World Bank Document

R E S T R I C T E D

CrRCULATIEGCOPY R e p o r t N0. TO-287b TO 1E RETURI"-Dl TO REPORTSDESK IN Gi:Ir2AL FILLS Public Disclosure Authorized This reportwas preparod for use within the Bank. It maynot be published nor mayit be quotedas representingthe Bank'sviows. Tho Bankaccepts no responsibilityfor the accuracyor completonessof the contentsof thereport.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized

APPRAISAL REPORT

THE INDIAN COAL INDUSTRY

INDIA Public Disclosure Authorized

July 31, 1961 Public Disclosure Authorized

Department of Technical Operations CURRENCY EQUIVALENT

Unit = Indian Rupee U. S. $1 = Rs. 4.76 Rs. 1 = U.S. $0.21 WEIGHTS AND MEASURES Unless specified otherwise all tonnage figures used herein are long tons of 2, 240 pounds. APPRAISALOF TIHEINDIAN COAL INDUSTRY

TABLE OF CONTElTTS

Paragraphs

I. INTRODUCTION 1 - 4

II. THE ROLE OF COAL IR THE INDIAN ECONOX2 5 - 23

A. Consumption 5 - 7 B. Reserves 8 - 11 C. Production 12 - 19 D. Transport 20 - 23

III. THE FR AMWORK OF GOVERWIENT CONTROL 24 - 58

A. Control Authorities 24 - 33 B. Quality Control 34 - 36 C. Price Control 37 - 45 D. Import Control 46 - 49 E. DistributionControl 50 F. Production Control 51 - 54 G. Summary of Proposed Changes in Control Policy 55 - 58

IV. TIE STRTUCTUPLLhMD ORGAFNIZATIONOF TIThIINDIAN COAL IN1JDUSTRY 59 - 77

A. The Public Sector 59 - 68 B. The Private Sector 69 - 77

V. THE T1I7nDPLAN EXPANSIOH PROGRAI, 78 - 94

A. The Public Sector 78 - 84 B. The Private Sector 85 - 94

VI. PROPOSED BDPiKLO-AN 95 - 111

A. The Need for Finance 95 - 102 B. The Purpose and Amount of the Proposed Loan 103 - 106 C. Administrationof the Loan 107 - 111

VII. CONCLUSIONSAND RECOiGl'2ELDATION1S 112 - 121 LIST OF fUt?EXES

A. Consumptionof Energy by Source 1950-1975

B. Estimated Demand for Coal by Principal Consumers

C. 11apof Main Indian Coal Fields

D. hap of Coal Fields in West Bengal and Bihar

E. Problems in the Transport of Coal

F. Considerationsin the Determinationof Coal Prices

G. Coal Prices in West Bengal and Bihar

H. Subsidies for Difficult I.iningConditions

I. Map of Proposed Central Ropeways

J. Analysis of Private Companies Participating in Third Plan Expansion Program A?PflKSi OF TIE TRDIAINCOfiL I_TDUCTRY

SUMMAR

i. After a policyin recentyears of restrictingthe privatecoal industryand attemptingto meet the nation'sneeds from publicsector production had resultedin a severecoal shortage,the Governmentof India changed its approach and provided for a substantial expansion of the private industry in the Third Five-Year Plan. The Bank has been askedto make a loan for the foreignexchange costs of this expansion(Paras. 1 to 4). ii. Coal is a basic elementin the Indianeconomy, and must be countedon to play a predominantrole in the futuredevelopment of the country. Althoughthe countryhas amplecoal reserves,the average qualityis low and has necessitatedconservation measures and construction of washeries. Most of the productioncomes from a small area in the northeastportion of the country. For technicalreasons the extractionof coal is dependenton a supplyof sandfor fillingin the resultingvoids (Paras.5 to 11). iii. The productiontarget for the last year of the SecondFive-Year Plan was 60 milliontons, of which 16.5 milliontons was to come from the publicsector and 43.5 milliontons from the privatesector. The private sectorreached its goal but the publicsector fell some 6 milliontons short and the countrywas left with a severecoal shortage. The Third Plan target is 97 milliontons, of which 36 milliontons is projectedfor the pub'ic sectorand 61 milliontons for the rrivatesector. The latteris a realis- tic targetbut the formerseems unlikely of achievement(Paras. 12 to 19). iv. The most seriousproblem of the Indiancoal industryis transport. Most coal in Indiamoves by rail and the railwayshave been unablc to providesufficient cars to move the coal that can be produced. This has resultedin curtailmentof productionand has greatlyintensified the problem of coal shortages (Paras. 20 to 23). v. The government exercises strict control over all aspects of coal production. This is done througha varietyof agenciesand committees,many with overlappingfunctions, which administercontrols over miningmethods, quality, prices, imports, distribution and production. The price controlsystem has been particularlyinjurious to the industry and has long preventedit from earningan adequatereturn or properly maintainingits equipment(Paras. 24 to 54). vi. To enablethe industryto expandin the ThirdPlan, the government has recentlymade a numberof concessionsin its controlpolicy. These involvea minor price increase,an elaboratesystem of subsidies for mines with difficultoperating conditions and some relaxingof the prohibitionagainst opening new mines. T1hileless than might have been hoped,these concessionswill aid the industryin achievingits Third Plan target (Paras.55 to 58). ii -

vii. The public sector of the Tndian coal industry consists of a relatively small number of collierieswhich are widely scatteredgeo- graphically. Its newer mines are largely open cast, and have generally lower grade coal reserves than the private sector. Its operations are handicappedby a shortage of trained personnel. It has power to acquire uaworked coal-bearingareas from the private sector. The private sector consists of hundreds of collieries ranging from veryr large operations to extremely small ones. The financial condition of these undertakings varies widely. Most private sector operationsare underground,and they have wide experience in the hazards of deep mining. The private sector has the best coal and practically all the coking coal reserves in the country (Paras. 59 to 77). viii. The public sector expansion plan amounts to nearly a 250% increase over present output. It includes opening of deep undergroundmines in which the public sector has had little experience. It also includes constructionof central sand ropeways and washeries (Paras.78 to 84). ix. The private sector expansion plan envisages the productionof an additional17 million tons above present output. Of this, about 11 million tons are to come from expansion of existing workings and 6 million tons from new sinkings. There are 115 companies participatingin the program. The total cost, exclusive of The Indian Iron and Steel Co., L-td. (II5BO) project being consideredfor separate Lank financing,is estimated at about Rs.555 million, of which approximatelyRs.287 million ($60.2 million) would be foreign exchange. The program for new mines would have to be carried to completionto be of any benefit, while the remainder of the expansion would produce results on a year-to-yearbasis. Detailed plans for all collierieshave not yet boeenworked out (Paras.85 to 94). x. The private industry maintains that it can raise all the funds necessary for the program and that all it needs is access to the required amount of foreign exchange. While this may be an optimisticassessment, it is probable that many of the companies involved will not need finance, and the governmenthas agreed to provide assistancefor those which do. A Bank loan would thereforetake the form of a loan to the Governmentof India with the foreign exchange earmarked for the use of the private coal industry. The governmenthas requested a loan of $35 million to cover mainly the first two years of the program and has undertakentofurnish the balance itself. Individualprojects would be screened by a committee of government and industry technicians and approved by the Bank for par- ticipationin the frogram (Paras. 95 to 111). xi. In view of certain assurancesgiven to the Bank by the government, the private sector Third Plan expansion program would be a suitable basis for a loan of ';35million equivalent for a term of 15 years including a grace period of five years (Paras.112 to 121). I. INTRODUCTION

i. In recent years expansion of the private coal industry in Irdia has been restricted as an act of government policy, while the government has moved on a large scale into coal production as a public undertaking. This policy, taken together with the tremendousneed for coal in the countr-, led to the fixing of altogether unrealistic targets for public sector production. As a result, the public sector fell far short of its Second Five-Year Plan goal, and the country was left with a coal shortage so severe that it threatened its further economic development.

2. The government as a result has partially revised this policy and has provided for a substantial expansion of private sector production during the Third Five-Year Plan. This has made possible a consideration by the Bank of the Indian coal industry, and it has accordinglybeen asked to make a loan for the foreign exchange costs of the private sector expansion.

3. The program involves over a hundred companies,most of which ieed not loans out access to foreign exchange. Therefore the proposed loan would be a loan to the Government of India, with the foreign exchange earmarked for purchase by the private coal industry.

4. The following is an appraisal of the Indian coal industry and of the proposed expansion program of the private sector.

II. THE ROLE OF COAL IN THE INDIAN ECONONY

A. ConsumplLon

5. Coal is Indiats principal rawr material resource and the life- blood of her growing industry. In eddition to supplying the rapidly rising requirementsfor steal production,coal furnishes the motive power for virtually the entire railway system and generates the largest portion of the countryls electricitysupplies. It accounts for over 75'-of the total primary sources of energy in the country, and in the absence of any sigrificantdiscoveries of oil or gas is likely to remain predomlinantfor mamy years to come. The acceleratinggrowth of the Indian economy and the major role which coal will continue to play in it will require a ve-y large increase in coal output over the next few years. A long-range fore- cast of energy supplies is shownl graphicallyin Annex A eandclearly ir- dicates both the great dependenceof the country on coal and the degree of expansion of coal production which will be required.

6. The goverrmenthas recently erbarked on its Third Five-Year Plan, covering the period ending Narch 31, 1966. The projected require- merts of the more important coal-using industries at the end of this - 2 -

period are shown in Annex B, together with their actual demand at present. The government itself accounts for over half of the demand throuLh l.ts ownership of steel, railway and power facilities.

7. India has exported about 1.5 million tons of coal per year in recent years, principally to Pakistar, Burma and Ceylon. She could export substantially more if it were available, and this could help to earn critically short foreign exchange.

B. Reserves

8. In relation to her needs, India possesses abundant coal reserves. The Geological Survey of India has estimated reserves variously at from 32 billion tons to 39 billion tonls, although other estimates vary widely depending on the ass-umptionsmade as to recoverability. A sampling of operating units in the major coal fields showed most of them to have 40 to 100 or more years of reserves at present rates and methods of re- covery. However, the reserves of good quality coking coal required for steelTmakingare more limited, laving been estimated oy the l.etallurgical Coal ConservationCommittee at 2.4 billion tons lying in existing workings. Reserves of this magnitude are ample for the future of the steel industry, but the rate at which they can be extracted makes it imperativethat they go in fact to the production of steel and not, as happened regularly in the past, be diverted to other uses.

9. The average quality of Indian coel is low, having a generally high ash and moisture content. i1oreover,as productionincreases the average quality is deteriorating;a 1953 study found that the ash content of coal dispatched from mines had increased from 11$ to over 205 in 20 years. Thus while total reserves are ample, supplies of good quality coal are not, and the government has had to undertake stringentmeasures to conserve high-grade coal. Yluchof the coal used in steel production has to be washed, and it has the-efore been necessa:y to start large- scale constructionof washeries.

