commercialenergy is comparativelyhigh, particularlyin rural areas while the use of electricity and kerosene remains mostly limited to lighting. Although commercial energy will continue to replace non-commercial energy, the latter will remain a major source of energy supply for rural households. Energy needs in agriculture are still met mostly by animal power. Currently commercial energy consumption in this sector accounts for only about 7S and consists mainly of electricity and diesel oil. However, the use of commercial energy in agriculture has been growing rapidly reflecting the efforts to modernize the sector. 9. The industrial sector, which consumes about 40% of commercial energy resourcesis the largestuser of coal and electricity.In 1984/85 it accountedfor 42Z of coal consumptionand 71Z of electricity consumption. The energy intensity of the industrialsector has remained virtually unchanged since the early 1970s, mainly because of the slow turn down of capital. 3/ It is largely the result of the relatively poor energy efficiency of the technology that is still used in many manufacturing processes. Thus the expected acceleration of industrial growth in India is likely to place a heavy strain on the energy sector. 3/ In terms of industrial energy Lntensity, India ranksnear the top among developing countriesand well above the averageintensity in industrial countries. -58- ANNEX 1 Page 4 of 4 10. The transport sector is the largest user of petroleum products and the third largest user of coal, after power and industry. Over the past twenty years the structure of demand has changed considerablyas a result of the rapid growth of road transport and the substitutionof diesel electric for steam locomotives. In 1984/85 oil products accounted for 66% of the commercial energy consumed in the sector compared to 47% in 1970/71, while the share of electricity remained at about 3%. Current projections in the transport sector indicated continuing decline in coal consumption as road transport increases in importance and as railways continue to shift to more efficient diesel electric locomotives, thereby contributingto a growing demand for petroleum products. C. Energy Policy 11. In its energy policy the Government pursues three objectives, to fully develop indigenous energy resources, to improve the efficiency of energy utilization and to limit the use of oil products to those end-uses in which economic substitutionby other energy resources,particularly coal, is not possible. In line with this policy the Government places particular emphasis on the development of the coal industry and the exploration for oil and gas. To this end the Governmenthas increased the allocation of resources to these two sub-sectors in the forthcoming Seventh Plan. In addition, the Government is currently considering new initiatives to attract foreign oil companies to explore in India. 12. This policy, whose design reflects the Government's response to the increases in international oil prices during the 1970s, places much of the burden of replacing oil products on the coal industry. Through pricing policies and rationing the Government curtailed the use of oil products, where this was technically and economically feasible, and encouraged the use of coal. To overcome, at least in part, the distributionalproblems associated with the greater use of coal, the Governmentencouraged also the constructionof coal-based thermal power plants. -59- ARM 2 MND - CXOL!UI AID a) gnr= W 3r W COALED31 ANDSJUX 1984/85- 1989/90a/ AMS A g Gh Rate CbalDeman 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 (Z per year) Them.l Coil Paw 62 72 77 87 97 110 12.2 (3) (3) (4) (5) (7) (9) 2.6 Railbys 9 9 8 8 8 8 (2.3) Ceent 7 8 8 9 11 12 11.4 Fertize 4 4 4 5 5 6 8.5 Othr 33 34 35 38 _ 42 48 7.8 Subtotal Thezmi 115 127 132 147 163 184 9.9 QdIxWcGal 33 33 35 38 42 48 4.4 (raum Total 148 160 167 185 205 232 9.4 -~~ y m CIL 131 L34 143 158 175 1% 8.4 (3) (3) (4) (5) (7) (9) 24.6 SaL 12 16 17 19 22 24 14.9 TISM/IISCD 3 3 3 4 4 5 10.8 Total 146 153 163 181 201 225 9.0 ThermalCOl 116 123 132 148 165 183 9.6 WddgCol 30 30 31 33 36 42 3.7 Total 146 153 163 181 201 225 9.0 a/ Figu In rkets are the qmttlies fiubexy mddlin uszedfer pa. Soaces: CfMDI,flaik Staff. - 60- ANNEX3 Page 1 of 2 DhIA - ALMl ANDaOL (qJL Dnwiw PMc EC AND)M 1EWN PODM M lb asms the quality of invenctm poztfolls of FM and SE0. a revim hu been mdekof projects ir i-ammtaton and az itted for approval, with focum an tecllal vUability, capital and operatiri tixmtes, projec iqlemtstIn sdulble, and actual roges. S1ze projects ffer in m1 qtality, pro&xctIonprofle and servics 3ife, they bv beewbrubht to a cmn basis for the pupme of campa thir relativ ecouwc writs uuizg the concept of ecao c cost per Gallode, :dch Is defin M tm rtio of rat prent vlm (NPV)of capital asd operstix cost stre In econic tex 0to the WV of enz content of coal prouctiOon (w sld in Gigaclories) disuited at the ppotunity cast of apital In Try"an emy estimated at 12Zp.a. For thls pUrpose, cittal asd opemtki cast streem of each project hie been ajisted to ecll al Identifiable taf and dutis, wA a staulaz cnersion factor of 0.8 ha been applied to loclly s.ppiM irpx to reflect tkir apportlity cot to the . The renks thus dedi are gLvenin te follwizr table. Caloif ic C1pital OpetfRg EFnlc Capsdty Vale CaGt / Cat Ccst Project (BiS t), (kcal/kg) (PA/tOn) (Rs/tm) (Rs/Gigcal) ECL - I 1 =emAza I. Bao.l aVG 1.1 4600 128 79 17 2. S BtgUG 1.2 4900 371 111 30 3. BaEilAUG 1.2 4900 145 88 19 4. JKt NgrWU 0.9 4200 38 89 26 5. Parbelia G 0.8 5700 264 78 18 6. Jhanjra UG 3.5 42)0 580 48 39 7. Chinawd UG 0.7 6500 667 47 34 8. Dtuimin UG 1.4 4900 561 88 30 9. I ottatUhUG 1.0 5500 583 102 30 10. N. Sear Sole UG 1.2 5500 152 68 15 11. SeealpUr U; 0.6 6600 1030 142 43 12. Raj.Pu. OC 5.0 3400 435 57 36 - For A Wprva 1. C(Dra BlockUG 1.0 4200 589 93 41 2. Sarpd BlodcUG 0.9 4200 419 133 38 3. K1a5rdlhiU 1.2 400 565 93 35 4. Guuik UG 2.0 5300 784 76 48 5. BlhUatdukU; 1.7 5300 68D 89 37 6. Jaili U; 1.4 5900 766 108 38 7. alidaInpor UG 1.0 5U00 455 101 29 8. aIdaba UG 0.7 4300 607 80 41 9. Kttadih OC 3.0 4700 474 68 32 10. GouraidihOC 1.0 3100 418 63 35 11. Sonp i OC 3.0 5200 650 106 34 .12. Omm n0C 1.5 32D0 344 56 28 13. JanbmOC 2.3 5300 863 131 41 al Cpltal costs (iry1ilM muddzr capLtal) per mtof aEuzal cap ty in ealy 1985tem. ; 61- ANNEX3 Page 2 of 2 Cmlod.ElC aCpita 0alratizb Eonwlc C:aaty Valim Cmt 5/ Ctst cozt Project t) (/tn (R/ton) P/G4pcaI) SEMl- Uner iplsiatimi 1/ 1. PaliUG 0.5 42W0 264 56 19 2. NcphUr 1.2 5300 138 66 14 3. ChidIa UG 0.5 5300 327 91 22 4. Slwra UG 1.0 3400 381 152 50 5. Snr UG 1.5 3400 332 73 36 6. Balgi UG 0.6 5600 495 100 26 7. Rajgaw Ur. 0.7 5300 509 98 28 8. Churds W. UG 0.6 5600 544 74 24 9. Ppr UC 0.7 6200 323 137 25 10. I RirwR. UC 0.6 5300 186 77 16 11. Goisa UG 0.6 5300 238 80 18 12. Svpuri UG 0.5 4200 369 I00 30 13. Jamm UG 0.5 4900 225 91 20 14. Ne Chadui UG 0.6 4600 219 87 21 15. llWr UG 0.7 4200 387 104 32 16. Kawnta OC 6.0 3800 284 61 23 17. Ge aOC 5.0 3100 153 54 21 18. uer OC 1.8 3830 138 46 36 19. Sti OC 1.0 3500 284 39 21 20. Bsuanpw OC 1.3 560D 197 52 12 21. Becpahar OC 2.0 3700 316 59 24 22. lajmra oc 1.0 2500 273 46 30 23. G4gm OC 1.5 3900 458 71 33 24. Padmpur Oc 1.3 38D0 418 73 34 25. NewMajri OC 1.0 4000 232 61 19 26. Rajapr OC 1.0 390O 258 50 22 (iEM- For a4Ep I 1/ 1. NamianUG 0.6 6100 304 140 24 2. TazUisiU; 0.9 5000 585 98 37 3. Bh4gatn UG 0.6 5600 465 118 27 4. Shobhqxr UG 0.6 49q0 330 121 27 5. Katkona U 0.8 560D 421 104 25 6. Gevra Exp. OC 5.0 3100 224 43 25 7. KuraslaExp. OC 1.0 4900 296 83 21 8. Dlk*aOC 2.0 3100 283 50 26 9. Nljal OC 1.9 30 475 94 37 1/ Al9no li 0.. projects. - 62 - ANNEX4 Page 1 of 10 INDIA - COAL MINING AND COALQUALITY IMPROVEMENTPROJECT FAZAL COMMITTEEREPORT - SUMMARYOF RECOMMENDATIONS Recommendation Government Decision 1. The long-term Standing Linkage Accepted. Committee should at suitable intervals of say every 5 years review the entire pattern of coal linkage to thermal power stations - whether existing, under constructionor proposed - in order to eliminate irrationalitiesthat might have crept in, though frequent shifting of coal linkages should be avoided. 2. Rajmahal, Talcher, Singrauli, Accepted, except that coal Korba Mand-Raigarh, Hasdeo- from Wardha has to be supplied Arand, North Karanpura, to consumers in South India Hanuguru, Wardha and some such as cement plants to make portion of lb Valley up the shortfall from coalfields should be mainly Singarani, and these linkages reserved for pithead will have to continue. generation. 3. Raniganj, Jharia, North Karanpura, some portion of Ib Accepted. Valley and Godavari Valley coalfields should be the main sources of coal supply to power stations located at load centers. 4. The power stations in Northern India (Punjab, Haryana, Delhi Accepted. and U.P.) should be linked mainly to Bihar/Bengal coalfields only. 5. All power stations located in Bihar, west Bengal and the Accepted. areas in Assam served by the broadguage railway line should be linked to Bihar/Bengal coalfields. - 63 - ANNEX 4 Page 2 of 10 Recommendation GovernmentDecision 6. The existinglinkages of old Accepted,however CEA should power stations to superior examine each case of such old grade coals of Ranigani, South power stations using A & B Karanpura,Central India and Grades of coal, to see whether Pench-KanhanValley Coalfields it is economicallyviable to should.tontinue till power continuethe operationof stationsexist. these power stationsand indicate to the Department of Coal when they are expectedto be closed down. This will also help in the saving of higher grades of coal which can be supplied to industrial consumers who need such coal. 7. Power stations in Rajasthan Railways have not accepted should be linked to Singrauli, this. They have stated that and in case of need for power stationsin Rajasthan alternativesource from North shouldbe linkedto Singrauli KaranpuraCoalfields. and CIC (WCL). Hence this recommendation is not accepted. 8. New Power Stations in Gujrat The recommendation in respect should be l'nked to Korba and of South Guiarat Power Ib Valley, Hasdeo-Arand and Stations is accepted. It has Mand-Raigarh coalfields. been decided that Railways should examine the extent of investmint required and take appropriateaction for building up the capacity. Regardingpower stationsfor North Gujarat,Railways have suggested that the linkages should be to CIC fields. This may not be feasible since the potential for growth In CIC is limited. To meet the requirements of power stations adequately, it would be necessary to link power stations in North Gujarat also to Korba. Railways may be asked to examine the matter again. - 64 - ANNEX 4 Page 3 of 10 Recommendation GovernmentDecision 9. Power Stations In Maharashtra Accepted. HoweverWardha, should be linked to Wardha Umrar and Kamptea will not be Valley,Umrar and Kamptea able to meet the requirements Coalfields. of MSEB Power Stations. At present60Z of the linkagesof Koradi TPS are met from Gevra- Kusounda. This needs to be examined further. 10. Power Stationsin Southern Accepted. However,due to Maharashtra should, however, inadequate availability of be linked to Godavari Valley coal from SCCL, the flfth unit Coalfields. of Parli has been linked to lb Valley. 11. Existinglinkages from Existinglinkage to Wanakbori SingrauliCoalfields to from Singraulimay continue. Wanakboriand Trombay power Trombay may be linked either stationsshould, however, to CIC or NPKW. continue. 12. Power Stationsin Southern Accepted. India should be linked to GodavariValley Coalfields. Existing linkage of Tutico-rin thermalpower stationto RaniganjCoalfield should, however,continue. 13. The number of mines supplying Acceptedto the extent oal to a particularpower feasibleconsidering the stationshould not exceed ten availabilityof coal, loading in any case and be preferably capacity,etc. three or four in case of biggermines. 14. The PlanningCommission should Accepted. attemptto give to the coal departmentperiodically a forecast of the region-wise power-generation program,and the consequential coal requirement. 15. It is desirableto have cushion Accepted. in terms of the linkageagainst actual consumption so that over a period of time, with the actual supply being in excess of consumption requirements, some ground stocks could be built up. - 65 - ANNEX 4 Page 4 of 10 Recommendation Government Decision 16. Annual reviews of requirement Accepted. of coal for power stations are suggested to be done at the time of formation of the annual plans and made known to all agencies concerned so that the program for generation of power, the production of coal and its transportation can be planned accordingly. The Coal Projects linked to a particular power station should be approvtd at least three years in advance of the approval of the power station to which they are linked in view of the longer gestation period of the coal projects. 17. All collieries linked for coal Accepted. supply to thermal power stations should have mechanized facilities to load a full large rake of minimum 44 box wagons. 18. In case of collierieswhere Accepted. settingup of facilities for full rake loading is not possible because of low productionor non-availability of land, a centralized loading point for a group of such collieries should be established. 19. Box 'N' wagons should be Accepted. However, railways introduced in existing should take early decisions on collieries/powerstations for the free-time allowed for movement of power coal in loading and unloading of Box consultationswith the 'N' rakes. Also, since Box collieries/powerstations. 'N' cannot be weighed on the existing weighbridges the carrying capacity of the wagons and the mode of loading should be decided by the railways after proper trials in association with the coal companies and consumers. - 66 - ANNEX 4 Page 5 of 1o Recommendation GovernmentDecision 20. Box 'N' wagons should be Accepted subject to the introduced as per program condition as pointed out suggested by the Railways to against recommendationNo. 19. the coal mine. 21. The issue of granting free Accepted. loading/unloading time more than 5 hours for manual loading/unloading may be looked into by Railways. 22. Open wagons should be Accepted. supplied to collieries having mechanical loading facilities and to power stations having mechanical unloading facilities. Railways should try to supply covered wagons only to manually loading points and manually unloading ends. 23. Where only manual loading Accepted. facilities are available, the wagons should be supplied barring exceptional circumstances at specified pilot time. 24. The supply of wagons by the Accepted. railways should be according to the offer of slack or steam made by the colliery for that particular day. The colliery should indent according to standard rake size and siding capacity and should not indent for undersize rakes. Railways will supply accordingly. 25. The Committee recommends Accepted. However, Railways reconciliationby railways for should take an early decision restoration or tolerance for for restorationof the overloading and underloading tolerance fc- underloading/ of wagons. overloading of wagons. - 67 - ANNEX 4 Page 6 of 10 Recomendation Government Decision 26. Arrangements provided for Accepted. mechanical unloading at power stations should be kept in absolutely good working order. 27. The minimum coal stock at the Accepted. power stations should be equivalent to 4-5 weeks' consumption,and that at loading points should be equivalent to 2-3 weeks' dispatches. 28. Railways should ensure The actual movement during movement of coal for power 1983-84 for power stations was plants at an average of 5,470 at the rate of 4,891 wagons wagons per day during 198,-84. per day. Railways should move at the rate of 6,235 wagons per day. 29. Coal weighing facilities Accepted. should be provided at all major loading points, and at all power stations. 30. The weighbridges provided, Accepted. both at loading points and power stations, should be regularly recalibrated. 31. Gradually, electronic weigh- Accepted. However, before bridges should be installed in installing the weighbridges, place of the existing all relevant factors including mechanical weighbridges and the possibility of underload- all future installations ing and overloading should be should be electronic weigh- examined. In electronic bridges, which would provide weighbridges,once weight is recording of tear of wagons. recorded automaticallywhile the rake is in motion, no adjustment is possible if there is underloading/ overloading. In such cases railways should allow reasonable tolerances so that payment of penal freight is avoided. - 68 - ANNEX 4 Page 7 of 10 Recomuendation Government Decision 32. Bottomdischarge wagons for Accepted. However,railways transportof coal from shouldconsult the power sta- collieriesto power stations tions and the Coal Companies shouldbe introducedas soon beforedeciding on any change as possibleto facilitate in the designof wagons. convenient and quick unloading Otherwise, problems will arise at power plants. later on, as has happenedin the case of Box 'N'. 33. Governmentshould examine the Acceptedwith the condition feasibilityof utilizing that no subsidywould be pay- coastalshipping for transport able in respectof such of coal to power stations. If movement. necessary,Government may consider extension of a subsidy for such movement. 34. Railways should take suitable Accepted. steps to increase line capacity to enable evacuation of coal from North Karanpura coalfields to power stations in NorthernIndia. 35. Railwaysshould increase the Accepted. line capacityin Gevra Road ChampaSection. 36. The programof installationof Accepted. coal handling plants and mini coal handling plants is to be implemented on schedule and the coal companiesshould give priorityand monitor its implementation vigorously. Whenever coal handling plants are installed, the entire coal of the mine must pass through coal handling plants and by pass is avoided. 37. Pneumatic/hydraulichammers Accepted. and grabs should be provided near the grizzleyat the loadingend of the mine and unloading end of the power houses. - 69 - ANNEX4 Page 8 of 10 Recommendation Government Decision 38. In small and medium mines Accepted. which are supplyingcoal to power stationseither singly or jointlywith othersshould be providedwith crushersof permanent/semi-permanent/ portablein conjunctioa.with mini coal handlingplants for enablingthese collieriesto load coal of propersizes. 39. The shale stone pickingarea Accepted. shouldbe well lightedto ensurethat dirt and stone are completely removed before coal is loadedinto rakes. 40. The joint sampling arrangement Accepted. at each coal mine as decided by the Ministryof Energy should be put into effect at once and should from basis of agreement between coal producer and thermal power stations. 41. Electronicsorters for dirt Accepted. separationshould be introducedas soon as possible at coal mines. 42. Coal shouldbe testedfor Accepted. arrivingat the design dimensionof mechanical cleaning equipment. 43. The stacking ground at coal Accepted as far as stacking mines and power stations areas at loading points and at should be made of properly the power houses are compacted formation to prevent concerned. contamination. 44. Simplebeneficiation circuit Accepted. shouldbe designedfor Indian coals which are difficultto wash and which cannotbe used in boilers in ROM condition. - 70 - ANNEX4 Page 9 of 10 Recommendation Government Decision 45. Railways should take care, Accepted. while diverting rakes meant for one consumer to another, to ensure the proper quality and size as needed by consumer. 46. Automatic Ash Indicator (coal Accepted. analyzer) should be installed in coal handling plants. 47. The coal mine supplying coal Accepted. to power plants should supply, at the time of drawing of agreements of coal supply, authenticated quality certifi- cates relating to ash and moisture content, with copy to Central Electricity Authority, and there should not be a variation of more than 5% in quality, in any consignment actually supplied during the currency of coal supply con- tract between the colliery and - 71 - ANNEX4 Page 10 of 10 Recommendation Governuent Decision 49. The Committee recommended that Accepted. even for power stations located in load centers, linkage should be made to specific mines. - 72 - ANNEX5 Page 1 of 9 INDIA - COALMINING AND COAL QUALITY IMPROVEMENTPROJECT MEJASURESTO DMPROVECOAL QUALITY 1/ A. Thermal Coal With the enormous increases in the demand of coal, psrticularly in the power sector, there has been definite spurt in coal production during recent years. From a meager 15.4 million tonnes of coal demand from power houses during 1970-71, it now stands at a level of 63.5 million tonnes in 1985-86. Against this, the actual take-off was 65.2 million tonnes which reflects a demand materialization of 102.7Z. In fact dispatch to power sector works out to about 50% of total CIL dispatch. Nationalized coal sector has not only been meeting this increased demand but is also geared up to meet the future growth in the demand of the power sector. In fact, the year 1989-90 will likely see nearly 64% of total CIL dispatch to various power stations, with the supplying pattern effectively streamlined, keeping in view their qualitative and quantitative requirement. 1. Fluctuations in Coal Quality and Efforts to Reduce the Same: Occasionally there has been fluctuations in the qual$ty of coal being supplied to the power stations when compared to the design parameters of their boilers. Some of the old power stations are continuing with their old boilers designed for consumption of higher grade coal with low ash content. However, with the depletion of higher grades of coal, the ash content of coal supplies is on the rise with the result that despite efforts made by CIL, complaints on quality have at times been received from power stations. Modern and new thermal power stations, however, have been designed for consumption of coal with high ash and thereforecomplaints on quality from such power stations are seldom received. The main complaint in respect of coal supplied to such power stations are receipt of lumpy coal and shale etc. Different power stations have different sizes of opening in their grizzlies (metal gratings) at the coal receiving point. Any piece bigger than the size of such opening is termed as oversized and complaints are then made. However, the same coal would be quite acceptable at other power stations with larger openings in their grizzlies. Linkage of coal is normally provided in such a way that low ash coal is supplied to those power stations that essentiallyneed it. While making supplies to such power stations, collieries are also taking recourse to extensive shale picking etc. so that the ash content in coal remains within the stipulated limit. However, for a permanent solution it is desirable that all power stations should phase out old boilers and replace them with units that can consume high ash coal which is available in plenty today. It is a matter of regret that none of the older power stations have so far given a thought to bringing in new technology for consumption of this high ash coal. 1/ Provided by CIL. - 73 - ANNEX 5 Page 2 of 9 Presentlyabout 44% of the total coal suppliedto the power stations is loaded manually. There is no chanceof any complaintof oversized coal in the supplies made through CHPs but the possibility of passage of oversizes in the manual loading collieries cannot altogether be eliminated. The reason for such may be due to loading of wagons by payloaders when the supplies are made in the night time or odd hours and enough payloaders are not available. The oversized problem is likely to be eliminated altogether when the entire coal passes through the CHPs. It is planned that by 1988-89 about 90% of our total power coal could be routed through CHPs. The above, coupled with occasional diversion of rakes by the railways also cause problems in matter of both size and quality as coal earmarked for a particular consumer may not be suitable for another to whom the rake has been diverted. It is thus suggested that while power stations gradually phase out their old boiler and bring in new technology to accommodate high ash coal, railways on their part should also make placement of rakes at a fixed time at every siding and provide adequate loading time for loading of rakes. Thus, a concerted effort of the three agencies namely the CIL, the railways and the power houses can only bring forth a solution to the problem. 