10. Indian coal is bitumninouscoal of the Permian age and is founa principally in the Damodar River valley in the northeast portion of the country. Annex C shows the location of the major coal fields. A.bout80% of the nation's coal productioncomes from the states of West Bengal and Bihar, where the most important fields are Raniganj, Jharia, Bokero and Karanpura. Less important fields are found in the states of Eiadhya Pradesh and Andhra Pradesh, wfhile important lignite denosits are being developed in tladras. Good quality coking coal comes almost entirely from.the Jharia field. The Bengal-Biharfields are shown in detail in Annex D. .. 3 -

11. The coal seams in India are extraordinarily thick, some reach- ing in excess of 100 feet. This necessitates a technique of mining not employed in most other countries,namely the replacementof coal taken out with sand to permit the full thickness to be recovered lwithcut cave-ins. hining is done principallyby the room-and-pil'larmethod, in waich a number of parallel tunnels are driven through the coal seam and then connected by cross-tunnels,leaving the roof supported by pillars of coal. These pillars are then extracted, working back from the boundary to the starting point. If the roof were simply allowed to collapse as is done in most countriesthere would be damage to other seams lying aoove as well as to the surface. h further hazard is that of spontEneous combustionwhich can take place in a sealed-invoid. For these reasons the void areas are filled hydraulicallywith sand which is obtained from river beds. The availabilityof sand thus has an important bearing on the expansion of coal production. If it cannot be obtained the pillars must be left in place and the area abandoned,although it may contain as much as 70% of the original deposit. There is no accurate inform- ation, but it is estimated that there are in India several hundred million tons of coal standing in the form of pillars vihichcould be extracted by sand stowing.

C. Production

a) Second Five-Year Plan

12. In the year ended Niarch31, 1956, the last year of India's First Five-Year Plan, coal productionwas 38.2 million tons--a level that representeda rise of about 1,-;in the previous five years. Of this about 34 million tons came froimprivate collieries and 4 million from the public sector. The latter was representedby central govern- imentcollieries and by one colliery controlledby the state of Andhra Pradesh.

13. The Second Five-Year Plan establisheda target i'orcoal production of 60 million tons to be achieved in the year ended Miarch31, 1961, or an increase of close to 60,. It was at this time that the Indian Government entered the picture on a massive scale. The program envisaged that the public sector would account for 12 million of the approximately 22 million additional tons, raising its production from roughly 4.5 million to 16.5 million tons. The balance of about 10 million tons was allotted to the private sector, raising its production from just under 34 to 43.5 million tons. It was expected that 2 million tons of the public sector expansion would come from existing mines and the balance from the opening up of virgin areas. All of the private sector expansion was expected to come from existing mines and the private industry was forbidden to open any new areas. Coal was declared to be a basic industriy in which all new undertakings were to be the province of the state. - 4 -

14. Actual productionachieved in the year ended Miarch31, 1961 came to 54,6 million tons. Analysis shows that the private sector reached its target, but that the pubolicsector fell short by some 6 million tons, The yearly figures were as follows (million tons):

Years ended harch 31 Private Sector Public Sector Total

1956 33.9 4.3 38.2 1957 35.4 4.9 40C3 1958 38.J 5.3 44.1 1959 39.9 6.0 45.9 1960 40.7 7.1 47.8 1961 Z4.2 10.4 54.6

15. The failure of the public sector to meet its goal would have had drastic consequenceson the Second Plan except for the fact that other areas of industrialexpansion were likewise behind their schedules. As it is, there is a serious shortage of coal in the country and many industries, including the government-oimed steel plants, have at times had to curtail production because of lack of it.

b) Third Five-Year Plan

16. The Third Five-Year Plan has set a coal production target for the yeer ending March 31, 1966 of 97 million tons-an increase of 42.4 rillion tons or some 80% above actual production in the year just ended. This figure was arrived at by consideration of the separate targets set for all coal-consuming industries. Emphasis is on increasing the production of the highest grades. The figures assume a major expansion of the three existing public sector steel plants and the construction of a fourth, to raise total ingot production from about 3 miilliontons last year to 9.5 million tons (installedcapacity will rise from 6 million tons to slightly over 10 million tons). Coking coal productLonwould be increased from about 16 million tons to 26 million tons and the breakdown of pro-- duction in the final year of the Third Plan would be as follows (million tons):

Coking coal 26 Blendable coal 6 Noni-coking coal: High grade 46 Low grade 19

27 - 5 -

178 The government has 'oecome acutely aware of the failure of the public sector to reach its goal and of the need to stimulate the private sector if the economic development of the country is not to be impeded by a shortage of coal. Steel production has already been lost, railway efficiency impaired, other industrial output curtailed and export oppor- tanities missed. It has therefore been decided that the private coal industry will be given a larger role in the Third Plan expansion and will be allowed to open new mines in order to accomplish it. Of the 42.4 million tons additionalproduction projected, the private sector has been allocated 17 million tons, while the public sector will be responsible for the balance of over 25 million tons. This will be an increase of close to 40, for the private sector and nearly 250% for the public sector. A summary of past, present and projected production is as follows:

Years ended March 31 1956 1961 1966 Actual Target (% Inc.) Actual (, Inc.) Target (jjIc-)

Public Sector 4.3 16.5 (284) 10.4 (142) 36.0 (246)

PrivateSector 33.9 43.5 ( 28) 44.2 (_30) 61.0 ( 38) Total 38.2 60.0 ( 57) 54.6 (43) 97.0 (_Z8)

1S It is most unlikely that the public sector will be able to approach the proposed level by the Pnd of the Third Plan. On the other hand it is improbable that other industries,principally steel, will be able to meet their own Third Plan goals, so that the demand is not likely to be as large as 97 million tons. Nevertheless,the coal problem is an extremely serious one, and if productionwere to fall below the target to any substantialdegree the development of the country would be materially affected.

19. The goal set for the private sector is reasonable and should be capable of achievement. Indeed the industry may well be called upon for, and should be capable of, an even greater increase as the deficien- cies of the public sector become more evident.

D. Transport

20. The gravest problem facing the Indian coal industrytoday is transport. Virtually all of the nation's production moves by rail. Of the Second Plan coal production target of 60 million tons, the railways were originally expected to transport 55 million tons, the difference being consumption at mines and shipments by road and by sea. However, the rail.wayswere not assigned sufficient funds for such a program, and their Second Plan target for coal movement was set at 48 million tons. - 6 -

This warsreappraised in 1958 and adjusted to 51 million tons out of a then expected coal productionof 56 million tons. Although actual production fell short, the availabilityof railway cars fell shorter, and a ser-ous crisis developed in the summer of 1960 when a lack of coal caused considerablecurtailment of industrial production.

21. Because of the acute shortage of railway cars, every shipment from any colliery to any consumer, regardless of size, requires a permit from the Coal Controller and an allocation by him of the required number of cars. This is an exceedingly complex operation which appears to be handled quite efficiently under the circumstances. However, the Coal Controller can only allot the number of cars which the railways report to him are available. It is estimated that the demand for cars in the current calendar year will average in excess of 7,700 per day, against which the railways are today providing about 6,000. Txpressed in tons, the railways in the last year of the Second Plan moved 46.3 million tons of coal as against production of 54.6 million tons, with perhaps 10% transportedby other means or consumed at mines. Moreover, few mines have space or facilitiesfor stockpiling,and are forced to curtail productionveryj quickly if the output cannot be moved. Finally, country- wide statisticshide the real degree of the crisis in the fields of Bengal and Bihar. It is widely believed in the industry that production with existing facilities could be increased at least 10% if railway equipment of the proper type were furnished on a regular basis.

22. The availabilityof cars is only one aspect of the problem. The situationis extremely complex, involving such factors as size and design of railway equipment, availabilityof steel for manufactureof equipment, traffic management within the railways, seasonal factors, loading facilities and sidings at the mines, unloading facilities at delivery points, lack of adequate marshallingyards and line capacity, etc. A fuller discussion of the transport problem is given in Annex E.

23. The cause of these difficultiesis fundamentallythat not enough was provided for transport development in the Second Plan. There was no excess capacity to provide flexibility if one area of the economy surpassed another in pursuit of its planned goals. The Third Plan has set a target of 87.5 million tons of coal to be hauled by the railways, representing production of 97 million tons less l10< for mine consumption and other transport. Unless the crisis in coal transpcrt is tackled directly and solved, there will be little economic benefit realized from an increase in coal production.

III. THE FRAhEMORL O0 GOVERNKEi;!TCONITROL

A. Control Authorities

24. In one way or another the government has controlled the prices of coal, the level of production,the distribution,the import of equipment, the methods of mining and the location of mines. The Industrial - 7 -

Policy Resolution of 1956 de-claredcoal to be a basic industry in whicjh the future developmentwas to be the exclusive responsibilityof the state. The result has been the entry of the government into coal mining on a large scale, and strict control and suppressionof the private industry. The industry has consideredfor some years that it was living on borrowed time and would eventually be nationalized. In these circumstancesit is not surprising to find that the industry has done little to modernize or to equip its mines to leep pace with the rising demand.

25. Coal production is the responsibilityof the ivanistryof Steel, 11inesand Fuel. This ministry has a Secretary for Steel and another 1or Nines and Fuel. The latter is concernedwith the production,distribou- tion and conservationof the coal resourcesof the country. He exercises this authority through two principal agencies--theCoal Controller,whose responsibilityis production and distribution,and the Coal Board, which is responsiblefor conservation. In practice these functions tend to overlap, and the present Cod1 Controller is also Chairman of the Coal 3oard.

26. The Coal Controller's functiorn in respect of distribution has been described in Annex B. It will be recalled that no coal can be moved anywhere in the country without his sanction, and that he allocates the availableproduction among consumers according to a systeriof relative priorities. He also has the authority to screen applicationsfor licenses to import capital equipment and to arrange for the acquisitionof land. His function is viewed as one of assistingthe coal industry to meet the notion's demands.

27. The Coal Board has complete control over the methods of miiniing fro-a the standpoint of conservation. It has the authority to set ceilings on production. Its permit is required for every opening or reopening of a mine or a seam, and in the case of coking coal, for the closirg of a mine or seam. It prescribes the methods by Thich seams may be worked in order to assure that coal is not wasted or lost through accident or lire. Its approval is required for all cases of depillaringwhere sand stowing is not undertaken (see para. 11), and it has the power to order conpu.sory stowing. Cne of its major activitiesis the payrnentof subsidiesto producers for the cost of sand stowfingand it also makes loans for the construction of stowing equipment. In addition it is charged with quality control throurh its administrationof the systeiLof coal grading.

28. IMinesafety comes under ancther ministry-thtt of Labor and Employment. The respolnsibilityhere lies with the Chief Inspectorof Mines, who has an elaborate organization witl, authority to prescribe in detail working conditions, types of safety equipment,etc. (This pertains to safety of miners as distinct fromi safety of the rninewhich is the responsibility of the Coal Board. The two functions overlap, for exanple the Chief Inspectorcan order sand stowing to protect the miners.) The Chief Inspector,although responsibleto the labor ministry, - g -

is an ex officio member of the Coal Board. Exercise of his function can have drastic consequenceson a producer, as -whena mine is declared gassy and must forthwith replace all of its equipment with far more expensive flameproof gear. The Chief Inspector is also responsiblefor the examination and certificationof skilled workers.

29. The Labor lixnistry in addition is in charge of miners' welfare through the Coal Iviiners Welfare Commissioner, who can require construction of housing, pithead baths and other amenities and who has a fund to assist in their cost. There is also a Coal Miners ProvidentFund Commissioner,who collects funds from workers, employers and government for the payment of workmen's compensationand pensions.

30. A third ministry with important influence on the coal industry is that of Railways. Although it has no direct control over the industry its policies have an irmiediateeffect on it, since the railways consume about a third of total coal production and transport nearly all of it. Some decisions have direct effect on individual collieries,as for example the decision to constructor not construct a particular siding.