2. Investment Program in Commissioning of Coal Handling Plants: At presentaround 56% of the total dispatches are routed through Coal Handling Plants (CHPs). In 1984-85 alone, 13 major and 19 mini-CHPs with an aggregate annual capacity of 24 million tonnes have been commissioned. Coal India is expected to construct another 23 major CHPs with an aggregate capacity of almost 29 million tonnes during 1986-87. It is expected that 90% of the dispatches would be make through CHPs at the end of the 7th Plan period. Built in capacity of CHPs are as below: million tonnes (i) Existing CHPs as on 1/7/85 76.78 (ii) CHPs under construction 51.54 (iii) CHPs proposed during the 7th Plan period 51.44 It has been decided to provide all future CHPs with such facilities as screening/crushing and/or feeder breaker wherever necessary. Cost of commissioning of CHPs under construction as also those in the Project would be around Rs 181.66 crores. Company-wise break up of cost would be as below: - 74 - ANNEX 5 Page 3 of 9 No. of Capacity Cost Involved Company CHPs (tonnes) (lakh Rupees) ECL 9 8.74 4699.36 BCCL 9 4.96 1052.58 CCL 5 15.60 8339.00 WCL 11 19.02 4075.45 34 48.32 18166.39 A time bound schedule has been drawn up and close monitoring of progress of construction of CHPs has been resorted too, so that no unneces;sary delay takes place at any point of time to retard progress of work. 3. Other InfrastructuralFacilities: Similarly other infrastructuralfacilities such as provision of weighbridgesat all major loading points have been made to ensure loading of desired quantity, so that consumers do not suffer on account of either loss or excess supply. While there is a program for installationof new weighbridges (ECL - 4, CCL - 4, BCCL - 1 and SECL - 1), another 12 existing weighbridgeswould be modified as per requirement. Well equipped laboratories have been provided at all areas for quick assessment of quality and necessary feedback for assuring better future supplies. It has also been decided to build some express laboratories at some of the major loading collieries for quick analysis of samples. 4. Improvement in Quality of ROM Coal from Open Cast Mines: The deterioration in quality takes place due to admixture of extraneous materials along with coal during extraction specially in OCP mines where overburden stones often gets mixed up and create quality problems. Thus need for planned extraction of coal specially in OCP mines have been felt. Annual plans of each mine has been drawn to identify bench formation and maintaining them always sufficiently in advance during extraction to prevent any contamination. In case of bands of over one meter thickness, these will be separately mined. The deployment of small capacity hydraulic shovels in conjunction with 160 mm drills will enable bands to be removed separately. 5. Dry beneficiation of coal after crushing and screening is under consideration and will be introddced in a phased manner, for +10 mm size fraction. 6. Washing of poor grade coal for large consumers has been considered. It has been decided that coal that will be supplied to power plants of the National Capital region from North Karanpura as also Southern region power plants from the new mines at Kolinga will be crushed. - 75 - ANNEX5 Page 4 of 9 7. Other Remedial Steps: Other remedial steps taken to ensure proper quality and size of coal dispatches to power stations are: (i) Joint Sampling Agreements: Contractual agreement of Joint sampling for bulk coal supplies has been reached with various State Electricity Boards (vide Annexure I) which provides for necessary adjustment of bonus or penalty as the case may be from subsequent bills. As per agreement, joint sampling shall initially be done at the loading and based on which coal companies will raise bills. Joint sampling will be done at the power houses and at fixed block period of four to six hours per day. Destination-end sampling will however be the deciding factor for final payment. In fact, with the signing of the agreement and introduction of joint sampling number of complaints have come down sharply. Company-wise comparative position for the years 1984-85 and 1985-86 are given below: Company 1984-85 1985-86 ECL 28 55 BCCL 89 20 CCL 318 30 WCL 163 31 CIL (Total) 598 136 Percentage of supplies involved under complaint is only 0.23X of overall dispatch to power stations. Month-wise complaint position in respect of subsidiary companies for the year 1985-86 is given in Annexure II. (ii) Grade Control: Reassessment of coal seams of every working mine is done seam-wise for reidentification(regradation) of coal quality and declare the grade in the beginning of each financial year. Periodic check samples are also drawn to verify the quality of coal being dispatched. (iii) Inspection Facilities to Consumers During Loading: The facility of joint inspection of coal being loaded has been provided at each loading po'.nt and any consumer can avail himself of the same for instant rectification of wagons in case that is necessary. Inspection registers are also provided where consumer can put on record his observation about standard of loading and/or his reaction to the facilities provided. - 76 - ANNEX5 Page 5 of 9 (iv) Feedback on Supply: Regular feedback on quality is followed up as below: (a) In order to get proper feedback mainly on quality, representatives of the supplying companies are stationed at major power stations for round the clock monitoring of quality and size of coal being supplied. (b) Review of quality performance In respect of each subsidiary company is made every week and suggestions put forward for future guidance. (c) Regular quality audit inspections are carried out at producing end and at destination end and monthly reports a._e prepared incorporating monthly weight average ash p.c. in supplies to PEs as determined by joint sampling and is at Annexure III. Results are not at all unsatisfactory as barring a few cases, majority of cases ash p.c. supplies are within norm of power house boilers. Cd) For achieving quality control, the existing management structure of quality control department at different levels is being made uniform in each subsidiary. The Quality Control Department will have three tiers and will be responsible for quality of coal being loaded, implementation of remedial measures to improve quality, etc. 6. Implementation of the Recommendation of the Fazal Committee and Government' s Acceptance Thereof: Statement showing various recommendations of the Fazal Committee on coal supplies to TPSs and Government's decision thereof is enclosed at Annexure IV. As will be seen from the statevent, most of the recomiendations have been accepted by the Government, many of which are already in operation as decided time to time under the SLC Meeting. Those yet to le operated are being sorted out by the Government or by direct dialogue between CIL/coal companies and the railways/PSs. While in a number of cases, implementations of Governient decisions depend upon the railways acceptance of the issues, CIL's shaxe primarily rests in implementation of the decisions at paras. 29-31, 36-48 which mainly deals in building up infrastructural facilities and protocol of joint sampling agreement with power stations. As already enumerated in earlier paragraphs above, building of infrastructural facilities in the form of CHPs/weighbridges at all the major loading points have already been taken at hand. As regards installation of electronic weightbridges, it has been decided to provide the same at ten load centers of CCL and WCL initially. All future CHPs will be provided with crushers and slow moving picking belts, latter to enable shale pickers to work effectively. Advice has already been issued to all loading personnel to onsure that dirt and stone are completely removed from the siding and this is being monitored. W....~. - 77 - ANNEX5 Page 6 of 9 As regards payment of bonus/penalty on the basis of analysis of joint sampling with PRs, this has already been taikn care of in joint sampling agreement reachedwith various power stations. 7. Conclusion: Concertedefforts from all concernedhave resulted in reduction of the number of complaintsfrom power stationswhich are negligible in terms of percentageof total supplies. This will be apparent from D.O. letter from Ministerof State for Power to the Union Minister of Steel, Mines and Coal who expressedhis appreciationas below: 'As a result of the steps taken by the Departmentof Coal there is an improvementin the qualityof coal and the plant load factor of the thermalstations in March 1985 was 55.5Z which is the highest during the last two years." In fact, the PLF (overall) of thermal power plants during April- December 1985 was 50.8 against 48.0 during the correspondingperiod the previous year. There has also been an increasein generationof 15.7Z during this period. - B. Coking Coal As part of the Jharia Coal Project, 'CIL are preparing an annual progress report on actions to improve prime coking coal quality including inter alia statistics on the ash content of raw coking coal production by mine, and washed coking coal by washery plus a text discussing progress regarding the following matters and its impact on coal quality. CIL have initiated the following measures which are already providing improvements in washed coal production: (i) elimination of substandard coals and more intensive picking arrangements; (ii) deployment of more experienced a d qualified personnel for washery operation; (iii) closer monitoring of washery operations; (iv) increased capital expenditure for washery improvement; (v) installation of rotary breakers at certain washeries; and (vi) utilization of premium quality Assam coal for blending purposes. In addition, CIL is preparing the following measures which should provide benefits in the longer term: (i) upgrading of slurry by froth flotation at Dugda I and II; modification to Patheridih Washery; (ii) trials with prescreening jigs at Barora Washery; (iii) development of new areas of superior quality prime coking coal; (iv) installationof new coal handling plants; (v) testingof certaindisputed coals by CentralFuel Research Institute;and (vi) possibleestablishment of a Washery Institute. Source: CIL. - 78 - ANNEX 5 Page 7 of 9 ANNEXURE I Name of Power Stations with Whom Agreement Reached for Joint Sampling: Si. Electricity Power Si Electricity Power No. Board Station No. Board Station 1. W B S E B Bandel-TPS 11. 0 S e B Talcher Santaldih Gouripur. 12. A S E B Bangaigaon 2. D V C Durgapur 13. H S E B (Faridabad Chandrapura. (Panipath 3. B S E B Barauni 14. OTHERS DPL Patratu (WB Gvt.) Muzaffarpur. Pvt.(AEC 4. U P S E B KESA (Renusagar Panki Harduagani 15. D E S U Indraprastha OBRA. Rajghat. 5. P S E B GNDTP Bhatinda Rupar. 6. N T P C Singrauli Badarpur Farakka Korba 7. R S E B K O T A. 8. G E B Gandhinagar 9. M P E B KORBA Amarkantak Sarni. 10. M S E B Koradih Khaparkheda Nask.i Bhuswal Chandrapur Ballars-hah. - 79 - ANNEX5 Page 8 of 9 ANNEXUREII Month-Wise Complaint Received from Power Stations (1985-1986) CCL WCL Months ECL BCCL (Including NCL) (Including SECL) April '85 2 4 1 5 May '85 5 3 6 2 June '85 5 7 2 14 July '85 5 5 1 4 August '85 7 1 2 6 Septerber '85 5 - 2 6 October '85 5 - 2 1 November '85 4 - 3 4 December '85 9 - 6 1 January '86 4 - 1 1 February '86 4 - 1 1 March '86 5 - I I Total 85-86 55 20 30 31 Total 84-85 28 89 318 163 - 80- ANNE 5 Page 9 of 9 ANNW M Wothygb1gt AwEr AMhP.C. In Bpmes to ThurumlPor StatLam -A dI-Dsi*ii2r 1985) Nam of Noz of Ash Powr Stati Atw NW Jum Juy Avg Sep Oct Now DIC BuRel 35 24.5 24.6 26.2 '4.5 22.9 22.3 22.8 23.2 24.6 Santaldih 28-35 24.7 25.9 24.4 23.8 24.6 23.5 23.5 23.3 22.4 03kA 25-33 30.0 31.7 32.1 32.1 29.6 31.3 30.5 - - OESLJ(BCL 32-45 . 32.0 30.9 33.0 31.1 40.8 30.9 36.3 - CIPS (BOCL) 40 29.2 31.7 33.7 33.7 32.2 35.0 31.6 30.3 - BIPS (L) 24-33 35.4 35.8 33.9 35.0 32.9 34.7 36.1 35.9 - TIPS (CCL) 37-44 33.5 37.2 36.5 31.5 36.8 35.9 36.3 36.3 - Lhiapeda 28 29.0 30.5 26.9 29.4 30.4 24.0 25.0 30.5 24.7 Balluzalh 24-26 18.7 18.3 18.1 19.1 18.0 19.0 18.7 18.6 18.9 Paras 25-35 28.4 27.3 NS 32.6 NS N 27.2 26.5 30.3 Nasid 25-30 28.0 28.0 28.5 28.4 27.8 27.7 27.9 27.1 27.5 Ganxihinagar - 30.3 27.9 30.0 24.5 21.0 23.5 22.2 22.0 21.4 Ukai 28 28.8 24.5 28.7 23.5 24.7 24.2 24.7 22.2 25.5 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - 82. - ANNEM 6 Page 1 of 3 INDIA - ODAL MINING AND COAL QUALITY IMPROVEMENTPROJECT COAL PRICE SCHEDULEa/ (Effective January 8, 1986) Grade Specification Price (Rs/ton) A. Non-Coking b/ Grade A UHV exceeding 6200 kcal/kg cJ 296 Grade 8 WV 5600-6199 kcallkg 269 Grade C UHV 4940-5599 kcal/kg 235 Grade D UHV 4200-4939 kcal/kg 205 Grade E UWV 3360-4199 kcal/kg 138.5 Grade F UHV 2400-3359 kcal/kg 108.5 Grade G UHV 1300-2399 kcal/kg 74.5 Singareni Coalfields Grade C 332.5 Grade D 292.5 Grade E 252.5 Grade F 183.5 Grade G 143.5 Assam Ungraded 342 B. Coking Steel Grade 1 Ash not exceeding 15% 480 Steel Grade 2 Ash not exceeding 18% 402 Washery Grade I Ash not exceeding 21% 347 Washery Grade II Ash not exceeding 24% 289 Washery Grade III Ash not exceeding 28% 222 washery Grade IV Ash not exceeding 352 207 C. Semi-Coking Grade I Ash plus moisture not exceeding 192 347 Grade II Ash plus moisture not exceeding 24% 289 D. Hard Coke By-product Hard Coke Premium Ash Not Exceeding 25% 1,110 - " ~- Ordinary - - 25-30% 1,000 Beehive - Premium - 27Z 880 - - - Superior - - - 27-31% 730 - - - Ordinary - 31-362 500 E. Soft Coke For Industrials 300 For Domestic use 175 a/ This schedule refers to ex-pithead prices of run-of-mine coal excluding all statutory levies and sales tax which are chargeable extra as per the prevailing rates. b/ Long flame coals (grades A-D) have a surcharge of Rs 25 per ton. ci Useful Heat Value (UWV) is defined by the following formula: UHV - 8,900 - 138 (A+M) where UHV - Useful Heat Value in Kcal/kg, A - Ash eontent in 2 M, - moisture content in Z. - 82 - ANNEX6 Page 2 of 3 STATUTORYLEVIES AND SALES TAX (As of January 1, 1987) 1. Statu.ory Levies A. Co_mmn for All States 1. Royalty Coking Non-Coking Grade Re/ton Grade Rs/ton Steel I 7.00 A 6.50 Steel II 7.00 B 6.50 Washery I 7.00 C 5.50 Washery II 6.50 D 4.30 Washery III 6.50 E 4.30 Washery IV 5.50 F 2.50 Semi-CokingI 6.50 G 2.50 Semi-Coking II 6.50 Assam Coal 6.50 2. Stowing excise duty - Non-Coking Rs 3.50/ton - Coking Rs 4.25/ton 3. Coal mines labor welfare cess Rs 0.75/bon B. other Levies West Bengal 1. Rural employmentand production cess 20% on coal value 2. Primary education cess 5% on coal value 3. Public Works and Road cess Rs 1.00/ton 4. Asansol Mines Board Health cess Rs 0.40/ton Bihar 06/21/85 1. Cess on Coal 30% on coal price 2. Royalty cess 5% on Royalty 3. Jharia Mines Board Health cess (BCCL only) Rs 3.50/ton Orissa - 1. Mineral Area Development cess 200% on Royalty - 83 - ANNEX 6 Page 3 of 3 Madhya Pradesh 1. Mineral Area Development cess 125Z on Royalty 2. Storage cess Rs 2.00/ton Maharastra 1. Cess on Royalty 10Z on Royalty II. Sales Tax 4Z sales tax is charged on coal values plus all statutory levies. - 84 - ANNEX7 INDIA - COALMINING AND COAL QUALITY IMPROVEMENTPROJECT SCOPE OF WORKFOR ASSISTANCE ON WORKSHOPDESIGN A. OBJECTIVE To assist the CIL Group to design modern workshops to fully meet CIL's requirements to service mechanized open-pit mining equipment. B. SCOPE OF WORK The consultant should assess th! present (Singrauli) and projected (Korba and Raniganj) requirements of workshop services within CIL, in close consultation with its counterpart, and should assist in the location and design of state-of-the-artfactilities to meet CIL's needs. The assistance will cover in particular the following areas: (1) Repair and Maintenance Facilitiv.=.Review the adequacy and capacity of existing repair and maiatenance facilities, tooling, procedures and skills of peisonnel in light of existing fleet of equipment and its actual service requirements. (2) Additional Workshops. Size, location and design of state-of-the-art workshops for open cast and underground coal mining equipment, on basis of projected increase of quantity and capacity of equipment as reviewed in consultancy with counterpart staff. Detailed consideration should be given in designs to permit future expansions, and whenever possible to design these expansions. (3) Fabrication of Spares. Associated with the workshops, the consultants should also design foundry and machine/tool facilities, in consultancywith counterpart staff, to fabricate spares required within CIL. C. DURATION AND REPORTS The work, which should be initiated by December 31, 1987 and completed by December 31, 1988, will require about 36 man-months of effort by consultantswith sound background in the design of workshops for large mining operations. The consultantsshould issue an interim report regarding location, size and service options of the proposed workshops. On completion,workshop designs and a final report would be issued concerning the implementationof the facilities. - 85 - ANNEX8 Page 1 of 3 INDIA - COALMINING AND COAL QUALITY IMPROVEMENTPROJECT SCOPEOF WORKFOR ASSISTANCEON MANPOWERPLANNING AND TRAINING A. OBJECTIVES To assist the CIL Group in improving its training and manpower planning sys8tems for the entire organization. B. SCOPEOF WORK The consultants should provide assistance regarding (i) improving the trainingsetup of the CIL Group, (ii) developinga computerized manpower planning system, and (iii) establishing the requirements for and undertaking detailed design work to assist the development of two excevation training centers. Based on their conclusions, they should present detailed and specific recommendations. Their work should focus on the following aspects: (a) Training Assistance for training should be mainly oriented to: I, Organization and policies. Review cofpresent training structure, policies, norms, controls, communicateons and relationships, both between CIL and subsidiaries, and among the latter. Particular emphasis should be given to implementation of training policies and relationships between training and production activities. 2. Training capabilities. Review and assess existing training activities(on-the-job and off-the-job,and outsideCIL), programsand facilities (Centers and Institutes),in termsof their qualitativeand quantitative ability to satisfy present and projected training requirements. This review should include the following areas, presenting specific recommendations for improvement: (i) the competence and skills of training officers and instructors (sample); (ii) the curriculum and course content for different trades (including supervisory and management training); (iii) the capability of outside institutions at present training CIL Group personnel; (iv) adequacy of facilities, equipment, training aids, audio-visual aids, and written teaching materials; and (v) review of present evaluation (if existent) of training activities. 3. Training needs and training program. Assess present methodology for determination of training needs both at CIL and subsidiaries level. The consultants should present a very detailed proposal for determining training needs because this is one of the weakest points at the CiL Group. Based on identified needs, the consultants should - 86 - ANNEX8 Page 2 of 3 preparea detailedtraining program for the next five years,which the consultantswill implementin a specificsubsidiary (SECL), where they vLll train a number of training officers on this task. This exercise would include a preliminary estimate of additional facilities to be established and programs to be developed. 4. Evaluation of results. After reviewing existingpractices, the consultants will present a proposal for periodicevaluation of training activities and the follow-up of the implementation of training programs. 5. Unskilled personnel. A review will be undertaken of this highly populatedcategory to deriveconditions suitable for establishing policiesand proceduresregarding their possibleutilization/training/ educationand changesin recruitmentpolicies. (b) Manpower Planning 1. System Development xi) ManpowerData Base. The consultantsshould study and analyzein close consultationwith its counterpartthe existing manpower planning system (MPS) within CIL. They should also review the present data base of the MPS and the reliabilityof its sourcedata. The consultantshould assess the acceptabilityof presentpractices including level of detail and recommend detailed procedures for reaching more disaggregated data in the system that may allow a sound MPS. (ii) Manpower Needs. The consultants should evaluate the present methodsfor deducingmanpower needs from corporatework plans,expansions, projects, levels of activity,manning levelsper type of operationsand skillsinventory. In consultations with the counterpartand managers,the consultant will recommend specific modifications so that needs can be directly related to availability with adequate level of detail. (iii) ManpowerSupply. The consultantsshould also reviewand evaluate present methods for analyzing current manpower resources, changes in manpower resources, turnover analysis and replacement, changes in work conditions, and external supply factors. - shouldrelate these elements to the potentialimpact of changesof technologyand labor productivityfor the futureyears on the manpowerstructure (occupational mix) and proposeadequate models. - another aspect will be analysis of the composition of overstaffing at all unskilled and semiskilled level and the clarification of recruitment and training policies regardingthis levelof staff. - 87 - ANNEX 8 Page 3 of 3 (iv) ManpowerForecasting. The consultantsshould review (a) the statisticalmethods presently used for forecasting,(b) the appropriatelevel of detailsin skill mix and organizational level, analyze them and make recommendatons for improvement. (v) Computerization.The consultantsshould review the current limited use of the computer in CIL's MPS and recommend proceduresof more effectiveuse, includingpersonnel informationsystems, coding and data collectionanalysis. Also assessneeds for (1) CIL HQ' and (2) subsidiary companies. 2. System Implementation.After agreeingon the new MPS, for which hardwareand softwarewould be providedas part of the project,the recommendationswould be implementedby CIL with the help of the consultants. Once the system is operatonal, follow-up assistance will be required to monitor its performance and rectify any problem. C. DURATION AND REPORTS The work, which should be initiated by December 31, 1987 and completed by December 31, 1989, will require about 66 man-onths by consultants with solid experience in training and manpower planning systems for mining companies and/or other organizations with very large workforces. The first stage, which should last twelve months (and will entail 48 man-months effort), will consist of (i) the review of and recommendationsfor improving CIL's training set-up, including a proposed five year training program for SECL (18 months); and (ii) the detailed development of a manpower planning system suitable for implementation within the CIL Group (18 man-months). An interim report will be issued concerning the present training organization, policies capabilitiesand needs. It will also cover the manpower data base, needs, supply and forecasting,as well as computerization. The second stage, which will follow on from the first, should also last about twelve months and will consist of (i) implementation of SECL training program (12 man-months) and (ii) implementationof computerized manpower planning system for CIL (18 man-months). The final report will address the full scope of the work accomplished. - 88 - ANNE9 Pasp 1 of 2 INDL- _ & iwMI NID 0A3L (WIflY DIFIW PMM CIL FEINAAL SEAMDO DNCMESMEM1TMS - ODALINDIA II 1980/81-1985/86 (Rs miLhtoEI) 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 Coal P Total Col Produoud (nllUion tons) 100.6 109.1 114.7 121.4 13U.8 134.1 Coal Produe&dby Revenm 97.2 105.3 113.5 119.2 127.7 130.8 Mines (UDL1n tMns) Net Saleable Coal fron Reuenue 93.7 101.7 109.5 116.4 125.6 128.7 Mines (aili MM) Rns AverageSale Price (Rs per ton) 120.6 139.8 155.8 160.0 188.2 191.1 Net Reerumes 11,300 14,209 17,063 18,624 23,690 24,594 Salaries andWages 6,849 7,758 8,42 11,70B 12,620 13,321 Ovrhebls 537 597 753 940 887 1,083 Stores 1,508 1,996 2,603 3,015 3,336 3,8EI Power 534 745 964 1,187 1,437 1,706 Transportionlm of Coal and Sand 296 420 462 452 503 542 Other Costs less Misc. peceipts al 549 622 917 1,178 1,8B5 2,853 Total Operating Expenses 7-0Z73 12,138 14,240 18,480 20,668 23,306 Depreciation ,a6 951 1,344 1,716 2,069 2,497 Interest 626 778 1,110 1,324 1,733 2,158 Total Productiom Costs 11,637 13,867 16,694 21,520 24,770 27,961 Profit/Loss (337) 342 369 (2,896) (780) (3,367) a,' Tnels PFi/Aoss o Soft arx Hard Coke and WashedComl opealoio ard also adjusbt for overburden PeamwalCoat. - 89 - ANa 9 Pasp 2 of 2 SlIAM EAlANCE MFEMS- 0WALINDIA JID. 1980/81 - 1985/86 (Rs Millon, aoE Mard 31) 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 Assts Current Assets 6,430 8,292 10,383 14,52 15,205 15,254 TomIw and AMvamn 4,272 4,641 5,431 7,147 7,913 7,363 Net Fi2ed Aseta 10,665 14,177 18,984 24,139 28,693 34,633 Total Assets 21,367 27,11.0 34,798 45,788 51,811 57,250 T4Ablitifi Crnent Liabities 5,871 6,072 6,862 11,8S4 11,611 12,382 (a)Debts to GDeVnenMc 12,577 14,836 17,462 19,273 21,737 25,2B4 (b) Otber LiailLities to Gbvernmetb/ 518 717 _931 3,137 3,430 3,883 Total LLngTenA Liabi1tites 13,095 15,553 18,393 22,410 25.167 41,549 (a) Share Capital 9,862 12,869 16,913 21,299 25,567 30,123 (b) Rserue 385 733 1,049 - 1,625 519 (e) Aowulated Profit/Loss (7,846) (8,117) (8,419) (9,765) (12,159) (14,941) Total Equity 2,401 5,485 9,543 11,534 15,034 15,701 Total EqUity anid Liabilities 21,367 27,110 34,798 45,788 51,811 57,250 - - -m a/' Including cagital wcd1rpQrso bI Overdue oipital Iepay.nt and interest cn Government ioans Source: CIL. - 90 - ANNEX 10 I}DIA - COAL MINING AND COAL QUALITY IMPROVEMENTPROJECT SCOPE OF WORKFOR ASSISTANCE ON TRAINING INSTITUTE DESIGN AND DEVELOPMENT A. OBJECTIVE To assist the CIL Group in finalizing -be design and implementing excavation training centres at Korba and Raniganj. B. SCOPE OF WORK (c) Excavation Training Centers Aasistance in this aspect will include assessment of justification for the establishment of the three proposed centers in (Korba and Raniganj) consultation with the relevant CIL Group personnel (training, planning, production, and maintenance). Based on this assessment, the consultants should design in detail the centers, giving particular attention to: 1. The projected capacity of the center for each specialty to be imparted. This comprise classrooms,workshops, laboratoriesand yards, including size and number of working places, schedule of accommodation,and number of instructors needed. A detailed layout of the center will be prepared and will be the base for the architectural and civil engineering design. 