31. The Ministry of Finance and Ministry of Cormerce and Industry also affect the industrJy through the Joint Chief Controller of Imiports and Exports. All major items of coal mining equipment have to be imported and all imports require a license issued by the Chief Controller.

32. Within or supplementary to this framework is a large number of agencies and committees with particular responsibilities. There is, for example, the Coal Council of India, an advisory body composed of govern- rent and industry representatives for the purpose of aiding in coordin- ation of various activitiesunder the Five-Year Plans. It has committees on i,ssessmentof Resources, Production and Preparation,Requirements and Utilization,Transportation, Fuel Efficiency,etc. The last of these is highly important, since it has reco=aendedstandards for the kind and grade of coal which each type of consumer should be allowed to use; these standards have been approved by the ministry and are being enforced by the Coal Controller. (The committee has also recorimrended that all station- ary boilers in the country be equipped to burn lower grades of coal, although no action on this proposal has yet been taken.)

33. Other agencies have functionswith respect to schools, research, geological surveys, etc. The control structureis elaborate end complicated, and many of the responsibilitiesof the various bodies overlap. Subject to these conciderations,however, the majority of the regulatoiy duties are expeditiouslyand competentlydischarged, and the present Coal Controllerhas given careful study to means of simplifying and rational- izing the system. Some of the functionsexercised are beneficial to the industry and the country. Others are the inevitable result of an economy of many shortages. Some have doctrinalorigins and have served greatiy to hinder the growth of production. -9-

B. QualitkrControl

34. Quality control is maintained by a system of grading standards set by the Nlinistryof Steel, 1I"inesand Fuel and administeredby the Coal Board. High moisture coals (3% and above) are graded according to ash plus moisture content; low moisture coals are graded on ash content alone. The grades for the Bengal-Bihar fields are as follows (high moisture coal is found in the Raniganj seams and the high moisture classi- fication applies to all coals from those seams);

Low INoistureCoal: High MioistureCoal: Ash Content Ash plus lCoisture Content Grade

Up to 15%J Up to 17-5%O Selected Grade A 15 - 17,, 17.51%- 19% Selected Grade D 17 - 20%, 19' - 24% Grade I 20 - 24%,o 24'%- 28e' Grade II 24 - 28%c' - Grade III-A 28 - 35% - Grade III-B

Low moisture coal above 35% ash or high moisture coal above 28%'ash plus moisture carnot be sold as coal. Coal in the outlying fields is graded on a slightly different scale. Coking coal is all coal determinedto be such by the Coal 3oard.

35. Grades are assigned to collieries by the Coal D,oard after taking samples of both seams and dispatches. Thereafter, subject to periodic checks, all coal produced by that colliery from that seam is deemed to bae of the assigned grade. In fact it varies widely, since the quality of coal in a given seam is not at all constant. The variation in quality from what they have ordered (and paid for) is one of the primary complaints of the steel companies as well as most other ccnsumers.

36. India formerly graded its coal according to volatility, ash and moisture content and calorificvalue. However, after price controls were adopted the system was simuplifiedto its present form. It would be more in accord with generally accepted practice for the coal to be sold on the basis of its physical and chemical properties as before, and for paVrmentto be made on the basis of the coal actually shipped. These questions are being studied by the government.

C. Price Control

37. Price control was institutedin 1944, followiingtwo decades of chaotic price movements. Controls have alwayrs taken the form of fixed, rather than ceiling prices. Yo attempt was made at first to assess operating costs. In 1957 a Coal Price Fevision Committee was appointed to examine the cost of coal productionfor the Second Plan and to recommend appropriate charges in the price structure. The conmmitteemade a study of operating costs and profits, and reconmendeda nelrschedule of prices wl:ich wrere intended to provide the industry with what was deemed - l0 -

to be reasonablereturn. These prices were promulgatedin 1959 and have been increasedto compensatefor wage increases a number of times since then, in addition to which a premium has been granted for the highest quality coking coal. The committee also recomended that subsidies be paid to those mines where difficult conditionsresulted in higher than average costs.

38. The reasoning underlying the existing price system and the method by which the prices were determinedby the Coal Price Revision Committee is summarizedin Annex F. The price schedule for the Bengal- Bihar fields as presently in effect is given in Anrex G.

39. Indian coal prices are anmongthe lowest in the world. The price of the highest grade coking coal (the equivalentof approxim!ately $5.00 per ton) compares favorablywith the U.S. price (approximately $7.50 per ton) and is substantiallybelow European prices.

40. There is no doubt that the general level of Indian coal prices has beeritoo low. Although the entire future of the country depends on coal, the industry that must produce it has been unable to attract new capital or properly to equip and maintain its properties. A major injusticeof the system is the small spread allowed between the lowest quality coal end the highest. This at present is cnly a little over Rs.6 per ton. The disproportionis magnified for a distant consumer by the freight charge; a buyer in Bombay pays about Rs.43 for Grade III-3 and only about Rs.49 for Selected Grade A. Hlighgrade coal is what India is short of, and such a price structuredoes nothing to encourage either the production of high grades or the investment in equipment to permit the consumption of lower grades.

41. Paradoxically,it is the largest companies which have the lowktest profit margins. This occurs because they mine the better quality coal which is found at depth and generally accompanied by gassiness, while the small hand-labor operations are in shallow seams with no unusual difficulties. Against the average selling price of about Rs.21 per ton, some larger mines may have a profit of Rs.l while the small mines often make Rs.7. Thus production of plentiful, low-grade coal is made highly profitable while many of the producers of the scarce, high-grade coal which is vital to the economy are barely getting by. It is in recog- nition of this fact that a Rs.l premium has recently been allowed for the highest grade coklng coal and subsidieshave been proposed for difficult mining conditions. It is clear that rather than holding all prices up or down, controls are keeping them together, and that if they were removed a substantiallygreater spread would open up between the various grades.

42. In addition to the fixed price, the consumer must pay a number of cesses, or excise duties on coal purchased,to finance particular government activities. The cesses are collected by the railways along with the freight charges and remitted to the government. The present cesses are as follows: - 11 -

Cess per ton

Coal IKinesSafety and ConservationFund is. 1.68 Coal hines Welfare Commissioner 0.50 Chief Inspectorof Ilines 0.02

The first of these accrues to the Coal Board and has been used in the past principallyto pay the subsidy for sand stowing. The amount includes recent increases of Rs.0.25 to be used for payment of the new subsidies for difficult mining and Rs.0.80 for subsidizing the sea movement of coal (see Annex i). The second cess is used for constructionof housing and other workers' amenities,wnile the third is for rescue stations.

43. The sand subsidy has been paid for many years as a measure of conservationand safety. In the year ended MIarch31, 1960 there were 6.9 million tons of sand stowed for which the Board paid assistance in excess of Rs015 million. The Board also makes loans for the erection of stowing plants, aids mines in the undertakingof protective works to contain fires and engages in other activitieswhich have been no-ted elsewhere. Its sole revenue aside from interest and miscellaneousre- ceipts is the cess. Assistancewas formerly given for 75','- 85")of the actual cost of stowing subject to a ceiling figure per ton of material stowed. In September 1959, this was raised to l00§Zof the actual cost; the ceiling was last raised in February 1960 and nowistands at 7is.2.50 per ton of sand. The industry proposed as one of its conditions for increasing production by 17 million tons in the Third Plan that the ceiling be raised to 's.3.25,pointing out that mines distant from rivers were not fully compensated. The governmenthas agreed in prin- ciple that assistance should be increased and the Coal Board has offered an alternative proposal whereby payments would be based ornthe distance transported. The final form of the increase has not yet been decided.

44. Although the Coal Price Revision Committee had reconnended subsidies for difficult mining, little was done about it until t'hle setting of the private industry's Third Plan goal. Prompt implementa- tion of these subsidies had become one oL the incustry's conditions for agreeing to be responsiblefor a 17 million ton increase, and in Novem- ber 1960 the ministry announced a schedule of payments whichl would be made for one or more of the following adverse factors:

Gassy nature of mines Depth of shafts Inclination of seams Pumping cost Thinness of seEms High transportation cost from pithead to railhead

The schedule of payments is given in Annex H. A Special Assistance Committee was created to advise the Coal board as to the merits of ap- plLcationsfor subsidy, and all proposals approved b5ythe Doard were to -12 -

oe submitted to the central government for approval. While this last requirement was objected to by the industry,which felt that the Coal Board should be empowered to approve payments itself, the level of payments was considered adequate until such time as the results can be evaluated.

45. Thus the price system has become one in which prices are controlled ostensiblyto protect the consumer,while levies are made against all consumers to subsidizethose mines which are the principalvictims of the low prices. Yet surprisingly,this cumberscme structureis actually preferred by the industry, and in putting the question to a large number of operators not one was found who desired the elimination of price controls. They have bitter memories of the thirties and seem apprehensive of any return to competitionin the industry. They point out that government regulation would prevent layoffs of personnel and the closing of inefficient mines if the price should fall. They much prefer to have a guaranteed price and market as they do today, and ask only that they be subsidizedto the point where they can make an adequate profit. Host of the larger producersbelieve that the proposed subsidies will have a beneficial effect on their profit margins. It is indeed true that it would not require much of a subsidy to double the profit of a company making only RLs.1 per ton, but this hardly seems reason for satisfaction. The low profitabilityof the Indian coal industry in general should be cause for serious concern in a country so vitally dependent cn coal. A study by the Reserve 'ank of India showed an after-taxreturn on invested capital in the coal industry of 6.7,-in 1958--less thar.that of electric power generation and among the lowest of all industries in India. This should now improve, but the grant of subsidiesis ronethelessa complicatedand not very logical substitute for a general price increase.

D. Import Control

46. Import controls have been made necessary by the shortage of foreign exchange, and have had a drastic effect on the coal industry. Controls are administeredby the hlinistryof Commerce and Industry, which allocatesthe availableforeign exchange among the various industries accordingto their respectivepriorities in the current plan. Allotmentsare announced semi-annually. Applicationsfor each six months, allotment of exchange to the coal industry are screened by the Coal Controller,and those allowed by him are issued import licenses through the Chief Controllerof Imports and Exports. Licenses can be issued for actual users only, so that manufacturers'agents may not maintain stocks within the country. The Coal Controller denies applications for any equipraent that can be manufactLred within the country unless excess- ive delay can be shown, and allocates to the others accordingto his assessment of the various collieries' programs. The Chief Controller of Imports and Exports has a small contingencyfund that can be used in cases of emergenciessuch as breakdowns.

47. The exchange shortage has become acute in the last two years, as can be seen from the followirg figures of demand and allocationfor the private sector coal industry during the Second Plan (Rs. million): - 13 -

Years ended iviarch 31 Demand Allocation

1957

Spare parts 7.4 7.0 Capital equipment 10.5 10.0

1958

Spare parts 7.4 7.0 Capital equipment 9.4 9.0

1959

Spare parts 11.0 9.0 Capital equipment 20.0 17.5

1960

Spare parts 12.5 9.5 Capital equipment 25.0 11.0

1961

Spare parts 15.0 9.5 Capital equipment 25.0 13.2

48. A portion of the exchange provided in the last three years has come from tied credits from the United Kingdom, Germany and the United States. H;ostof the U.S. (Export-ImportBank) credit was surrendered to other industries since the U.S. is competitiveonly in heavy earth- moving equipment for open-castmines, which are not found to any great extent in the private sector. (The public sector, which does operate such mines, has used a large amount of this credit.)