2. A detailed list of equipment with its specificationswill be prepared including estimated cost per item (includingthe supplementaryequipment to be provided to the BETI-Korba). The list would also include teaching materials and visual aids. 3. The above-mentionedaspects will be based on a thorough job analysis of the various kinds of jobs being performed in open cast coal mines in India, leading to detailed job descriptions for the different kinds of operators and maintenancepersonnel. Based on this draft, course contents will be produced by the consultant in collaborationwith local instructors. C. DURATION AND REPORTS The work, which should be initiated by December 31, 1987 and completed by December 31, 1990 will require about 18 man-monthswork by consultants with experience of developing and running mining training centres. The first stage, which will involve 6 man-month effort, will be a review to recommendimprovements in the design of the training institutes as presentlyenvisaged. The second phase will involve assistance in the implementationand organization of the centres. An interim report will be prepared at the end of the first phase and a final report will be prepared on completion of the asfAgnment. -91- ANNEXI I Page I of 3 INDIA - COALMINING AND COAL QUALITY IMPROVEMENTPROJECT RVSETTLEMgNT ARRANGEMENTS A. Gevra The project at Gevra involves the expansion of an existing mine and land acquisition is well advanced with about 85Z (2,956 ha lan-'^having been acquired so far out of a total of 3,500 ha. Compensationhas been agreed with the families according to Government norms and Rs 31.7 million had been paid as of March 1986. More than half of the families involved (500 out of 995) have already been resettled. Each household receives 150 m2 as per GOI norms. Basic amenities being provided include approach road and drainage system, school building, drinking water sources, shopping center, health center, street lighting and power supply (the latter two facilities through the local Electricity Board). To the extent that the project needs to employ local people, preference is given to members of resettled families. So far at least one job has been provided to over 80% of the families being resettled (818 jobs for 995 families). Wages with the coal industry are over Rs 80 per day, three to four times earnings in agriculturalor other unskilled employment. Indirect employment is also being generated Luy the large scale development and construction work associated wi.Lhthe Gevra project. The mining activities are also generating other small scale ancilliary industries in the coalfield area which also offer employment potential for the reaettled families. SECL is encouraging local self employed cottage industries and farming and has established market complexes in tne colonies so that sellers can directly sell their products which will enable them to realize higher prices than if they sell them to traders which is the usual practice. The remaining 495 families at Gevra will be resettled by March 1991. At the same time, 375 families will be resettled from the Dipka mine which is being developed adjacent to the Gevra mine. The families will be resettled in two phases according to the following schedule:- first phase of 364 families to be completed by March 1988 and second phase of 506 families to be completed by March 1991. B. Sonepur-Bazari Land acquisition is at an early stage at Sonepur-Bazariwith about 13% (157 ha/1205 ha) having been acquired so far and no resettlement having taken place. During the life of the project about 740 families will need to be resettled. About one third of the land to be acquired is cultivable, much of the rest being so-called -danga land which is barren and uncultivable. For the remainder it is estimated by ECL that the annual earnings per hectare of cultivable land is about Rs 2,000 about one tenth of the annual earnings of a coal miner (about Rs. 20,000 per year). It is estimated that 40-50% of the families involved in resettlement presently are directly or indirectly dependent on coal mining activities in the region. - 92 - ANNEX 11 Page 2 of 3 During the first phase of land acquisition about 270 families will need to be resettled. As with Gevra, compensation is based on government norms and the villages will be given the similar basic amenities (approach road, drainage system, school building, drinking water sources, shopping center, health center, community center and playground) most of which are not availablein the villageswhere the peoplepresently live. ECL will help the state government in providing suitabletraining facilities for the affected population, in consultation with and as per the guidelines of the state government, so as to make them suitable for possible future employment in the project or elsewhere if oppirtunities arise. ECL will also help in developing small scale industry ancilliary to the mining project. These include enterprises to make the following supplies needed by ECL's operations (a) coal tub wheels and axles; (b) brattice cloth (fireproof); (c) water bottles; (d) dognails and fish plates; (e) bolts and nuts of various sizes; (f) safety boots and shoes and (g) building brick-. A report prepared by outside consultants has indicated that such activities could provide employment for up to 300 persons in the areas around the Sonepur-Bazari project--although the major share would be brick making which is a seasonal industry. In addition, ECL has other mines and new projects in the surrounding area which might be a source of employment for resettled persons. Other employment opportunities for resettled people include construction activities at the project which are likely to require 350-400 persons per day for the next seven to eight years and cottage industries spawned by the project. The latter include poultry farming, animal hu;bandry and dairy, piggery, pisciculture, shops in the shopping center and farming in reclaimed/undistributed land owned by ECL. ECL estimate that about 195,000 man-days of self employment could be available annually from such activities (including project construction 75,000, brick making 30,000, township 30,000, ancilliary industries 30,000, forestry related 20,000 and small contracts 10,000). ECL estimate the earnings from such employment would more than compensate for the foregone annual earnings from the land lost from cultivation (which would be about Re 900,000 per year i.e. 450 ha times Rs 2,000 per ha per year). ECL are aware that small units will require assistance in raising initial capital investments and working capital. ECL propose to work with the appropriate authorities of the state government to establish sources of finance for small units possibly including state government guarantees to commercial institutions. ECL also recognize that such small units, especially engineering and manufacturing units, will require necessary technical capabilities and are prepared to consider providing suitable training for such entrepreneurs on a limited scale. - 93 - ANNEX11 Page 3 of 3 The timetable for resettlement at Sonepur-Bazari is as follows: So epur-Uszari-Land Acquisition and Resettlement Land acquisition for resettlement - complete by December 1988 Land development - complete by March 1989 Construct basic facilities - complete by March 1990 Phase I resettlement - 430 families by December 1990 Phase II resettlement - 310 families by December 1993 Total 740 famdlies Conduct training program - December 1987 - December 1990 --..- 94 ANNE 12 IA -CAL KM= A. COAL QaLlPl DWUO W n Cr PROJUC KNONCO OWGAPZZAntIO .Z M-o Project Qm"a MInage I~~~~~~~~~~F-t . PvO*c: r- Coat & Scebduling Engineeringnmftratfc D9Peput oject ngr too |Purchang l i ne Cal> . rinn Tou4a e 1 fratuctur Ceoro I Finance Procurmu Projicg Infeftutr P A isrojet Panni n tREraNtzwtomProject SoperSupeviaio T - IAT flU cm n_rlts _ .~~~ nxu - WAL ;m A Wei WT! DaW mr nomic? DWIZEUTrATI[ SC== Mm CiiMM iAy ml. I I- - ' I .I I - 1-I I .. I nr. | w a m vi am WmI am 9 . | mi I rIT. I I II _ | | | Tl S.a. alto _u1 _ w I =om inc w .m 0i w m _am_ 0:Fm Ao=ines aum. lIME 11. wl3s . LW2 LB 5.50 i.m m.1 io.aO ID Wm L31 S1. LmL' 715 1.11JD 90 nu%DULDATXSUL1 FOR SKIUI-L KUM GW | nd |- m l el _ mNo1 w T- -- T-T-r- 0 1I 2 I1./ D1 -s _iin __ o___w ftm inmncna a ir mm _ _.I. cmRm= I I tuzi*icmn 3g - mna . V3-ii -m 1.- 4.15 1.5 1_5 m.D. MM 1.5 1- 1. dqS o m _|hiu. | emis. O.ul 7 I ff.- - 96 - AM=nE 14 INDIA - COAL MININC ND COAL QUALITY DIPROVEMENT PROJECT EQUIJMENT COST ESTDI&TES (Rs million) Itm Quantity Unit Price a/ Base Cost Gevra Electric Rope Shovel 10.3 4 30.9 123.6 Electric Rope Shovel 4.60 8 7.5 60.0 Hydraullc Shovel 2.5-3.2R3 3 7.0 21.0 Hydraulic Shovel 2.5-3.203 with Backhoe 2 7.0 14.0 Dozer 400 HP 10 5.2 52.^ Dozer 300 HP 21 3.1 65.1 IBH Drill 250 - 8 9.3 74.4 RBR Drill 150-160an 8 3.3 26.4 Dumper 85t 12 5.1 61.2 Dumper 120t 22 13.3 292.6 Coalhauler/Duapers35t 75 2.5 187.5 Scraper 11.5.3 5 3.1 15.5 Grader 200-250 HP 6 1.3 18.0 Water Sprinkler 5 3.0 15.0 Training Center 1 37.5 37.5 Workshop 1 116.6 116.6 CHP 1 466.0 466.0 Other Local Equipment Lot 226.3 Subtotal 1,872.7 Spares 187.0 Total 2,059.7 Sonepur-Bazari Dragline 24/88 1 234.0 234.0 Electric Rope Shovel 10m3 7 30.9 216.3 Hydraulic Shovel 2.5-3.203 5 7.0 35.0 Dozer 400 HP 10 5.2 52.0 Dozer 300 HP 2 3.1 6.2 RRR Drill 250om 6 9.3 55.8 Dumper 120t 35 13.3 465.5 Dumper 35t 13 2.6 33.8 Coalhauler 32-40t 20 2.5 50.0 Scraper 11.5.3 1 3.1 3.1 Grader 200-250 4 3.0 12.0 Hater Sprinkler 4 3.0 12.0 Workshop 1 324.6 324.6 Training Center 1 37.5 37.5 CHP 1 109.5 109.5 Other Local Equlpnt Lot 176.5 Subtotal Spares 182.0 Total 2,005.8 a/ For foreign equipment, unit price - CIF + Duties + Inland Freight and Erection; for local equipmnt, unit price - Ex-Works + Taxes + Inland Freight and Erection. - 97 - L5 MU - aLM aNDML Q umr PIM _Tnseer SNE AM tusr WO k FDO anm BIdam Tderi Tar Ed E,ulmtlcm lidUg to au for lde Clmlsx w But Gmtruet B Si!sty 1 Reie bDe DbW for 1eis Wffctim . 0-1 3 20w! 1043 lbk 15. 1986 be 35. 198 Fb 15. va Am 15. 1987 Sept 15. 987 G-2 1 9 l 163 tbyr31.991 hJuly1. 1991(lt 1191 rIt 1. 1992 Hy 1, 1992 t-3 3 womee4.frP Jul 1 198 Sep 1, 199f be 1c 1988 hly 1. Mg9 Jo 1. I989 0-4 12 Thck SIt Apr 6, 198 Dee 15, I981 Feb 15. 1q87 Ji 15. 1987 Sp 15. 1987 cIs 11t Tac kb[1f 35. 196 bSe 15, 1988 Feb 15, 1987 JD 25. 1987 Sept 15 3987 r-6 11 nxk Ilt rHy 1. 1989 Ad 1. 1989 Oa I. 1399 1w 1, 399D May 1. 1990 -7 b killt25tk Apr 16, 1986 ee 35. 39 b e 1b I2987 Jm 15. 197 Sept 35. 1987 G-B3 5 Ibm 4(H Apr 16, 1986 bee 15 19386Feb 15, 197 Jun 15 1987 Sept 1 1987 Gt9 1 ear 4(ow hy 1.1990 ,Jl 1. 699) cIt 1. Ifli 1mI, 1993 tHy 1. 1991 C-lu 5 bea 3)09 Ar 16, 1988be 25, 2 Feb 15, 1987 J 15. 1967 Sept 15, 1987 Gil I bainhe Oscw .5 1. 1987 Ag 1, 39H7 lw 1, 1987 Apr 1. 19B Jun 1. 396 612 1 ldwxp FPa. Jun I. 19 Au7 1, 1917 Nbv 1, 197 Apr 1. 195 Jm 1. 15111 £13 I QauIbdp CiV. IWok un 1,1987I A 1. 19* Nos. 1987 Ar1r1. 1968 J 1, 198W C1G I set chwtg WEqp Jul 1, 39117 Sep 1. 1987 Db 1, 3967 my 1. 9W8 1.1.b 39W C35 I1t lty Repair Eq. .5l 1. 1987 Sep 1. 1987 bte 1 198171hy 1. 1968 Jul 1. lF Cib I Et Fr4he - - .hl 1,19B7 Sep 1, 1987 bee 1, 1987 hy 1. 19RB .5l 1, I8 l7 1poet Electrle - Ju,l1, 1987 Sep 1.I9dm be 3, 3907 thy13 15 ,i 1, 1988 Gin Elecnutdo Ptu. Ad 1, Wtl7 Sep 1. 1987 be 3, 1967 thy 1. 19H8 A. 1, 198W G19 I1t HydrsalicEquip Ju1 , 397 Sr I 1917 ec 1, 1967 thy 1 1998 Jul 1, 19W (3) 4 Hwel flue n Ar 1, 987 INy 1, 19R7 Aug 1 19H7 .o 1 1932 Par 1 19WI ;11 6 CGrd 21O-2PW Apr 1, 1917 Hay 1. 1987 A 1. 1987 J1.1, 19W N 1. 198. (22 5 %ftr Splrber Apr 1. I397 thy 1. 1*1?7 A 1, 987 Ja n 1988 nor 1. 1968 S-I 3 9Inl 1IkP I bv 15. 19B6 bEe 35, 1988 Feb 35, 1987 un 15, I987 t5, 1987 5-2 3 S%,i IOA3 Jun 1, 1989 Ag 1. 1989 lfl 3,1989 Apr 1, 199D JLm1. 1991) S-3 1 tlize 24/8B Ibv 15, 18 bDee 35,198b Apr IS, 1907 Spt 15. D67 Nov 15. 1987 S-4 2 lhel Hyd1 Nlv 35, 198Rb be 15. 191b Feb 15. 19B7 Jum15. 1987 Sept 15, 1937 2.3-3.2 . S-5 18 Tnd k1 kS 15, 986 De 15, 198b Feh IS. 1985 Am 15, 1987 Sep 15. 1987 S-0 17 Thitk3Mk JuZt1, 99 Ag L, 1989 Nlb 1. 39619 Apr 1. 199t) Jn 1. IMs 5-7 4 talr 350M I Apr 16, 19b Dbe 15, 1986 Feb 35, 1987 Jun 15, 1987 Sept .5. 19R7 S=- 4 fer 350M W Jul 1. 19B9 Sep 1. 3199 beX11 199 thy 1. 1990 Jul 1.19911 S-9 2 l tifel 1.Aprn,w ,1987 tky 1 1987 Ag 1, 1987 I 1.I19P0 nw 1.190 S-1u 5 Tttdc 3-4Gt lbv 15, 196 bec I5, 1966 Feb 35, 19B6 Jun 15, 1987 Sepc 15. 1987 5-11 14 Thdc 32-4lt .m 1, MT Ag 3, 199r) Nws 1, 1990 Apr t1 991 JLr 1, 1991 S-12 3 Drill 75 Apr 16, 1966 be 15, 1906 Feb 15,1907 J. 15. 1967 SePt 15, 1987 5-13 I DrilU 256m Ad 1. 1991 Sep 1, IY91 br 13, 1993 ty 1. 1992 .5d 1, 1992 S-14 & Cluder 2--253W Apr 1, 1987 thy 1. 197 Aug 1. I987 . 1. 198 lrtt 1 I89 S-15 4 -rw Sprinkler Ar 1. 19R7 thy 1 I37 AM 1, 19B7 .1s 1, 190R vr 1. 198W S-b6 1 0m1 HIdllhg Am 1, 1390 Ag 1. 1968 lbv 1, 1989 Apr 1, 1989 Jl 1, 1939 P- S-17 unlb 6saert uD 1, 1987 Ag 1, 1987 NoV 1. 1987 Ar 1, 19B Jn 1. 1930 S-Ie I Ulcitq..ut Ildetial Ju 1, 197 Aw 1, I7 kw 13,197 4r 1. 198 Jul 1. 19S S-Itb I tdadiwL tral RleidmntLal un 13,1987 A 1. 1987 It, 1, IP37 Apr 1, 198B Jun 1, 196 5-19 1 Iltt Axkduc S-19 Filitis Jum 13 191H Ag 1 1?87 bm 1, 187 Apr 1, 19B .Jun 1, 19B8 sY-19b Cvitl1 .5. 1. 3987 Ag 1, 1987 Nlv 1. 197 Apr 1, I .f 1. 190 S-19 Ihddnirg qup .51 3, 1987 Sep,3 1987 be 1. 1987 l'q 1 19 JulI 1 19B8 5-19d tw0ne 1p lip jai 1, 1987 Sep 1. 197 be 1, 1987 NWy1 19S 3 Jul 1, 1968 S-19e Iydt tru Fq Jul 1. 1987 Sep, IY1987 bee 1, 397 Hy 1, 198 Jal 1. 19B0 -19f Body Pop 1 1. 1987 Sep 1. 1987 Dee 1. 987 May 1. 19BS ,11.S9 S-19 Ibbile RepEqu .ul 1. 1987 Sep 3. 1987 ee 1, 1987 1.1 , 1968 Jul 1, 19PB S-19h lilt EtTdlEqu Jul 1, 1987 Sqt 1. 1987 e,1 VW79 thy 1. 198 Jul 1 988 S-191 Else Equp JUtI 1. 196 set 1. 1987 be 1, 3987 Hay 11 19W .5e 1.1I9 S-20 I tl Ib*p 5-20. Swvite bAId J 1. 1987 Ag 1. 1987 Nbs 1. 1987 Apr 3 19WB Jta 1 19B8 S-2b Civil wars J3 1, 1927 Ag 1. 1987 lbN 1. 1987 Apr 1. 19W Jun 1, 19W0 S-201 ladddrg Ey. Ju 1. 1987 Sep 1. 1987 ic 1. 1987 Pay 1. 16 Jt5l 1. 1968 S-2W1 Eigh RepFq Jul 1. 1987 Sep 1. 1987 n!e 1. 1987 th 1. 1988 Jul 1. 19SB S-le Hay Rep Fa Jul. I 3987 Sep 3. 3987 Dir 1. 1917 rhy 1, 3191 Jul 1. 3938 S-20f Trum Rip Eip Jul 1. 3987 Sep 1. 1987 re 1, 1987 tW I,1ISB Jul 1. 395R 5-It Dear Pqtpr Ep Jai 1. 1987 Sep 1, 1987 Ilew 1, 1987 thy 1. I9 Jl 3. 1998 S-20h Bdya[id Stn e lip. J 1, 1987 Sep 1. I7 Dbe 1, 1987 thfy1. 19W8 Jul 1, 1S0 87 5-201 Elecla Equ .d 1. 1987 Sep 1 19 De 1 1987 flh 1 ISB Jl 1 1989 S-Afl Fesy Eqdp id 13W87 Sep 1 1987 bee 1, 1987 ty 1. 19B Jul 1 19W S-& thoIle RepEqp Jrl 1.191 Sep L. 198 Da 1, 1987 NlWhyl1, Jul t, 1909 -2M u lsm 15, 186 De I,1966 hFb 15, 1967 Jun 15, 1987 Sept 15. 1987 - 98 - ANNEX16 INDIA - COAL MINING AND COAL QUALITY IMPROVEMENTPROJECT DISBURSEMENTSCHEDULE FOR BANKLOAN (million US$) (a) Mining Component Bank Quarterly Cmulative Fiscal Year Quarter Disbursement Disbursement 1988 I 5.0 5.0 II 0.8 5.8 III 1.0 6.8 IV 5.0 11.8 1989 I 5.5 17.3 II 7.9 25.2 III 7.8 33.0 IV 9.6 42.6 1990 I 7.9 50.5 II 9.9 60.4 III 9.4 69.8 IV 9.4 79.2 1991 I 9.8 89.0 II 8.6 97.6 III 10.7 108.3 IV 8.1 116.4 1992 I 9.4 125.8 II 7.8 133.6 III 8.2 141.8 IV 6.8 148.6 1993 I 7.8 156.4 II 7.2 163.6 III 6.6 170.2 IV 5.2 175.4 1994 I 3.2 178.6 II 1.4 180.0 (b) Coking Coal Disbursements will be at a rate approximately of about US$20 million per quarter, starting in the I quarter of Bank FY1988 tbrouigh the IV quarter of Bank FY1989. - 99 - ANNEX17 Page 1 of 4 INDIA - COAL MINING AND COAL QUALITY IMPROVEMENTPROJECT ASSUMPTIONSUSED IN THE FINANCIAL PROJECTIONS A. Projection Period 1. The financial projections have been prepared for 1986/87 through 1993/94. B. Escalation 2. All projections have been prepared in current terms assuming the following local inflation rates: 1986/87-1993/94 - 6.0% per year C. Production Plan 3. Production plan for the CIL group is in line with the Seventh Five Year Plan from 1985/86 to 1989/90 and shows steady thereafter: CIL - Projected Production (million tons) l986;s7 1987188 1988/89 1989/90 1990191 1991/92 1992/93 1993/94 kdergruxlnd 63.8 67.9 71.9 75.2 76.5 79.1 81.6 84.6 Open-Pit 78.8 90.1 103.4 120.8 131.7 140.7 152.8 164.8 Total 142.6 158.0 175.3 196.0 208.2 219.8 234.4 249.4 D. Investment Program 4. The investment program to support the above production plan is projected on the basis of average unit investment costs for open-pit and underground operations in CIL and investment requirements of existing mines to sustain current level of production. The investment profile is presented in the following table: - 100 - ANNEX 17 Page 2 of 4 CIL - Annual Investment Program (Rs million, 1986/87 terms) 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1M9394 9,690 9,750 11,320 12,550 11,850 11,350 11,50 11,3O E. Coal Prices 5. Until GOI and CIL complete the preparation of new measures to improve CIL's financial performance. Since coal prices are presently at economic efficiency levels, average coal prices have been assumed to remain constant in real terms and follow the local inflation rate in current terms. CIL - Average Coal Price (Rs/ton - 1986/87 terms) Fiscal Year 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 L993/94 With 1986/87 grade mix 235 2D5 205 2D5 205 2D5 205 205 With adjustBd grademix 205 201 197 191 189 187 185 184 F. Production Costs Salaries and Wages 6. Salaries and wages are dependent on production level, output per manshift (OHS) and earnings per manshift (EMS). EMS 7. In CIL, salaries and wages are fixed by the National Coal Wages Agreement which is renegotiated every four years between the unions and CIL management. It is assumed that earnings per manshift will remain unchanged in real terms during the forecast period. OMS 8. OMS projections for each subsidiary are based on CIL's estimates. The projections are shown below. - 101 - ANNEX 17 Page 3 of 4 OMS Projections (tons/manshift) ECL BCCL CCL SECL NEC 1986/87 0.57 0.64 1.50 1.33 0.86 1987/88 0.64 0.71 1.60 1.50 0.94 1988/89 0.70 0.76 1.72 1.62 0.94 1989/90 0.80 0.82 1.96 1.77 1.02 1990/91 0.85 0.82 2.10 1.80 1.02 1991/92 0.85 0.85 2.15 1.85 1.02 1992/93 0.90 0.90 2.20 1.90 1.02 1993/94 0.90 0.90 2.25 1.95 1.02 9. Administrative overhead, a major portion of which is administrative salaries, is assumed to increase at the sane rate as the salaries and wages. 10. Stores, power, transportationand other costs are calculated on a variable cost basis. For each subsidiary, the unit cost for stores, which includes spares, explosives, timber, diesel fuel, lubricants and other general consumables,has been slightly increased in real terms and unit cost of power has been marginally downward adjusted to reflect the increasing share of open-pit production characterized by higher than average usage of etores and lower power consumption. All other unit costs have been assumed to remain constant throughout the projection period. 11. Depreciation has been calculated using subsidiary-specific depreciation factor which is derived from data of historical depreciation as percentage of gross fixed assets to reflect the difference in the nature of investment in each subsidiary, i.e., underground vs. open-pit project, greenfield vs. rehabilitation. 12. Interest expense has been calculated based on the following average annual interest rates: Existing long-term loans a/ - planned portion 10.6% p.a. - non-planned portion b/ 0.0% p.a. New long-term 1== c 13.75Z p.a. Short-term loans 18.0% p.a. a/ Loans taken before April 1, 1984. b/ A subsidy equal to the interest payable is received from the Government. Hence, neither interest nor subsidy are included in the financial projections. c/ Loans taken in 1986/87 and thereafter, which is about 48Z of annual investment, repaid in 15 years. - 102 - ANNEX17 Page 4 or 4 G. Income Taxes 13. Accumulated losses from previous years have been carried forward. In addition, an investment allowance, up to 40% of the annual investment, has been assumed in calculating the annual taxable income. A 50Z income tax rate has been applied to the taxable income (if any). H. Balance Sheet 14. Current assets have been increased from the base at the same rate as the growth in total operating expenditures. 15. Current liabilities have been assumed to follow generally the same pattern as current assets with exception of the item of 'othercurrent liabilities" which consists mainly of wages and bonuses payable at the end of the fiscal year and is assumed to increase at the same rate as salaries and wages. 16. Fixed assets have been increased by adding 80Z of the annual investment to the previous year's balance. This addition is assumed to include both the direct addition from the annual investment and a transfer from previous year's capital work-in-progress. Seventeen percent of the investment has been asslmed to equal the net increase in capital work-in- progress and 3% of the investment, the net increase in loan & advances. 17. Long-term debt outstanding March 31, 1986 for CIL overall consists of the following loans: Planned Rs 20,958 million Non-planned Rs 4,326 million Total Rs 25,284 million - 103 - ANNEX 18 Page 1 of 3 INDIA - COALMINING AND COAL QUALITYIMPROVEMENT PROJECT PRO FORMLFINANCIAL STATEMENTSFOR COAL INDIA LTD INCOME STATEMENT 1986/87 TO 1993/94 (in Rs million) 86/87 87/88 88/89 89/90 90/91 91/92 92,':3 93/94 COAL PRODUCTION (MILLION TONS) UG PRODUCTION 63.8 67.9 71.9 75.2 ?6.5 79.1 81.6 84.6 OP PRODUCTION 78.8 90.1 103.4 120.8 131.7 140.7 152.8 164.8 TOTAL PROD-UCTION 142.6 158.0 175.3 196.0 208.2 219.8 234.4 249.4 SALEABLE PRODUCTION 136.7 151.2 166.8 187.1 198.2 209.3 223.2 237.5 -EVENUES AVERAGE PRICE, RS/TON 205 212 221 228 249 264 280 296 SALES REVENUES 27953 32077 36813 42737 49428 55284 62382 70172 OTHER REVENUES 41 44 47 50 53 56 59 62 TOTAL REVENUES 27994 32121 36860 42787 49481 55340 62441 70234 PRODUCTION COSTS SALARIES & WAGES 14103 15056 16191 17338 18740 20181 22000 24171 OVERHEAD 1128 1205 1298 1389 1501 1620 1778 1964 STORES 4158 4865 5678 6746 7592 8500 9638 10891 POWER 2020 2373 2778 3272 3651 4083 4592 5151 TRANSPORTATION 797 927 1084 1280 1427 1593 1796 2020 OTHER COSTS 2822 3413 3915 4538 5043 5576 6238 6956 TOTAL OPERATING COSTS 25027 27840 30944 34563 37954 41553 46041 51154 DEPRECIATION 2890 3414 4054 4764 5466 6210 6999 7835 INTEREST 2479 2892 3329 3935 4600 5144 5686 6222 TOTAL PRODUCTION COSTS 30396 34146 38327 43262 48020 52907 58726 65211 PROFIT BEFORE TAX -2402 -2025 -1466 -474 1462 2433 3716 5023 NET INCOME -2402 -2025 -1466 -474 1462 2433 3716 4761 -- _ _ -__ _ __ -_ -__ - 104 - ANNEX 18 Page 2 of 3 BALANCE SHEET 1986/87 TO 1993/94 "in Rs million) (Asof Narch31) 1987 1988 1989 1990 1991 1992 1993 1994 ASSETS CURRENT ASbZTS CASH & BANK BALANCES 1300 1463 1644 1858 2065 2277 2529 2811 COAL STOCK 4950 5569 6260 7076 7862 8669 9631 10702 STORES & SPARES 4450 5207 6078 7220 8126 9098 10316 11658 SUNDRY DEBTORS 4200 4726 5312 6004 6671 7356 8171 9081 OTHER 1470 1654 1859 2101 2335 2575 2860 3178 TOTAL CURRENT ASSETS 16370 18619 21153 24259 27058 29974 33507 37429 GROSS FIXED ASSETS 48809 57800 69515 82768 95229 108441 12,-53 137304 less ACCUMULATED DEPREC 16987 20411 24503 29317 34813 41056 48089 55961 NET FIXED ASSETS 31822 37389 45012 53451 60416 67386 74364 81344 CAPITAL WORK-IN-PROGRES 9310 10343 11690 13213 14646 16164 17775 19482 LOANS & ADVANCES 7653 796' 8367 8824 9254 9710 10193 10705 TOTAL ASSETS 65155 74315 86222 99747 111374 123234 135839 148959 LIABILITIES CURRENTLIABILITIES SUNDRYCREDITORS 3900 4388 4932 5575 6194 6830 7588 8432 ROYALTIES, CESS, ETC. 1020 1148 1290 1458 1620 1786 1984 2205 OTHER CURRENT LIAB. 7200 8101 9106 10292 11435 12610 1400. 