49. The exchange shortage has severely inhibited coal output. A large amount of equipmentlies idle for want of spare parts and many machines are in use long after they should have been scrapped. There is no doubt that productionfrom existing facilities could be substantially increased- estimates in some mines range up to 20% - if a regular supply of spares and replacementswere available.

E. DistributionControl

50. Distributioncontrol has been discussed in detail in Annex E. This is an unusuL.llr coI-. 1 e:- oper tion ;-cessitteci .x the short-e both of coal and of transportfacilities. IThile it might be simpfiaed, there is little hope of relaxing this control so long as these shortages persist. In the meantime while consumersgo without, coal piles up at the pithead and production in many cases has to be curtailed. - 14 --

F, _ duction Control

51. It has been noted that exercise of the powers of the Chief Inspector of Mines can have an unintendedeffect on production. This has frequently happened. It has been urged that in carrying out his charge of miners' safety the Chief Inspector should have due regard to the possible detriment to output. There has now been set up a co- ordinating committeebetween the two ministries to deal with this problem.

52. For the purpose of conservation,the Coal Board is empowered to set production ceilings on each grade of coal. This control has not been enforced because of the shortage, and the ceiling in recent years has been set substantiallyabove the expected output. Once the demand for steel productionis fulfilled this power may well be invoked to prevent the production of coking coal which might be diverted to other industries.

53. Productioncontrol has, however, been very definitely applied through the power of the Coal Board to authorize the opening of new mines. The IndustrialPolicy Resolution of 1956 stated a general policy that the opening of new coal mines should be reserved for the state. The interpretationof this resolution has confined the private sector to the sinking of new shafts into areas already being worked. The private sector mines have leases on many good propertieswhich they have not been allowed to exploit. And since the public sector has the right to appropriateto itself any unworked areas, some of these propertieshave been lost.

54. Permissionto open new mines was set by the industry as one of the conditionsfor its undertakingto produce an additional 17 million tons. The governmenthas now agreed to permit new openings in non- contiguous areas upon a determinationthat the proposed production is necessary to reach the industry's target. The applicationsreceived thus far have been favorably considered,and the industry's plans for achieving the 17 million ton goal include about 4 million tons to come from new areas.

G. Summary of Proposed Changes in Control Polien

55. Since passage of the Industrial Policy Resolution of 1°56, events have necessitateda more pragmatic approach to the question of coal production. As recently as iqovember1959 debate took place in the Indimiparliamenton a resolutionto nationalizeall private sector mines, and fear of nationalizationis mentioned in the 1960 annual report of the Coal Board as one of the reasons for lagging coal production. Nevertheless the Second Plan record could not be disputed - the public sector had fallen 40% short of its target while the private sector, even under the most oppressive governmentregulation, had reached the goal assigned to it. The logic of a policy of curbing the development of the private coal industry and maintainingartifi- cially low 7rices during a time of serious shortages became steadily - :5 - more questionable. Elyr the time of formulationof the Third Plan it had become evident that revision of this policy was an urgent national necess- ity, and that the full participationof the private sector would be esser- tial if the Third Plan target was to have any hope of fulfillment.

56. Accordinglythe private industry was asked what increase in productionduring the Third Plan it would be able to achieve. In October and November of 1960 an accord was reached between the government and the private coal industry under which the industry agreed to undertake to increase its production by 17 million tons in return for a number of concessions by the government. The more important of those concessionshavre been mentioned; they include (i) an increase of 11ls.1 per ton for the highest quality cokii.gcoal, (ii) an increase in the subsidy for sand stowing, (iii) payment of subsidies for deep, difficult and gassy mining, and (iv) agreementto permit new openings in non-contiguousareas.

57. This agreementwas promptly attacked on the ground that it represented a retreat from socialistdoctrine. The governmenthas at- tempted to reconcile the new policy with past pronouncementsbut has riot succeeded in wholly allaying the fears of the private industry. However, in general the industrsy tends to view the agreement as evidence of a real clhange of heart by the government and at least a reprieve for its private status.

58. From another point of view the agreement does not go nearly far enough. These "concessions", far from getting the government out of the private coal inclustry,are getting it deeper in. Instead of an elaborate system of price controls and subsidies,prices should be allowed to find their oum level; the demands of a free market would get the good quality coal out of difficultmines far more efficientlythan subsidies. If it is true that distributioncontrol would prevent free market bargaining (and this seemis so only to a limited degree), prices should at least be revised substantially upward for the higher grades. 1`oreover, in an econormy that is crying for coal, private owners should be given general permission to open new mines wherever they wish, rather than only in such areas as the government approves. And finally the multiplicityof authoritieswith overlappingfunctions could be simplif'ied.The nation vitally needs a healthy and vigorous coal industry- one which can earn enough to cover the increasingly higher costs both of operations and of new and replacement eouipment, with enough left over to permit expansion and developmentof new coal- bearing areas. - 16 -

IV. THE STRUCTUREAiD ORGANIZATIONOF THESI2ZDIAN COAL IiIDiSTRY

A. The Public Sector

59. The public sector in the coal industry consists of the National Coal Development Corporation Ltd. (NCDC),a central government body under the jurisdiction of the hilnistry of Steel, iviines and Fue, and the Singareni colliery in the state of Andhra Pradesh. The latter is owned in majority by the state government which took it over from private interests. (The central government also owns the Neyveli Lignite Corporation Ltd., which is exploiting lignite deposits in lviadras.)

60. The NCDC was formed on October 1, 1956 to take over 13 collieries which had formerly belonged to the railways. Production of these collieries in the year ended March 31, 1956 had been 2.9 million tons. Singareni in that year produced 1.5 million tons. By hIarch31, 1961 there were 20 NCDC collieriesand annual public sector production,including Singareni,had increased to approximately10 million tons. The public sector now employs about 40,000 people.

61. The quality of the public sector coal is generally lower than that of the private sector,which over the years had acquiredmost of the good coal reserves in the country. The NICDChas had very little coking coal, but recently acquired a group of excellentcoking coal collieries from the private sector.

62. At larch 31, 1960 the NCDC had paid-up capital of Rs.139 million and debt of Rs.213 million, all of which had been provided by the government. (The corporationis aiming toward a 50/50 debt/equityratio and further funds are being provided in the form of shares until such ratio is reached.) Net propertieswere carried at Rs.190 million and sales for the year were Rs.96 million. The accounts showed a small profit, although they are not kept according to commercial principles and operations were actually conducted at a loss.

63. One of the principal problems of the hCDC is the geographical location of its mines. The original collieries were spread throughout the country according to the needs of the railroads. The new ones have been opened in jungle areas where no housing, water or transport facilities existed. Transportationand coimnunicationsbetween headquartersat Ranchi and the operatingunits are exceedinglydifficult, and there is at preser,t a lack of effective central direction.

64. Most of the new mines opened oy the i1CDCare large open-cast operations. The Second Plan target for the NCDC was 13.5 million tons, of which 8.3 million tons were to come from open-castmines. These mines are highly mechanized and employ the largest and most modern earth-moving equipment. The NCDC maintains that the difficultiesof removing over- burden and opening mines in virgin areas is what has caused production to fall short of the target, but that this preparatory work has now been largely firished and that they now have the capacity to produce at the target rate. - 17 -

65. how soon this level will actually be achieved is another m2tter. While output can temporarily be pushed to an impressivelevel (it actually reached the target rate in March 1961, although it has fallen sharply since then), the NCDC suffers from a serious shortage of trained personnel. Maintenance of the new equipment is entirely inadequate,and mines are being improperly exploitedbecause of lack of experienced guidance and long-range planning. The organizationhas been criticizedby a number of authoritiesfor having all its top men centered at Ranchi and exer- cising no effective supervisionat the mines. The NCDC has in addition most of the problems of the private industry; its advanced mechanization makes spare parts even more of a difficulty and rail transport is equally deficient.

66. The NCDC is empowered to acquire unworked coal leases from holders in the private sector. This is done in two steps. The first step is the acquisitionof prospectingrights, which are granted by the government on the recommendationof the Coal Controller after a hearing in which the private holder may object. Within three years thereafter the NcDr must ask for mining rights or abandon the property. Where mining rights are granted, the NCDC then must compensatethe holder. The first btep has been taken in respect of most of the land which the NrDC will require in the Third Plan, although if prospecting shows some of these areas to be not worth exploiting it will have to acquire others. The second step has been taken in only a few cases, as the NCDCwishes to evoid paying compensationuntil its developmentplans are ready to be implemented.

67. The Second Plan envisagedthe constructionof four central public sector washeries for coking coal. Only one was completed,that at Kargali in the Bokaro field, which is owned by the NCDC and has a rated capacity (not yet reached) of 2 million tons of raw coal per year. There is in addition a washery at the Durgapur steel plant with a rated capacity of 1,2 million tons. The other washeries are as much as two years behind schedule,and their delay is a primary cause of present difficultiesin steel production. (The steel plants have received coal with an ash content as high as 30%). Wlasheriesin operationand under constructionare as follows: - 18 -

IŽOperation

Private Sector Capacity (rillion tons raw coal)

West Bokaro 0.6 Jamadoba 1.4 Lodna 0.2 Nowrazabad 0.5

Public Sector

Kargali 2.0 Durgapur 1.2 Total in Operation

Under Construction

Public Sector

Dugda 2.4 Bhojudih , 1.2 Pathardih 2.0 Total under Construction 5.6

TOTAL 11.5

* not yet started

68. All of the public sector washeries eccept XKargali are owrned by the Hindustan Steel Corporation which is the owmer of the nublic sector steel plants. These washeries buy or will buy raw coal from public as well as private collieries at the controlledprice and deliver washed coal to the steel plants. The NCDC washerrywashes its owm coal and presently sells it to the HindustanSteel Corporationat the controlled price plus Rs. 5 per ton, which has recently been fixed as the price for washed coal.

B. The Private Sector

69. The private sector consists of 830 collieries,ranging from small, individually-ovmed units to those forming parts of large complexes of companies controlled by leading managing agencies. The diversity of these enterprisesis striking. On the one hand there are large, well- managed operationsmining at 2,000-footdepths with mechanized equipment; on the other there are small proprietaryundertEkings with little more than an open-pit mined by hand labor. A breakdown of collieriesaccord- ing to output is as follows: - 19 -

Annual Produntion (tons) No. of Collieries

Below 5,000 239 5,000 - lO0000 93

10,000 - 20,000 119 20,000 - 30,000 94 30,000 - 50,000 82 50,000 - 100,000 95 100,000 - 200,000 82 200,000 - 300,000 12 Above 300,000 14

70. The very small mines account for a substantialshare of India's total production. There is a great deal of waste and duplication in these small operations with adjoining shafts extending into the same strata, and efforts have been made by the governmentto induce them to combine. Com- pulsory amalgamationwas once proposed, and this proposal may be revived in order to increase production,to get at deeper seams and locked-up deposits and to facilitate distribution. Most of these small undertakings are sole proprietorships, partnerships or private limited companies (cor- porations with less than 50 shareholders).

71, At the other end of the spectrum are major companies owning a large number of collieriesand usually directed by a managing agency. These agencies are enga,ed by the shareholdersto furnish the management of the company, and they may have a controllinginterest in the company. Most of them have considerableresources and operate in many different industries. The four largest agencies manage companiesthat account for about 25% of total private sector coal production. The private sector also includes captive mines owned by the two private steel companies. There are 55 coal companies listed on the Calcutta stock exchange.

72. The financial situation of private sector companies varies widely. As was pointed out in the discussion of price control, it is generally the smaller companieswhich have the widest profit margins. This comes about because it is necessaryto go into quite deep and difficultmining to get at the good quality coal, while the price differential between good and bad coal is inadequateto reward properly those who do it. The result is that the large companies whose books are audi-ted and made public show very thin margins, while the proprietary companies which hardly keep books at all are doing exceedingly well.

73. The private industry employs some 350,000 people. It has most of the best mining engineers, and, although it could use more technically skilled people, has not thus far experienced a serious enough shortage to affect production. Its operations are mostly underground although it does have - 20 -

some open-castmines. Operatiois are heavily concentratedin the Jharia and Raniganj fields; of the 330 collieries,356 are in the former and 290 ii: the 'Latter. There are 192 collieries producing coking coal. The private sector has all of the experience that exists in the countnr with the hazards of deep mining. As has been noted, it has the oest quality coal and nearly all of the coking coal production in the country.

74. The private companiescooperate closely through four industry federations. The heads of these federationscomprise a bod- known as the Joint Working Committee, wbich meets regularly to consider and deal with problems of the industry. It is the Joint Working Committee which has planned and coordinated the industry's Third Plan expansion program.

75. lining rights are embodied in leases granted by the various state governments. The older leases have terms as long as 999 years, with royalty payments ranging up to about Rs. 1 per ton. The private sector in general has adequate reserves under leases with satisfactory terms. Leases may still be granted but the states must now consult the Coal Controller for his recommendationsbefore doing so. Surface rights are acquired from the owmer, either directly or through a statutory-pro- ceeding. The right of the NCDC to acquire unworked properties has been discussed above.

76. Being largely undergroundthe private sector is heavily dependent on sand for stowing. Those collieriesthat could afford it have constructedropeways to bring the sand from rivers to their mines. This requires acquisitionof sand rights from the government as well as rights- of-way along the route. Some collierieswithout ropeways have purchased sand from others which have them. There were 85 collieries carrying out stowing during the year ended Mlarch31, 1960; they stowed a total of 6.9 million tons of sand in exchange for a yield of 3.7 million tons of coal. Assistance toward the cost of this activity was paid by the Coal Board as discussed previously. The governmlentnow proposes to construct seven central ropeways to supply said to the private sector (see below).

77. The private sector also includes four coal washeries, of which two are owned by or affiliated with a private steel company and one by a cement company (see para. 67). The private coal industry did not build washeries because the governmenthad not set a price for washed coal. Private washeries are now forbidden without permission and the governmnent is undertaking construction of a number of washeries in the public sector. - 21 -

V. THE THIRD PIAN EXPANSIONPROGRAM

A. The Public Sector

78. The Third Plan production target for the public sector is an increase of 20 million tons over the Second Plan target, or 25.4 million tons (240,) over the actual level at the end of the Second Plan. Singareni is expected to account for 3 million tons with the balance coming from the NCDC. The 17 million tons which the NCDC expects to add in the Third Plan to its as yet unrealized Second Plan target breaks down as follows (million tons):

Coking coal 6 Blendable coal 1 High grade non-cokin3 coal 8 Low grade coal 2

79. The new NCDCproduction is tentatively phased as followls

rears endin; ilarch3' 1962 1.0 1963 3.2 1964 5.5 1965 11.0 1966 17.0

It can be seen that if this schedule is delayed by even one year, additional productionwill fall 6 million tons, or 350, short of the target. Further- more, only 1 million tons of the increase will come from existing collier- ie2; the rest will have to come from new areas, many of which have not yet been fully prospected. The plans include several deep mines in the Raniganj and Jharia fields, which will present extreme gassiness and other difficulties not now found in NCDC operations. It is highly optirmisticto count on production frormthese mines in less than five years. All in all, the pos- sibility of the public sector achieving its Third Plan target may be re- garded as remote.

8O. The cost of the total public sector program (includingexpendi- tures to complete Second Plan projects) is estimated at Rs.1,240million, of which Rs. 570 million would be in foreign exchange. No arrangements have yet been made for acquiringthe foreign exchange, although offers of technical assistancein carrying out the program have been made by a number of countries. - 22 -

81. It is also proposed to build seven central sand ropeways in the Raniganj and Jharia fields for the benefit of private sector collieries. This is being done in the national interest to facilitate ar.increase in coal production and because it would be uneconomic for a great number of small collieries to build ropeways themselves. Approximately50 collieries are expected to benefit from the proposed ropeways, and much coal presently standing in the form of pillars for want of sand will be released. The ropeways will be built by the government and owmed by the Coal Board which will operate them at its own expense with consequentreductions in the stowing subsidy paid to those collierieswhich use theme The avail- ability of sand is decreasing because of dams being built upstream, and some of the private ropeways are operating at reduced capacity because they cannot get enough sand. However, the Coal Board believes it has ad- vantageous sand-gathering locations and will be able to operate the rope- wyas at capacity. Six of the seven routes have been surveyredand are shown in Annex I; the seventh is still being stuudied.All are scheduled for cori- pletion by March 1964. It is estimated that the ropeways will cost in the neighborhoodof Rs,160 million, of which about half would be foreign exchange. No estimate of operating costs has been made, and no arrangements have y7316en L.d8efor external f-°iancial assistance.

82. The extent to which private coal operators depend on the real- ization of this plan varies. However, in general it would not greatly impede the realizationof the private sector's Third Plan target if the ropeways failed to materialize. It would have a serious effect on the industry's ability to increase, or even maintain, production in the Fourth Plan.

83. Aside from the backlog of washing capacity resulting from the delay in Second Plan construction,it is estimated tha,tthe Third Plan will require additional coking coal washing capacity estimated at nearly 14 million tons per year. Part of this will be obtained by expanding the existing plants or those being constructed,and part by the construction of new washeries including two at Kathara, two in the Karanpura coalfield end one in the Jharia field to wash coal from the deep mine proposed to be developed there. It is probable that the NCDC will own those washeries that wash its owm coal while the Hindustan Steel Corporationwill continue to own those that purchase from private collieries, Studies have not yet been completed, but the total cost of this expansion is estimated at Rs.200-250 million of which about Rs.100-120million would be foreign exchange. No firm arrangements have been made for securing the foreign exchange. There are also proposals to wash non-coking coal for use boy the railways, but no definite plans have been made.

84. The new washeries are required for the public sector,whose coal is of generallyinferior quality to that of the private sector. Delay in their constructionwould cause serious problems for the steel industry out would not be of primary concern for the private coal industry. -23 -

B The Private Sector

85. The privatesector target of an additional17 milliontons was reached as the result of actual detailed projects put forth by individual 2ollieries. These projects were evaluatedby a committee consistingof gnoiernment and private mining officials. The resulting expansion program contemplates the participation of 173 collieries owned by 115 different companies.They representall segmentsof the industry,from the smallest to the largest. The participatingcollieries, although only about 20% in number,represent about half of today'sprivate sector production. Sparesand replacementswill be requiredfor these as well as a large number of the companies which are not expanding in order to maintain present output.

86. The increase (afterallowing for a small reduction in the output of some collieries) breaks down as to type of coal as follows (million tons):

Cokingcoal 4.9 Blendablecoal 1.1 Non-cokingcoal 10.8

16.8

Is is expectedto be achievedby the followingmethods (million tons):

Expansion of existing mines 10.8 New sinkings in existing mines 2.2 Developmentof non-contiguousareas 3-8

16.8

All of the private sector increase will be in the three highest grades. 87. The figureof 17 milliontons representsa fair targetthat on technicalgrounds can be reasonablysure of achievement.It is possible that the industrycould do more,and it may be called upon to do so if the public sector falls short. An analysis of the participating companies is given in Annex J. The IISCO (Martin Burn Ltd.) project included at the time of preparation of the industry's program for about one million tons has been subsequently enlarged and is being considered for separate financing by the Bank. The projects for the remaining 16 million tons form the basis for the proposed Bank loan. 88. Industryrepresentatives have compileda list of goodsfor the proposedloan. The list is a theoreticallist of the equipmentwhich would be requiredfor the productionof an additional16 milliontons of coal; it has not been builtup from the requirementsof individualmines. The Bank'sconsultants have examinedit and found it to be reasonable, althoughbecause of its globalmethod of preparationit can be considered only a rough estimateof actualrequirements. - 24-

89. The estimated cost of the 16 million ton expansion is about Rs.555 million ($117 million), of which the foreign exchange component is about half. Expenditures have been estimated under the following four headings:

1. Expenditures for the achievement of 5 million tons additionalproduction from new mines.

2. Expendituresfor the achievementof 11 milliontons additional productionfrom expansion of existing mines.

3. Expendituresfor new equipmentrequired to maintain presentoutput in existingmines. 4. Expendituresfor spare partsfor equipmentnot to be replaced(items 1, 2 and 3 containtheir own provisionsfor spareparts).

90. Total costsare estimatedat Rs.250million for the first category, Rs.165million for the second,Rs.122.5 millionfor the third and Rs.17.5million for the fourth. The foreignexchange expenditures under theseheadings and theirapproximate phasing by years is as follows (Rs.million):

Year ($ Mil. Categorv 1 2 3 L 5 Total EAuiv.) 1 3.5 21.4 25.3 22.3 19.7 92.2 (19.4) 2 34.4 31.2 9.0 7.6 0.4 82.6 (17.3) 3 35.9 29.4 15.2 8.0 6.0 94.5 (19.8) 4 5.9 5-4 2.3 2.3 1.6 17.5 (3.7) 79.7 87.4 51.8 40.2 27.7 286.8 (60.2)

($ million equivalent)(16.7) (18.4) (10.9) (8.4) (5.8) (60.2) Figuresunder category2 are based on the industry'sassumption that 20% of the proposedincrease could be achievedwithout additional equipment if railwaydispatches were regularand if adequatesand stowingfacilities were provided;the equipmentis thereforecalculated for additionaloutput o0V8.8 million tons. 91. These expendituresare based on presentquotations and on long experiencein determiningthe type of equipmentrequired. The capital cost of new mines has been estIn&tedat Rs.50 per ton of annualoutput, which is about the median between the least expensive and the most expensive mines in the industry's experience. Expansion has been estimated on the basis of past experience, and comes to aboutRs.19 per additionalton. - 25 -

Foreignexchange represents about 37% of the total cost of new mines, 51% of that of expansion, 77% of that of replacementsand 100% of that of spare parts.

92. To the extentpractical, orders will be placedon the basis of internationalcompetitive bidding. Much of the existingequipment is of Britishmanufacture and since standardizationis one elementthat makes for efficiencyin miningit is likelythat in the categoriesof expansion and replacement equipment this practice will be continued. (There is a proiect under way in the public sector to manufacture mining machinery, but it is not expected to be in production in time to offer locally- produced equipment during the Third Plan.)

93. The expenditures for new mines (category 1) are of a nature that they must be carried through to completion before any production is realized. New mines take several years to open, and no projects in category 1 should be undertaken unless funds are assured for their completion. The other three categories are continuing programs in which the benefits will be realized as the money is spent, and hence could be undertaken in segments of less than the full five years.