15567 SHORT TERM DEBT 900 989 1091 1205 1305 1419 1559 1712 TOTAL CURRENT LIAB. 13020 14626 16419 18529 20554 22645 25139 27916 LONG TERM DEBT 27829 30573 34538 38939 42476 45968 49413 52803 OTHER LIABILITIES 3600 2880 2160 1440 720 0 0 0 TOTAL LIABILITIES 44449 48079 53118 58908 63751 68613 74552 80720 SHAREHOLDERS' EQUITY PAID-IN-CAPITAL 37531 45085 53421 61630 66951 71516 74466 76658 RETAINED EARNINGS -16825 -18850 -20316 -20790 -19328 -16895 -13179 -8418 SHAREHOLDERS'EQUITY 20706 26235 33105 40840 47623 54621 61287 68240 TOTAL LIAB. & EQUITY 65155 74315 86222 99747 111374 123234 135839 148959 -_ -_ - - 105 - ANNEX 18 Page 3 of 3 SOURCES AND APPLICATION OF FUNDS 1986/87 TO 1993/94 (in Rs million) 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 SOURCES NET INCOME -2402 -2025 -1466 -474 1462 2433 3716 4761 DEPRECIATION 2900 3425 4092 4814 5496 6242 7u33 7872 TOTAL INTERNAL CASH 498 1400 2625 4340 6958 8676 10749 12633 NEW EQUITY CAPITAL 7408 7554 8336 8209 5321 4565 2951 2192 LONG TERM LOANS 4845 5168 6733 7616 7162 7593 8053 8535 TOTAJ.SOURCES 12751 14121 17694 20165 19441 20833 21752 23360 APPLICATIONS INVESTMENT 9690 10335 13466 15233 14324 15186 16106 17070 DEBT REPAYMENT 2300 2423 2768 3216 3624 4102 4608 5145 INCREASE IN WORKING CAP. 478 643 741 996 774 826 1039 1145 DECREASE IN OTHER LIABL 283 720 720 720 720 720 0 0 TOTAL APPLICATIONS 12751 14121 17694 20165 19441 20833 21752 23360 RATIOS CURRENT RATIO 1.26 1.27 1.29 1.31 1.22 1.32 1.33 1.34 LONG TERN DEBT/ 0.57 0.54 0.51 0.49 0.47 0.46 0.45 0.44 EqUITY L 0.43 0.46 0.49 0.51 0.53 0.54 0.55 0.56 LONG TERN DEBT SERVICE 0.58 0.71 0.87 1.05 1.30 1.39 1.61 1.67 -106- ANNEX 19 Page 1 of 5 INDIA - COALMINING AND COAL QUALITY IMPROVEMENTPROJECT MEDIUMTERM EFFICIENCY IMPROVEMENTPROGRAM (1986-1990) AND PERFORMANCETARGETS In December 1986 CIL issued a Medium Term Coal Efficiency Improvement Program (the Efficiency Program) to cover the period 1985/86 to 1989/90. The contents of the Efficiency Program include (i) enumeration of specific priority actions to be implemented in the subsidiary companies to increase coal production, reduce costs and improve productivity; (ii) evaluation of the effects of such measures in terms of their physical impact on production terms; and (iii) assessment of the impact of the Efficiency Program on CIL's financial viability. The Efficiency Program draws upon CIL's Action Plan for 1986/87 as well as a draft CIL Five Year Corporate Plan covering the period 1985-90 which CIL had previously prepared. The Efficiency Program is based on a mine by mine productionanalysis which targets an increase from 134 million in 1985/86 to 196 million tons in 1989/90 as shown below: CIL - Production Target 1985/86 - 1987/Sq (Million tons, raw coal) 1985/86 1986/87 1987/88 1988/89 1989/90 (Actual) Existing mines 77.43 74.00 76.64 62.37 58.74 Sanctioned mines 56.68 68.60 89.32 104.33 119.66 New mines to be sanctioned - - 1.04 8.80 17.60 134.11 142.60 158.00 175.50 196.00 Production Of the present production of 143 million tonnes (1986-87), the underground mines account for 45% and the rest comes from opencast projects. In the increased production of 53 million tonnes envisaged by 1989-90, 75% would be contributed by opencast mines. By 1989-90 the share of opencast mines to total productionwould be 61%. The predominanceof fixed cost element over the variable costs in capital intensive projects (fixed 80%, variable 20Z) has necessitatedCIL to pursue economies of scale through planning and implementationhigh capacity mining projects. The - 107 - ANNEX19 Page 2 of 5 common size of a mechanized opencast m3lxe which used to be 1-2 m.tonnes per annum is being progressively increased to 10-14 m.tonnes per annum. Examples of such big projects are Mukunda (12 m.tonnes), Jayant (10 m.tonnes), Rajmahal (10 m.tonnes), Nigahi (14 m.t.) Dudichua (10 m.t.). Planning of high capacity projects is not confined to opencast mining alone. Underground mines like Jhanjra (3.5 m.tonnes) and Pootkee Ballihari (3 m.tonnes) are also under implementation. In planning and implementing high capacity projects the induction of technological expertise and equipment and machinery from a number of foreign countries is being pursued actively. Some of the countries from whom such assistance is being obtained are USSR, West Germany, UK, France, Poland and Canada. Many of these projects are being entrusted on a turnkey basis with adequate performanceguarantees. Productivity Productivity improvementsare designed to increase the output per manshift (OHS) of both undergroundand open-pit mines. In the area of mechanizationin existing underground mines, the technology of powered-support longwall mining would be extended. As against six longwall faces working in 1985-86, 23 would be working by 1989-90. Medium level mechanization has been introduced with side discharge loaders and load control dumpers in bord and pillar mines. The possibility of introduction of continuous mining and shuttle cars in bord and pillars mines with roof bolting is being investigated. The need for mechanizing transport of men and material in underground mines has been recognized and would find introduction during the Seventh Plan period. Other special methods of mining like Blasting Gallery method and Hydraulic Mining and Descending Shield method are also being adonted. Besides mechanization, a number of system improvement and managerial measures are being adopted. These include "allmen all iob systems- in mechanized mines, better amenities (such as housing, recreational,water supply facilities) to reduce absenteismand a system approach in mechanizing coal evacuation, face ventilationetc. Based on these measures CIL is targetting the following progressiveincrease in OMS for each subsidiary: CIL - Output Per ManshiftTarget 1987/88 - 1989/90 (tons per manshift) Company OMS 1987-88 1988-89 1989-90 Eastern Coalfields Ltd. 0.64 0.70 0.80 Bharat Coking Coal Ltd. 0.71 0.76 0.82 Central Coalfields Ltd. 1.16 1.16 1.26 Northern Coalfields Ltd. 8.02 8.50 8.60 Western Coalfields Ltd. 1.17 1.30 1.43 South Eastern Coalfields Ltd. 1.63 1.83 1.94 North Eastern Coalfields 0.94 0.94 1.02 Coal India Ltd. 1.07 1.17 1.28 - 108 - ANNEX19 Page 3 of 5 Manpower Planning The existence of a substantial surplus labour force in some of the coal mines has been well recognized. Concerted efforts are afoot to contain and reduce the labour force through a package of measures. The broad contours of the strategy are as follows: (a) control over fresh recruitment;(b) preparation of manpower budgets; (c) introduction of multi-scale workforce; td) training and re-orientationof workforce; (e) reorganization of uneconomic mines; (f) re-deploymentof surplus workforce; and (g) voluntary retirement scheme. One of the important steps taken to control fresh recruitmenthas beel.the abolition of the system of providing jobs to land losers in the coal projects. Following the recommendations of the Chari Committee on Eastern Coalfields Ltd., measures are afoot to rationalize the labour force in the identified uneconomic mines and deploy the surplus labour force elsewhere. A voluntary retirement scheme is also under formulation. As a result of the various measures enumerated above it is expected that the net addition to the labour force would be about 21000 only by 1989/90 as shown in the following table: CIL - Manpower Targets 1987-1990 Company Manpower as on 1st April 1987 1988 1989 1990 Eastern Coalfields Ltd. 1,88,500 1,88,500 1,88,500 1,88,500 Bhrat Coking Coal Ltd. 1,71,000 1,71,000 1,71,000 1,71,000 Central Coalfields Ltd. 1,05,000 1,03,300 1,02,400 1,00,400 Western Coalfields Ltd. 80,249 82,000 82,600 82,600 South EastzernCoalfields Ltd. 1,05,200 1,07,700 1,14,000 1,20,500 Northern Coalfields Ltd. 11,000 14,000 17,000 19,100 North Eastern Coalfields 5,426 5,400 5,500 5,600 Central Mine P1- ing & Design Institute.'Coal 5,096 5,200 5,500 5,900 India Ltd. Office/ Dankuni Coal Complex Total: 6,71,471 6,76,400 6,86,500 6,93,600 Equipment Availability and Utilization Increasing introductionof machine'y and equipment in underground mining and the key role which equipment and machinery play in opencast mining call for strict adherance to international standards in their availabilityand utilization. It has been estimated that in the development of a large sized opencast project, plant and machinery account for 64-78% of the project cost. A multi-pronged strategy covering the whole gamut of activitiea from equipment selection to their efficient operation on field has been drawn up by Coal India. The strategy consists - 109 - ANNEX 19 Page 4 of 5 of (a) equipment selection; (b) equipment standardization;(c) equipment operation and training; (d) equipment maintenance (including spare parts management, spares depots, service centres, rehabilitationof idle equipment, high technology electrical inspection and workshop facilities); (e) computerized information system; and (f) other measures (including operating procedures, pit lighting, optimal drilling and blasting and _mplementingthe results of the METCHEM study). Material Management The objectives of CIL in the area of materials management could be broadly classified as follows: (a) material demand and compatibility in keeping with end-user work stations; (b) integration of quality, quantity and price of materials to meet the projected demand efficiently with due regard to inventory holding norms and availability fluctuations;(c) minimization of down time of production equipment and project implementation delays by obviating stock outs; and Cd) ensure optimum inventory levels. To achieve the above objectives a series of steps have been taken. These include streamlining the purchase, procedures,vendor rating, computerization,opening of spare parts depots, training of executives, increasing the number of warehousing stations at carefully identified locations, disposal of obsolete items and evolution of optimum inventory levels. Communication and Comouterized Management Information System One of the felt requirements for efficient management of the coal sector is the availability of a speedy and reliable communication network linking the mines, the areas, the headquarters of the companies and Coal India Office in Calcutta. Towards this end a communication facility called Coalnet is under implementation. This network would be based on satellite communication. Under phase I of this satellite communication program 10 stations would be linked with each other and would have speech and data communication facilities. Under phase II, 9 more stations would be linked. Both these phases are expected to be completed by 1989-90. Managerial Climate Several steps have been taken to improve the managerial climate in the coal industry. Some of these steps are: (a) drawing up organization charts identifying responsibilityand accountability; (b) adequate delegation of financial and administative powers; (c) master plan for reorientation training utilizing institutions in the country and bilaterial assistance for training in new technologies being imported; (d) more stress on participative management to improve industrial climate; and (f) introducing systems for recognition of good work and penalties for failures. Labour Participation The Joint Bipartite Committee of the Coal Industry has been fully activised and regular consultations are taking place between the management - no - ANNEX19 Page 5 of 5 of the coal companies and representativeof the labour. Production, productivity, absenteeism,rationalization and redeploymentof manpower, cost consciousnessand welfare measures form the subject matters of these deliberations. To secure active labour participationin achieving the corporate goals, six committees have been constituted with representatives of labour. These committees cover subject areas like planning and training, safety and environment, investments and costs, and welfare. In addition, coal companies have revived the three-tier forums for workers' participation in management. These tiers are the colliery, the area and the corporate office. Studies A number of studies have been commissioned by CIL to go into diverse aspects of coal production. These studies range from technical aspects of coal mining to optimization of transportation, managerial innovations and overall improvement of the working of specific subsidiary companies. The following studies have thus been commissioned: - Management practices in Moonidih mine and Planning, design and management of the fully designed Pootkee-Bulliary underground mine. - Transportation of sand to Jharia coalfield from Maithon and Durgapur. - Study on operational Budgetary control systems in Coal India Ltd. - Study on Equipment Efficiency and Equipment Maintenance. - Study on Haulroad Construction and Maintenance. - Study on Blasting design and Practice. - Study on Project Implementation Manual. - RITES Study on Coal Transportation. - Chari Committee to examine the working of ECL. - Banerjee Committee to examine the working of BCCL. - Study of CIL and its subsidiaries. Industry Department March 1987 - iii - ANNEX 20 Page 1 of 5 INDIA - COAL MINING AND COAL QUALITY IMPROVEMENT PROJECT PRO FORMA INCOME STATEMENTS FOR CIL SUBSITIARIES 1986/87TO 1993/94 EASTERN COALFIELDS LIMITED - INCOME STATEMENT (in m8illion) 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 COAL PRODUCTION (MILLION TONS) UC PRODUCTION 17.0 18.0 19.0 20.0 20.5 21.0 21.5 22.0 OP PRODUCTION 8.2 9.4 12.0 14.8 15.0 16.0 17.0 18.0 TOTAL PRODUCTION 25.2 27.4 31.0 34.8 35.5 37.0 38.5 40.0 SALEABLE PRODUCTION 23.8 25.9 29.3 32.9 33.5 35.0 36.4 37.8 REVENUES AVERAGE PRICE, RS/TON 266 276 287 298 326 346 367 389 SALES REVENUES 6335 7155 8408 9798 10945 12094 13346 14697 CONTRIBUTIONS TO CPRA -730 -776 -577 -442 -493 -482 -471 -414 TOTAL REVENUES 7065 7930 8985 10240 11438 12576 13817 15111 PRODUCTION COSTS SALARIES & WAGES 4199 4451 4720 5001 5299 5618 5958 6315 OVERHEAD 235 249 264 280 297 314 333 353 STORES & SPARES 573 660 792 942 1019 1126 1242 1368 POWER 430 496 595 707 764 845 932 1027 TRANSPORTATION 232 267 321 382 412 45L 503 554 OTHER COSTS 708 853 1011 119^ 1280 1405 1541 1688 TOTAL OPERATING COSTS 6377 6976 7702 8503 9072 9764 10511 11305 DEPRECIATION 626 738 887 1044 1211 1388 1576 1775 INTEREST 516 600 690 814 948 1059 1168 1277 TOTAL PRODUCTION COSTS 7519 8315 9279 10360 11231 12211 13255 14357 PROFIT BEFORE TAX -455 -385 -294 -120 207 365 562 754 NET INCOME -455 -385 -294 -120 207 365 562 754 -_ -_ - - - -_ -_ - 112 - ANNEX 20 Page 2 of 5 SOUTH EASTERN COALFIELDS LIMITED - INCOME STATEMENT (in Rs million) 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 COAL PRODUCTION (MILLION TONS) UC PRODUCTION 26.6 28.7 30.0 31.0 31.0 31.5 32.0 33.0 OP PRODUCTION 27.9 34.0 40.5 49.0 55.0 60.0 65.0 70.0 _ _ _ _ - _ ------TOTAL PRODUCTION 54.5 62.7 70.5 80.0 86.0 91.5 97.0 103.0 SALEABLE PRODUCTION 52.3 60.2 67.7 77.3 82.6 87.8 93.1 98.9 REVENUES AVERAGEPRICE, RS/TON 187 194 201 209 229 243 257 273 SALES REVENUES 9748 11661 13620 16144 18885 21302 23950 26955 CONTRIBUTIONS TO CPRA 1599 2096 2344 2645 2753 3050 3392 3609 TOTAL REVENUES 8148 9565 11276 13498 16132 18253 20558 23346 PRODUCTION COSTS SALARIES & WAGES 3817 4127 4548 5001 5636 6129 6608 7406 OVERHEAD 291 315 347 381 430 467 504 565 STORES & SPARES 1524 1860 2218 2684 3038 3427 3853 4336 POWER 717 875 1044 1263 1429 1612 1813 2040 TRANSPORTATION 183 223 266 322 365 412 463 521 OTHER COSTS 690 817 964 1157 1316 1476 1651 1847 _ - _ _ _ _ TOTAL OPERATING COSTS 7222 8217 9387 10808 12214 13523 14891 16714 DEPRECIATION 980 1157 1351 1565 1783 2014 2260 2520 INTEREST 753 880 1014 1200 1406 1573 1739 1903 … ______- - TOTAL PRODUCTION COSTS 8954 10254 11752 13573 15402 17110 18889 21137 PROFIT BEFORE TAX -806 -689 -476 -75 730 1142 1669 2209 NET INCOME -806 -689 -476 -75 730 1142 1669 1947 - 113 - ANNEX 20 Page 3 of 5 BHARATCOKING COAL LIMITED - INCOME STkTENENT (in Rs million) 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 COAL PRODUCTION (MILLION TONS) UC PRODUCTION 14.9 15.4 16.0 16.5 17.0 17.5 18.0 17.0 OP PRODUCTION 8.6 10.1 11.3 13.0 14.0 15.0 16.0 14.0 TOTAL PRODUCTION 23.5 25.5 27.3 28.5 29.5 31.0 32.5 34.0 SALEABLE PRODUCTION 21.8 24.0 25.7 26.8 27.7 29.1 30.6 32.0 REVENUES AVERAGE PRICE, RS/TON 220 229 237 246 270 286 303 322 SALES REVENUES 4793 5478 6092 6602 7482 8336 9269 10277 CONTRIBUTIONS TO CPRA -1646 -1635 -1858 -2281 -2463 -2652 -3023 -3347 TOTAL REVENUES 6438 7113 7950 8883 9945 10988 12292 13625 PRODUCTION COSTS SALARIES & WAGES 3552 3765 3992 4230 4483 4800 5292 5770 OVERHEAD 297 315 334 354 375 401 443 482 STORES & SPARES 673 785 891 986 1081 1205 1339 1485 POWER 520 606 689 762 835 931 1035 1147 TRANSPORTATION 166 194 220 243 267 297 330 366 OTHER COSTS 634 626 690 744 804 879 961 1064 TOTAL OPERATING COSTS 5842 6291 6816 7319 7845 8513 9401 10315 DEPRECIATION 452 513 623 748 847 952 1063 1181 INTEREST 627 731 840 991 1157 1294 1431 1565 TOTAL PRODUCTION COSTS 6921 7534 8278 9059 985) 10760 11894 13061 PROFIT BEFORE TAX -483 -422 -329 -176 95 229 397 563 NET INCOME -483 -422 -329 -176 95 229 397 563 -- -- _- -__ ___ - 114 - ANNEX 20 Page 4 of 5 CENTRALCOALFIELDS LIMITED - INCONE STATEMENT (in Rs million) 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 COAL PRODUCTION(MILLION TONS) UC PRODUCTION 4.9 5.4 6.4 7.2 8.0 9.0 10.0 11.0 OP PRODUCTION 33.5 36.0 39.0 44.4 48.0 50.0 55.0 60.0 _ _ _ _ … _ ------TOTAL PRODUCTION 38.4 41.4 45.4 51.6 56.0 59.0 65.0 71.0 SALEABLE PRODUCTION 37.8 40.2 43.1 49.0 53.2 56.1 61.8 67.5 REVENUES AVERAGE PRICE, RS/TON 177 184 191 199 218 231 245 259 SALES REVENUES 6710 7400 8256 9740 11575 12930 15107 17490 CONTRIBUTIONS TO CPRA 745 309 91 114 233 127 158 231 TOTAL REVENUES 5965 7091 8165 9627 11342 12802 14948 17259 PRODUCTION COSTS SALARIES & WAGES 2416 2587 2797 2964 3171 3459 3943 4469 OVERHEAD 299 320 346 367 392 428 488 553 STORES & SPARES 1354 1524 1735 2090 2403 2685 3137 3631 POWER 338 380 433 522 600 670 783 907 TRANSPORTATION 216 243 277 333 383 428 500 579 OTHER COSTS 667 976 1086 1272 1441 1584 1821 2078 __ …----_------______TOTAL OPERATING COSTS 5290 6030 6674 7547 8391 9254 10671 12218 DEPRECIATION 801 970 1145 1341 1542 1756 1983 2223 INTEREST 560 654 753 892 1044 1168 1292 1415 …-----… ______TOTAL PRODUCTION COSTS 665; 7655 8573 9780 10977 12178 13946 15855 PROFIT BEFORE TAX -685 -563 -408 -153 366 624 1003 1403 NET INCOME -685 -563 -408 -153 366 624 1003 1403 - - -_ - - -_ -__ - 115 - ANNEX20 Page 5 of 5 NORTHEASTERNCOALFIELDS LIMITED - INCOME STATEMENT (in Re million) 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 COAL PRODUCTION (MILLION TONS) UC___PRODUCTION 0.4_0._0.5_.5 UC PRODUCTION 0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.6 OP PRODUCTION 0.6 0.6 0.6 0.6 0.7 0.7 0.8 0.8 TAP UI. 1.0______--. 1-- 1.2--- 1.3_ 1.4__ 1.4__ TOTAL PRODUCTION 1.0 1.0 1.1 1.1 1.2 1.3 1.4 1.4 SALEABLE PRODUCTION 1.0 1.0 1.1 1.1 1.2 1.3 1.4 1.4 REVENUES AVERAGE PRICE, RS/TON 376 390 405 421 461 489 518 549 SALES REVENUES 368 382 437 454 542 622 711 753 CONTRIBUTIONS TO CPRA 32 5 -1 -36 -30 -43 -56 -78 TOTAL REVENUES 336 378 438 490 571 665 767 831 PRODUCTION COSTS ______SALARIES & WAGES 119 126 134 142 152 175 199 211 OVERHEAD 6 6 7 7 8 9 10 11 STORES & SPARES 34 36 41 44 51 58 67 71 POWER 15 15 18 19 22 25 29 31 TRANSPORTATION 0 0 0 0 0 0 0 0 OTHER COSTS 123 141 164 174 201 231 264 279 TOTAL OPERATING COSTS 296 325 364 386 433 498 568 602 DEPRECIATION 30 36 48 66 82 99 118 137 INTEREST 24 28 32 38 45 50 56 61 TOTAL PRODUCTION COSTS 351 388 445 490 560 648 742 800 PROFIT BEFORE TAX -14 -11 -7 -1 11 17 25 31 NET INCOME -14 -11 -7 -1 11 17 25 31 - ll6 - ANNEX 21 Page 1 of 4 INDIA - COAL MINING AND COAL QUALITY IMPROVEMENTPROJECT FINANCIAL AND ECONOMIC RATES OF RETURN ASSUMPTIONS AND CALCULATIONS Introduction 1. The financial rate of return (FRR) and economic rate of return (ERR) for Gevra and Sonepur-Bazarihave been calculated in real terms on an annual basis. According to mineable reserves and production profile, 20 years of full production plus implementationperiod are taken as the life of each mine. Cost and benefit streams of each component are shown in tables attached. Cost Streams 2. Capital Costs are based on project implementationschedule and equipment deployment plan. Replacement investmentsare estimated according to useful life of major equipment deployed. 3. Operating Costs are derived from production and overburden stripping schedules, together with fixed and variable cost components of unit operating cost estimates. 4. Working Capital requirement is derived taking into consideration the level of minimum cash, inventory of consumables,coal stock, receivables and payables. This is equivalent to 3 months of operating expenditure. Conversion Factors 5. For the calculation of EIRR,all identifiableduties and taxes are excluded. In addition, the followirngconversion factors are applied to each category of inputs to reflect their opportunitycosts to the economy: Conversion Factor Category of Costs 1.0 Imported Equipment 0.8 Inland Freight & Erection of Imported Equipment 0.8 Local Equipment 0.8 Land, Civil Works & Infrastructure - 1.0 Engineering& Technical Assistance 0.8 Pre-operating& Operating Costs Revenue Stream 6. For the financial rate of return, the revenue stream is derived based on coal sales volume and the net pit-head coal price specific to coal from each mine which is projected to remain constant in real terms. These - 117 - ANNEX 21 Page 2 of 4 amount to Rs 124.6 and Rs 245.0 per ton for Gevra and Sonepur-Bazari, respectively. For the calculation of the economic rate of return, projected domestic prices paid by consumers at pit-head adjusted for the average conversion factor are used as approximationof efficiency prices, which are Rs 114.6 and Rs 245 per ton for Gevra and Sonepur-Bazari, respectively. The financial and economic cost and benefit streams for both mines are shown below: Gevra Mine Financial Cost/Benefit Streams (Rs million - 1986/87 terms) Capital Operating Working Net Fiscal Year Costs Costs Capital Revenues 1981/82 121 2 4 1982/83 224 - 4 30 1983/84 273 64 10 130 1984/85 260 82 4 285 1985/86 265 130 13 340 1986/87 363 170 10 386 1987/88 379 240 17 530 1988/89 266 290 13 685 1989/90 340 360 17 897 1990/91 195 411 15 1,059 1991/92 271 411 6 1,246 1992/93 323 411 0 1,246 1993/94-1996/97 160 411 0 1,246 1997/98-2009/10 200 411 0 1,246 2010/2011 (495) 411 (111) 1,246 - u18- ANNEX21 Page 3 of 4 Sonepur-Bazari Mine Financial Cost/Benefit Streams (Rs million - 1985/86 terms) Capital Operating Working Net Fiscal Year Costs Costa Capital Revenues 1986/87 36 1987/88 491 - 1988/89 458 - 4 - 1989/90 262 60 16 98 1990/91 282 150 15 270 1991/92 124 190 3 368 1992/93 153 190 - 368 1993/94 167 190 7 368 1994195 1 141 190 25 368 1995/96 109 300 10 613 1996/97 150 330 - 735 1997/98 113 330 - 735 1998/99 110 330 - 735 1999/2000 116 330 - 735 2000/01 110 330 - 735 2001/02-2005/06 140 330 - 735 2006/07-2013/14 150 330 - 735 2014/15 (220) 330 (80) 735 Gevra Nine EconomicCost/Benefit Streams (Rs million - 1985/86 terms) Capital Operating Working Net Fiscal Year Costs Costs Capital Revenues 1981/82 87 1 4 1982/83 162 - 3 28 1983/84 195 51 7 119 1984/85 187 66 3 262 1985/86 193 104 9 313 1986/87 262 136 7 355 1987/88 271 192 12 487 1988/89 189 232 9 630 1989/90 241 288 12 825 1990/91 136 328 10 974 1991/92 190 328 4 1,146 1992/93 226 328 0 1,146 1993/94-1996/97 112 328 0 1,146 1997/98-2009/10 140 328 0 1,146 2010/11 (353) 328 (77) 1,146 - 119 - ANNEX21 Page 4 of 4 sonepur-Bazari mine Economic Cost/BenefitStreams (Rs million - 1985/86 terms) Capital Operating Working Net Fiscal Year Costs Costs Capital Revenues 1986/87 30 1987/88 350 1988/89 333 - 3 1989/90 187 48 11 98 1990/91 199 120 10 270 1991/92 88 152 2 368 1992/93 107 152 - 368 1993/94 117 152 5 368 1994/95 98 152 17 368 1995/96 76 240 7 613 1996/97 105 264 - 735 1907/98 80 264 - 735 1998/99 77 264 - 735 1999/2000 81 264 - 735 2000/01 77 264 - 735 .2001/02-2005/06 98 264 - 735 2006/07-2013/14 105 264 - 735 2014/15 (156) 264 (55) 735 -120- ANNEX22 INDIA - COALMINING AND COAL QUALITY IMPROVEMENTPROJECT DOCUMENTSAVAILABLE IN THE PROJECT FILE A. THE COAL SECTOR 1. Report of the Committee on the Problem of Coal Supply to Thermal Power Stations (the Fazal Committee Report), October 1983. 2. Report of the Committee on Eastern Coalfields (the Chari Committee Report), October 1985. 3. A Report on Eastern Coalfields, A.N. Banerjee, September 1985. 4. A Report on Coal Aspects of the Seventh Plan, A.N. Barnerjee, February 1986. 5. The Seventh Plan Coal Working Document, Department of Coal, January 1985. 6. Annual Report 1985/86, Department of Coal, Ministry of Energy. B. THE COMPANY 1. Coal India Ltd. Annual Report and Accounts 1984/85. 2. Measures for Improvement in Efficiency and Control of Costs, April 1986, CIL. 3. Medium-Term Coal Efficiency Improvement Program 1986-1990, December 1986, CIL. C. THE PROJECT 1. Feasibility 'Report for Gevra Project, CMPDI, March 1982. 2. Feasibility Report for Sonepur-Bazari Mine, CMPDI, September 1982. 3. Report on Coal Quality Aspects of Ge%ra Mine, Norton Hambleton Ltd., April 1985. 4. Land Acquisition and Rehabilitation Arrangements at Gevra, SECL, January 1987. 5. Rehabilitation of Villages, Sonepur-Bazari Project, ECL, January 1987. PROPOStOAREA FORI OFFICE WORKSHOP , ,'.... '.R. - RESIDINTIALCOLONY :. I- - , . .r * 'COTPLEXjCOMLSTDIACEE DIESEL i MAINSUN sN.TN . C~~~iORRIHOORFOR NLTDPKACi3.EF s ------Y8-- ,E KUSM*N- OFIAOE~~~~~~~~~~~~~~ Marc*r~IN?. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~MI WSE Ui < * ~~~~~~~~~GEVRA FINAL PIT ';'.4z ~~~~~~~~~~~~~~~~~~~~~INDIA_ j GEVRA MINING COMPLEX ~~~~~~~~ ~~~~~~~Conl Minirg | nd CoalOtallit1 lntprvmilw ProeKt InckustrvDepirtment WoddBank 3111I1:1 Mseh 1987. , -- :.1~~~.- 01~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ i / ( X ~~~ < ~.IDI. 3 ~~~~~~~~ ~ ~ ~~~, / \ .X._ a<$t ab \ ~~~~~~~~~~~~~~~~~~SONEPUR* BAZARI MININGCOMPLEXi L / 2 >~ ~~~~~~~~~~~~~~~~~~~~CoaMInwigncoaIOuuityImpmntPro | |t Indultr Dwpirtmniai WorIdBhnk31111 :7 March1967 IBRD 19279R i-2 v-o~~~~~HIMACHALh e , -'AFGHANISTAN f >vPRADESH PI'.A._ PAKISTAN ( ? *-r' CHINA / .TtA RHANAi A r\ sDEL .SIKK/M.< g ~~ ~ LITTAR ~~~~~~ K ~~~'BHUTAN g C } ~~~~~~~UTrARPRADESH < - RA JA S THANIPAVSS A t - : Northern Coalfields N,_)SI .S A t <^(IYCL) ,Y Ltd. .\ - }> MEOALq4YA . lre ,> -- > rs<<,; B/hAR \ -~~BANGLADESH GUJAQATr 5epur - Bazari MADHrA PRADE - *E-T \-Coal Mine K ,.2 - . 4-f t * jGevraCoalMiner - Eavern Coal fields < 5 h xi \~~~~~~-0ONog|e< r \ v Ltd. (ECL) 20'O A harat Ccking Coal MAHARASHTRA Ltd BCL 203 ,~"~ \ >SoutEastern Coalfields .5,W-' Western Co.tlfields ANDHRA PRA Ltd. (WCL) - JS;naren; Collieries Co. Ltd. (SCL) GOAI \KARATA7 AKA53 I N D I A .7r"!cn 5C t COAL MININGAND COALQUALITY ,A. r-/:('!C/? cC. fM'lta . \ IMPROVEMENTPROJECT i -- ,r 'Th°tWodfeSCoal Mines Under the Project \j < JJtCoalFields (.eyveli Lignite Major Coal Field Areas 7 AfMIVA D -rP- LtdN L Operated by Various Mining Companies T .A_ U (NL) AL Coal India Ltd Headquarters rMbht_*8f~~~-E~I0A3rr iwaealw.d.bi' t .- J National Capital.0 (_dT>d_ t f0 Selected Cities a,,s k.3in ,_ 5 t \Due to seconsiderationssSame areas could not beinluded ld heI W ee| )~j sIn2h4map: North Easrn Coalfields Ltd. Which islocaed in _td8w e\ t (? ( ' JSRI Anm notincluded in the map. _#_>_ \, X ~~~~~~~~~SRI of_N_mmy o NW X KILOMEERS 0 200 400 _r LANKA4,r ._._._ ._ .__ ffw low amwMILES 0 100 200 300 i701_ 9cN 1.86 JUNE 1986