94. The new mines would involve 32 collieries owned by 27 companies, and would result in production increasesranging from 20,000 to 800,000 tons per year. These and other elements of the program will need to be more thoroughly checked as the individual projects come up for review. It is possible that the program could be completed in shorter time. Pefore the engineering can be checked further it will be necessary to translatethis over-all industry estimate into a list of the actual requirementsof individualmines.

VI. PROPOSEDBANK LOAN

A. The Need for Finance

95. The Joint W4orkingCommittee of the private mining industry has estimated that the industry can finance the entire Rs.555 million expansion program through internally-generated funds and local borrowings. The following sources are proposed:

Rs. million

Internal funds 380 Public issues lCO Financial institutions 20 Other 55 - 26 -

96. The figure for internal funds was arrived at on a tonnage bass from a study of the past cash generation of a number of leading companies. Because tthese companies are generally less profitable than the smaller ones the Committee considers the figure to be conservative. It takes account of the subsidieswhich are to be paid, and assumes that dividends will be held in general to present levels.

97. Although the industry has long demanded it, Indian law provides no depletion allowance for extract'veindustries. However, it has a liberal depreciationnolicy under which, in effect, companiesare allowed to recover 120% (formerly125%) of the cost of assets free of tax. The extra 20%, termed DevelopmentRebate, must be taken in the first year the property is put into use, and 75, of it must be reinvested and cannot be paid out as dividends. Since investmentsin the new program will sub- stantiallyexceed those of the past, cash generationfrom this source should be higher than has been realized in earlier years.

98. A careful.,company-by-company study has been made by one of the leading stockbjrokers in Calcutta which tends to substantiatethat about Ps.120 million could be raised from new issues and financial insti- Lutions. After many years during which the industry was unable to raise new capital, there have been three public issues of coal companies in the past year and the government's new policy toward the private industry Has benefited coal shares. Mlost of the new funds would have to be in the form of capital stock. The recently nationalized Life InsuranceCorpor- ation, ordinarily a large buyer of debt securities,requires an asset test that few coal companies could meet. Some of the larger companies would qualify for ICICI loans, while other possibilities are the Indus- trial Finance Corporationof India and the various state financing agencies. However, the Industrial Finance Corporationis restricted to public limited companies, which most of the medium and smaller coal companies are not, and the state agencies have too low a loan ceiling to be of much help.

99. The item "Other" rep-resentsprimarily family savings thought to be available to the small pronrietaryoperators. There is, of course, no way to verify this assumption.

100. This method of estimatingindustry-wide requirements is similar to that used for the list of equipme'it, and contains the same potential for inaccuracy whe4 reduced to indiv_tualrequirements. It is difficult to avoid the conclusion hbat the avai_a-bility of funds has been over- stated and that the industry as a whole may fall somewhat short of being able to provide the full amount. After- being prevented from expanding for so long, the industry is quite understandably anxious to stand on its own feet and not be forced to turn to the go-7ernment for the funds with which to undertake the expansion it is now being allowed. This Lay well have colored the viewpoint of the industry in assessing its &vailable resources. - 27 -

101. Even if this estimate were accurate for the industry as a who]e, the incidence of need would not, of course, fall equally on every unit ,.ithli5nit. Thus some companies will undoubtedly need finance for a ccn- siderableportion of their expansion while others will need none at all. It would be reasonableto conclude that in general the largest companies will be able to find public or institutionalfinancing while the smallest companies are so profitable as not to need financing, and that the need will be felt primarily by the group in the middle.

102. The governmenthas stated that it would be willing to arrange for finance for those companies which actually need it. The reluctance of thieindustry to use such facilitieswould probably cause a company to make every effort to raise funds from its own sources before turning to the government. It would be important that any loans that were made be made at market rates to avoid giving better treatment to the weaker companies than the strong ones were able to obtain on their own.

B. The Purnose and Amount of the Pronosed Loan

103. Even if all of the companiesparticipating in the private sector expansionprogram needed loans it would be obviously impractical for the Bank to lend directly to them. In fact, many of the participants are not in need of loans at all. What is needed for the private sector to carry out this program is access to foreign exchange. It has been noted that the governmentis critically short of foreign exchange,and it is clear that the vitally needed expansion of coal production cannot even be begun unless it is found.

104. It has therefore been proposed that the Bank make a loan to the G-overnment of India, with the proceeds earmarked for the expansion of the private sector coal industry. The loan would add nothing directly to the financial resources of units within the industry, but would make possible the undertakingof their expansionwith their own resources. Those companies that were unable to raise the full amounts required would be given assistance in obtaining the balance by the government. it is not possible tc determine in advance how many companies or how mnuchmoney this would involve.

105. The loan would be justified because of the urgency of expanding Indian coal production and the probability that the quantities required cannot be produced except by a substantial expansion of the private sector. The loan might, moreover, provide further practical demonstration of the vital role that private industry can play in an expanding Indian economy.

106. Since the Indian Government did not wish to incur an obligatioln of $60 million at this time the Bank agreed the loan would be for $35 million, of which $30 million would be for the costs of the first two years in categories2, 3 and 4, while $5 million would be available for new miles in category 1 but only in cases where it was sufficient to complete them. The Government of India has undertaken to make available the full foreign exchange requirements of the remainder of the program, i.e. $25 million equivalent, and to assure that the entire program is carried out on schedule. The loan would have a grace period of 5 years and a final maturity of 15 years.

C. Administration of the Loan

107. If such a loan is made, it is propesed that it be administered as follows:

i) A screeningcommittee would be created by the industry, consistingof private sector mining engineers familiar with each of the various types of operations involved, financial analysts and governmentrepresentatives includingthe Coal Controller.

ii) This committeewould call on the private coal industry for import license applicationsfor capital equipment for the entire five-year program to be submitted by a given date. Applications for spare parts and replacements would be called for covering a period of six months or one year.

iii) The committeewould screen these applicationsfor technicaland financial soundness. The committeets work would be subject to general review and approval by the Bank. The applicationsthat were approved would form the basis for disbursementsunder the Bank loan.

iv) Import licenses would be issued for the full list of capital goods and the immediaterequirements for spares and replacements.

v) (a) Those operators having no need for finance would order the equipment and pay for it as at present. Payment would be made through their banks, which would use the licenses as authority to pay out foreign exchange.

(b) Those operators requiring finance would endeavor to obtain it from public issues, financial institutions, etc. Failing that they would apply to the governmentfor financial assistance,after which they would follow the procedure in v(a). Otherwise they would drop out of the program. - 29 -

v±) The bankswould forward the invoicesto the Finance Ministry. If they were foundin orderthey would be forwardedperiodically to the IndiaSupply Ilission in Washington which would present them to the Bank for reimbursement.

Substantiallythis procedureis now beingfollowed for generalpurpose industrialcredits to Indiafrom DLF and the Export-ImportBank. The governmentis not reimbursedfor abouttwo monthsbut is prepared to accept these arrangements. The only new machinery that such a system wouldrequire is the screeningcommittee. The committeewould not be able to give fully detailed consideration to each of the 173 expansion projectsbut would have to concentrateon the importantones and develop its proceduresfor the othersas the work progressed.Detailed screening wouldnot be feasible for replacement equipment and spare parts. The screening committee after its initial function would meet periodically to consider revisions in capital programs and current requirements for spares and replacements.

L08. As at present, licenseswould be for specificgoods with approximatecosts stated, and couldbe amendedif the goods ultimately cost more. The licensecould by its termsrequire evidence of procure- rent on a competitivebasis. No methodof poolingorders appears feasible,but therewould be advantagesto permittingmanufacturerst representativesto maintainstocks of spareparts. At presentonly ultimateusers can get importlicenses, so that each must endeavorto carrya full stockof spares. If thesewere carried by the manufacturer the total stock required would be much smaller. It is even possible that manufacturers' representatives could be induced to carry stocks on consignment, so that no foreign exchange would need to be paid out until an item was actually required.

109. The interest of the Bank in screening the projects put forth by the companies is twofold--to assure to the extent practical that each project is technically sound and that the company has or has access to the financial resources to complete it. Without this there can be no assurance that the loan will contribute to an increase in coal production. The Bank's consultants have reconmended that priority be given to those properties in the best physical condition and with the best management, and that the most urgently neededspare parts and replacements be provided while the expansion plans are being given more careful scrutiny.

110. Because most of the companies that will benefit from the loan will not be borrowers,it will be impossibleto establishthe kind of contractualsafeguards by whichthe Bank normallyassures that its funds are properlyused. However,the importlicenses would be issuedon terms gilvinginspection rights and rightsto cancelthe unusedportion if pro- gressis not satisfactory.Progress reports would be submittedby each company to the Governmentwhich would summarizethem for perirdic sub- mission to the Bank. The decision of which Governmentagency or department should carry out this work will be made when Bank representatives visit Calcutta in August this year. - 30 -

311. The Bank through its continuing contact with representatives of government and industry would be in a position to make studies and reccmmendationsfrom time to time with respect to such problems as possible further changes in control policy, consolidationof agencies concerned with coal regulation,changes in the system of coal grading, alternativemeans of transport, amalgamation of small companies, etc. The common goal of government, industry and the Bank in such endeavors would be the increasing of the coal supplies of the country.

VII. CONCLTJSIONSAID RBCO~MMNDATIOVS

'12. There can be no doubt of the economic benefit of an expansion of the coal industry. The continued industrialdevelopment of the country is entirely dependent on it.

11)3. The governmenthas relaxed to a limited degree its strict controls on the private sector and assigned it a substantialprogram of expansion in the Third Five-YearPlan.

114. The modificationsin control policy do not go as far as they might have, and the vital need for coal in the country might best be served by a further relaxation. The system of price controls and sub- eidies has little economic justification. Nevertheless the concessions nade to private industry should enable it to expand its prodactionby the targeted amount, i.e. 17 million tons, and the industry has accepted them as the basis for its undertaking the program.

115. The most immediate problem facing the coal industry is transport. Unless this can be solved in such a manner as to keep pace with the coal program there would be little accomplishedby an expansion of coal capacity. The Bank will have an opportunityto see that the transportation of coal is provided for when it negotiatesa further loan for the Indian Railways.

116. The expansionprogram as laid out by the private industry involves the participationof over a hundred companies. The program is soundly conceived but is in only a preliminarystage of preparation and has not yet been translatedinto the particularrequirements of individualunits.

117. The financialposition of units within the industryvaries widely. It is probable that a majority of them could find the funds required to carry out their programs, and the governrLent has stated that At would be willing to assist those which could not. Because most of the einterprisesinvolved desire only access to foreign exchange rather than loans, Bank-assistance would have to take the form of a loan to the governmentwith the foreignexchange earmarkedfor purchase by individualcompanies. The funds would add nothing to t'e total resources available for investmentin the private coal industry. - 31 -

118. Individualexpansion projects would be screenedby a committee of industryand government technicians. The Bank would then review the work of the committee and approve projects for participation in the program. Spare parts and replacements would be processed in a less detailedmanner. Becausemost of the companiesinvolved will not be borrowers,they will have no contractualobligation to carry out their projectsproperly. However,the governmentwould retainthe right to cancelany undrawnforeign exchange. Progressreports would be submitted to the governmentwhich would summarizethem for submissionto the Bank.

119. The total foreignexchange cost of the expansion(excluding the IISCOproject being consideredfor separatefinancing by the Bank),is estimatedat $60.2million. Of this, ;19.4million wouId be for the costs of 5 milliontons additionalproduction from new mines, $'17.3 million for 11 millionadditional tons from existingmines, 19.8 millionfor the replacementof equipmentrequired to maintainpresent production and kŽ3.7 million for spare parts for existing equipment. The proposed loan of 035 miD- lion equivalent would cover the first two years requirementsfor the last three of these categories ($30 million) and furnish $5 million toward the cost of the new mines. However, no new mines would be undertaken with Bank fundsunless such funds coveredtheir entirecost. 120. The governmenthas agreedto furnishthe additionalforeign exchangenecessary to completethe five-yearprogram and to assurethat it is carriedout on schedule. It has furtheragreed to arrangefor financefor those companieswhich need it as well as to see to it that the centralropeways are completedon schedule. Finally,the government has stated to the Bank that it has no intention of nationalizing the coal mines and that it will review the price structure from time to time and make such adjustments as are necessary to enable the industry to fulfill its part in the Third Plan and beyond.

121. In viewr of the foregoing assurances the program would be a suitable basis for a loan of i:35 million equivalent for a term of 15 years includinga grace periodof five years. The borrowerwould be the Governmentof India,which would assignthe foreignexchange for purchaseby the privatecoal industryfor expenditureon approvedprojects.

July 28, 1961 ANNEX A INDIA:CONSUMPTION OF ENERGY BY SOURCE,1950-1975 (MILLIONTONS OF COALEQUIVALENT) 500 500

400 400

NUCLEAR

TOTAL 30030

PETROLEUM

200 200

I00 100

1950 1955 1960 1965 1970 1975

IBRD-EconomicStaff (R)1869 AINNE B

DEI >iANDFOR COAL BY PRINCIPAL COi.S1-UPS (1'1illion tons)

Allocated Demand in Estimated Demand in Last Calendar 1960 Year of Third Plan

Railways 1.3 21.0

Steel 9.7 25.0

Electric Power 6.6 12.0

Brick T'ilns 3.5 4.5

Cement 3.3 5.0

Textiles 3.2 3.3

Domestic Coke and Small Industry 2.7 7.1

Shipping and Export 1.9 3.5

Chemicals 1.1 2.0

Foundries 10 2.2

Paper 0.9 2.0

Refractoriesand Glass o.6 2.1

All other 5.0 7^3

57.S 97.0 ANNEX C

P U N J A B .*

,/ *"'.."j ''.5S

/ '. . k~~~QELHI

( R A J A S T H A N

U T T A R PRADESH

. ~~~~~~~~~~~~RANIGAN/d SINGRAU ,

TAr A PAN G U J E R A T MADHYA Pnch WEST PENCH VAALLEY V BISRAMPUP ~~~~~~~~~~~~~~~~~~CalcuttaBENGALo KORBA'- RAMPR- \ ~ ~ ~ ~~~~~~~ ...... % .....> ..

A.LCHFR

( C8A#DA.~CHANDAOR :"' ' O~~~~~~~~~~~~~R I S SAS A X

| M A H A R A S H T R A ::9,y ,' Bombay

SIN GAREN I At

V.ANDHRA PRADESH

INDIA M Y 5 0 R E''-'. IN A \.. ... \MAIN COAL DEPOSITS

%''::.. .. :' Madras \0 ' ..- /Maincoal deposits NEYVELI - State boundaries L ign~t Deposit \y . M A D R A S 0 50 100 IS0 200 250 300

MILES

MAY 1961 IBRD-830 61111DIII~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~AEI

, ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. ,.....,_.,

.. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~J,M/SH FO UR_J

RAMGARf UN OLI"""PUR

INDIA l// \P4 = o s DETAIL OF t /*>+ 5Y BENGAL-BIHAR COAL FIELDS X

* STIAP:L PLAN-TS ' > AJAMSHEDPUR - MABRADSAUGE PSIUWAINE .g*4.-,0*

RURKELA

MAT 1961 MIE5fC-/X BAA 12TREX E Page 1

PROBLENSIN THE TRANSPORTOF COAL

Directional Movements

The essentialproblem with which planners must cope is that coal production is concentratedin one small area, yet is required from one end of the country to the other. It is complicatedby the fact that most other industrialproduction is centered in the same area. This means an enormous concentrationof rail traffic in the northeastern corner of the country. A railway map on which have been located the principal coal fields appears at the end of this annex.

The railways have developed "rationalmovement rules" under which the country is divided into four sections to assure the shipment of coal by the most direct route from the fields to other parts of the country. A very large portion of total shipments moves via Moghalsarai Junction (see map), through which all coal destined for northern and ,esternIndia must pass. This has become a prime bottleneck,complicated recently by a substantialincrease in productionfrom the Karanpurafield for which it is the only outlet. The lack of flexibilityis clearly demonstratedhere; total productionfrom the Bengal-Biharfields is below the forecasts,but an excess of productionfrom one field within that area has contributedto a serious problem. Pithead stocks have been increasing very rapidly in the Karanpura field while a substantialunsatis- fied demand for coal is building up in the north and west.

The railways themselvesdo not bear the bulk of the blame for this situation. They have, in fact, exceeded their Second Plan target in ton-miles carried. Variationsin the traffic pattern from that contemplated by the plan forced the railways to haul over much longer distances than had been anticipated. The shortfall of public sector coal productionfrom fields in central India, for example, has resulted in large quantities of coal having to be shipped through INoghalsarai from the private sector mines in the Jharia and Raniganj fields far to the east instead of the more logical movement from fields nearer by. The fact that substantialpublic sector production has recently been achieved in Karanpura has only compoundedthe problem.

The railways have also been adversely affected by the failure of the public sector coal washeries to be completed on schedule. It was thought that coal would be loaded from bunkers at the washeries,thus permittingmovement in block trainloadsto the steel plants. When the washeries did not materialize,the cars that were to have shuttled between the washeries and the steel mills had to be used for transporting coal directly from the widely dispersedmines.

However the essential cause of the transport deficiency,as found by the recent Bank railway mission, has been a lack of funds to carry out the program that was planned for them. They were destined to fall short from the beginning,and coal was only one of the many areas of the economy that had to share the burden. AM= E Page 2

AlternativeMethods of Movement

Virtually all of the coal in India is transported by rail. Coal represents about 40% of all goods traffic in the country and some 70% of that of the Eastern Railway which serves the principal coal fields.

About 3 million tons of coal a year is presentlybeing transported by road. Although there may be some scope for increasingthe amount of road haulage over short distances, the cost is generally higher than that by rail. Furthermore, considerable improvement will be required before the roads have the capacity to handle a greater volume of traffic. Roads thus do not offer any immediate solution to the coal transport problem.

Despite the long Indian coast line, movements by sea are neg- ligible, amounting at present to about 1 million tons. There is almost no inland barge transport,and coastal shipping,which is restricted to Indian flag ships, is considerablymore expensive than the railways for a similar distance. The charge for coal delivered in Bombay by ship is nearly double that shipped by rail. This disparity results not only because of higher rates but because the coal must first be moved 150 - 200 miles from the coalfields to Calcutta by rail, loaded into ships, transported by sea, unloaded at the destination, loaded again into railway cars and carried to the consumer. A typical rail freight bill per ton of coal in Bombay is Rs.25.5; the correspondingcharge for sea freight plus rail freight to Calcutta and port charges would be Rs.46. The governmentat present is planning means of equalizing these charges, by (i) securing a reduction in the sea freight rate; (ii) requiring the railways to give a concession on charges for coal destined for sea movement; (iii) revising the railway rate structureto put more of the burden on long hauls, and (iv) subsidizingcoal shipped by sea through means of a new cess on all coal shipped by rail. If successful,these measures should increase shipments by sea and take some of the burden of shipments to western India away from Moghalsarai.

There is, however,another limiting factor on sea movement, namely the capacity of the ports. Calcutta,where all seaborne coal shipments originate,cannot take a 10,000-tonvessel fully loaded, and the practice is to sail with about 8,000 tons. Also it is a river port with consequent problems of congestion. There are proposals to build a satelliteport to handle bulk commoditiesfurther down the river, but even if this were done there would still be undercapacityat all of the possible ports of destination. It does not seem likely, therefore, that in the foreseeablefuture coal movements by sea will exceed 2 - 24 million tons a year.

Studies have been undertaken on movement of coal by pipeline and by monorail locomotive,but the practical applicationof such schemes seems a long way off. ANNEXE Page 3

Equipment

The undersupply of railway cars has been referred to in the main report. To what extent it results from an actual shortage of equipment and to what extent from unsatisfactory traffic management is beyond the scope of this study. However, there can be little doubt that the railways could use a great many more cars for the carryingof coal and there does appearto have been some underplanningin the provisionsmade for railway rolling stock.

Of the 97 million ton Third Plan coal production target, roughly 72.5 milliontons is to come from the Bengal-Biharfields and 24.5 million tons from outlyingfields. Deducting10% for consumptionat mines and transport by other means, the railways' ThirdPlan targetfor coal movementhas been set at 87.5 milliontons. This will require11,800 cars per day as againstthe approximately6,000 being furnished now, of wihich9,000 would be for the Bengal-Biharfields and 2,800for outlying fields. Movements to the steel plants alone will take over 4,000cars per day as comparedwith about1,400 today. (Thesefigures take account of the doublemovement of cars required to deliver raw coal to the washerlesand washedcoal to the steelplants.) The railways'plans for the ThirdPlan reflectthese requirements fully, but the Bank'srailway missiondoes not believethat adequatefunds have been providedto carry them out. There is alreadya backlogto be made up and unlessthese plans actuallymaterialize there will be a far greatercoal crisisthan the countryhas thus far experienced.

An equallyvexing problem for the coal producersis the type of cars that are provided. A largeproportion (often 50%) are enclosed box cars which take a much longertime to load and unloadand cannotbe loadeddirectly from screeningplants. These cars are neededfor grain movementsin season,and are used for coal shipmentat other times. The producerswould preferto receiveall open cars which can be loadedmechan- icallyrather than by hand. The railwaysfor their part have embarked on a programof building55-ton open cars ratherthan the 20-toncars now used throughoutthe country. Many producerscomplain about this becausethe large cars will not fit their loadingequipment. This is an area where a littlemore flexibilityon the part of the coal industry seemsindicated. The closedcars cannotbe helpedwhen there is a shortageof all cars,and means of loadingthem mechanicallyhave been devisedelsewhere. Moreover,it is clear that the long-rangesolution of the transportproblem lies with the large cars,and the mines should be preparedin their own interestto adapt their eauipmentand practices for them. Rollingstock is not the only equipmentproblem. Insufficient line capacityand a lack of adequatemarshalling yards are other causes of the irregularityof supplyof cars to the mines,and factorswhich ANNEX E Page 4 must be dealt with if the proposed coal production is to move properly. Finally, the railways have been electrifying portions of the system; this will greatly improve the situation but has caused delays during progress of construction.

Other Problems

Various means of speeding turnaround have been adopted or proposed by the railways, but most of them have aroused the opposition of coal producers or consumers. One such plan would be loading 7 days a week instead of the normal 6. This is now being done under pressure of the coal stocks and the railways wish to make it permanent. However, the producerspoint out that this requires them to maintain a work force on Sunday who by law must be paid overtime even if they are given another day off during the week. They maintain that if this is to be continued the controlledprice of coal should be raised to compensate for the increased cost. No doubt it should, as Sunday loading is imperative in the present state of transport capacity.

Another recent measure is a requirementthat cars must be loaded in 5 hours (this was formerly 8 - 10 hours) and can be delivered at any time of day or night. This not only creates problems of labor supply for the producers but causes quality to deteriorateat those mines where shale is picked out by hand.

There is also a pronounced seasonal factor in both railway operations and coal production. The summer months are slack months for the railways and they are able to supply a much greater number of cars at that time for the movement of bulk commodities. Unfortunatelythis coincides with the period of low productionin coal mines due to monsoon rains and absenteeismof workers during crop-sowingtime. Pithead stocks thus accumulate during the winter and are cleared during the summer.

The producers say that they can cope with these problems provided they know what to expect. Their principal complaint is that they dc not know in advance when cars will arrive, how many there will be or of what type. Of all the many problems of coal transport, this would seem to be one of the easiest to solve, yet insufficientnotice from the railways is an importantobstacle to planning for production and movement.

Another proposal is the establishmentof central loading points in the coal fields, and dumps in the main consuming centers, with coal being transportedto and from these points by truck or ropeway. This would allow rail movrementto take place in entire trainloads (55 - 75 cars) and eliminate the spotting and picking up of small numbers of cars at each colliery. It would also allow coal allocations to be decentralized and transferred from the Coal Controller's office to the state governments in which the dumps were located. Some unloading dumps are now being built, although the plan is being resisted by consumers because the re- handling will mean higher prices. It would seem that a higher price would be fully justifiedto get coal moving into the hands of consumers when they needed it. ANNIEXE B-ge 5 Alloreation

The shortageof transportcoupled with the generalshortage of coal has givenrise to an exceptionallycomplicated system of priorities and allocations. This distributioncontrol is the principalfunction of the Coal Controller,without whose sanctionno coal movementof any size may take place. The outlinesof the systemare as follows:

1) The consumersubmits his requirementsto his Sponsoring Authority. All consumers are divided into Consumer Groups, now numbering 33, which are industry-wide classificationssuch as steelcompanies, cement companies,power plants,etc. Each grouphas a Sponsor- ing Authority, usually a ministry. Each of the 33 Consumer Groups has a relative priority.

2) Each SponsoringAuthority screens the applications and forwardsthe total requirementsof its groupto the Coal Controller,in most cases annually.

3) The Coal Controllerconsiders the requirementsof all 33 groups,allocates the available supply among the groupsaccording to their respectivepriorities and advisesthe SponsoringAuthorities of their allotments. 4) Each SponsoringAuthority allocates the coal allotted to it among all the consumers in its group. The consumers are issued Permits stating their allotments. 5) The consumernow negotiateswith the collieryof his choice. He obtainsa ConsentLetter from the colliery statingthat the collieryis preparedto sell the re- quiredamount and grade of coal. 6) The consumer brings his Permit and his Consent Letter to the Coal Controllerand obtainsa Sanction. This is an authorityto move coal,and it statesthe names of the buyer and seller,the amountand grade,etc. It may be annual,seasonal, quarterly, monthly or otherwise.

7) The consumer delivers his Sanction to the colliery, which issues an Indent to the railway Coal Allotment office. An Indentis a requisitionfor cars. It must be issued 72 hours in advance of requirements. AIIEX E Page 6

8) The railway Coal Allotment office (there are four) pre- pares a summary of all Indents received and forwards it daily to the Coal Controller. The summary is grouped according to various railway operational factors, such as direction, junctions, pilots, etc.

9) Meanwhile the head offices of the railways submit a daily Offering to the loal Controller,showing the number of cars available within each of the "rational movement" zones.

10) The Coal Controllermatches the Indents with the Offering and makes the final Allotment of cars to individual collieries, communicatingit to the railway Coal Allotment Offices.

11) The Coal Allotment Office now orders the pilots to place the cars on the proper sidings.

In October 1960, a variation of this scheme was introduced in the Bengal-Bihararea whereby the Offering was standardizedat 5,030 cars per day and the Allotment (Step No. 10) was made in bulk for 10-day periods, with the actual day-to-day allotmentbeing done by the railways. This experiment did not work because the railways cannot supply 5,030 cars per day (they are able to furnish about 4,800) and because they do not have the monthly reports of stocks from all consumers which the Coal Controller gets and therefore cannot tell who is in greatest need. Another experimentalplan was begun in June 1961 which it is yet too early to evaluate.

The foregoing should serve to illustrate the complexity of Indias problem in being short both of coal and of the means to transport it. While it might be possible to simplify the system, some system of allocationswill have to be used as long as these conditions prevail. '2S OtL

4 2

0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ w C) ~ ~ ~ ~ ~ / ,t CD.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~j~ ~ ~~ ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -0 ol~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 ' ANqNEXF Page 1

CONSIDEPRATIONSIN THE DETER1INATIONOF COAL PRICES

Price control w-asinstituted as the result of severalyears of violent swings in prices and productionlevels. A note on the history of these years will illustrate these conditions. In 1922 the average price was Rs.8 per ton. Production rose while the price declined until 1931 when production also fell off, and by 1933 output was below that of 1918. lianymines closed, and those that remained open engaged in "slaughter" mining, i.e. exploiting the best quality coal and wasting the lower grades. By 1935 the average price had reached a record low of Rs.2.5 per ton and the fight for survival had resulted in a state of overproduction. From 1937 to 1942 rising internal as well as export demand graduallybrought the price up to Rs.4.5 per ton. However, from 1942 to 1944 there was a steep drop in production as the war prevented imports of replacement parts and reduced the labor supply. The price shot up to Rs.115 in 1943 and controls were imposed the following year.

Controls have always talkenthe form of fixed, rather than ceiling prices. The initial prices for sized coal ranged from Rs.13.3 per ton for Selected Grade A coal to Rs10.3 for Grade III-B -- a differential of only Rs.3 per ton between the best quality coal and the worst. IToattempt was made at that time to assess operating costs. Prices were raised or lowered for various reasons in the ensuing years, and in 1957 a Coal Price Revision Committee was appointed to examine the cost of coal production for the Second Plan and to recommend appropriate changes in the price structure. This committee circulated a questionnaire among a group of collieries deemed to be representative of the industry and received replies from 35 collieries in the Bengal- Bihar fields, representing19% of those fields' total production. (Eight of the collieries studied were in the public sector.) The committee discovered wide variations in costs which they were unable to explain, and consequentlyaddressed themselves to an assessmentof "normal" levels for each item of cost, or in the words of their report, to determine "the cost of production as it should be" in reasonably- managed collierieswith no special difficulties. This led to a find- ing that the "normal" costs (taken on what was found to be a reasonable output per man per shift of .4 ton) should be as folloxis:

Cost per ton

Wages Rs. 9.55 Labor amiienities,etc. 1.10 Salaries and administration 1.70 Stores 1.75 Power, royalties, and other miscellaneous 1.85 Depreciation 1.70 Brokerage and comrmission 0.25

17.90 ANPTX F Page 2

To this was added what was deemed to be a sufficientprofit to permit payment of taxes and a reasonable dividend, which was calculated at Rs.1.75 per ton. Nothing was included in this iter for reinvestment, as it was stated that the provision for depreciationshould be adequate for that.

This brought the figure that should be realized from sales to cover costs and profit to Rs.19.65 per ton. The committeeapplied this to a weighted average of output of the various grades and recommendeda new schedule of prices. These prices were promulgated in 1959 and have been adjusted for wage increases since then. Also, a premium 'has been granted for the highest quality coking coal. The price schedule for the Bengal-Bihar fields as presently in effect is given in Annex G.

The foregoing has been set forth in some detail to show the reasoning that has gone into the present schedule of prices. The committee recognized that there were mines with special conditionswhere the "normal" costs could not be achieved, and as to them it recommended a systen of subsidies. It also recommended an increase in the existing subsidy for sand stowing. Finally it recommendedthat prices be adjusted for changes in wage costs, but, in the interest of "stability", not for at least 5 years for changes in other costs.

The government is somewhat ambiguous in stating its reasons fcr controllingprices, pointing out on the one hand that costs to the consumer must be kept down and on the other that marginal operators must be kept in business. This dual purpose accounts for the setting of fixed, rather than ceiling prices, with the intent that the system will do all things for all parties concerned. If it is argued that the consumer should benefit if the industry is able to sell below the fixed price, it is replied that some operators would be driven out of business and that low prices in the past led to "slaughter" mining and loss of some of the nation's coal resources. The key to the present policy is seen in the following statement from the report of The Coal Price Revision Committee, referring to an earlier decision of the government: "After due examination of the proposal the Government decided that the stability which the industry had achieved through fixed prices should not be disturbed by converting them into ceiling prices."

This objective of "stability" was endorsed by the comittee, which also pointed out that as long as control of distribution was necessitated by inadequate transport capacity, any freedom given to the consumer by free market pricing would be largely illusory. The committee did, however, propose that the fixed price of the lowest grades of coal (III-A and III-B) be converted experimentally into a ceil-ng price. Little has been learned from this experiment since the shortage of all coal has thus far kep- the price of these grades from falling much below the ceiling. ANMU E Page 3

khatever the validity of the reasoning behind the system, the result couildhardly have been more injurious to the private coal industry. The 1960 edition of the Investors India Year-Book refers to a study of 45 listed coal companiesrepresenting a fair cross-sectionof the industry, which showed that only 15 had declared dividends, 25 had operated without substantial profits and 10 had worked at a loss. For many years no coal company was able to raise funds in the public market, and coal shares were among the most depressed of all equities. The return on invested capital was close to the lowest of all industries in the country.

The governmenthas now adopted the new approach referred to elsewhere in this report. It has implementedthe Coal Price Revision Committee'srecommendations for subsidiesfor difficult mining, agreed to raise the subsidy for sand stowing and put a Rs.l per ton premium on high-grade coking coal. These are steps in the right direction, but are still makeshift means of effectinga price increase. The vigor of the private coal industry can only be assured by a substantial upward revision of prices, and it would be preferableif controls were eliminated a'together. ANTUX G

COAL PRICES IN WEST BENGALA-ND BIHAR

The followinao are the prices at which coal may be sold by colliery owners in Ijest !$engal and Bilhar as fixed by the Government of India in Notifications dated Nyvember 21, 1960 and June 1, 1961:

Price per ton of 2,240 pounds Run-of-mine, Dust Coal Steam Coal, Rubble and Slack Coal and Smithy Nuts Non-cokin&R Coal

Se:LectedGrade A Rs. 21.80 Rs. 22.87 Selected C-radeB 20.80 21.87 Grade I 19.93 20.99 Grade II l8.80 19.87 Grade III-A Not exceedingRs. 17.68 Not exceeding Rs. J8.68 Grade III-B Not exceedingRs. 16.49 Not exceeding Rs. 17.49

Coking Coal

Selected Grade A Rs. 21.99 Rs. 23.O5 Selected Grade B 20.99 22.05 Grade I 20.12 21.18 Grade II 18.99 .20.O5

In addition to the price given above for coking coal, colliery owners may be paid the further am.ount specified below:

In the case of Selected Grade A

1) if the ash content is less than 14pj - Rs. 1 per ton over the price of Selected Grade A

ii) if the ash content is 14% or more but less than 1405%' - Rs.0.50 per ton over the price of Selected Grade A

In the case of Selected Grade B

if the ash content exceeds 15% but is less than 165/3 - Rs.0.50 per ton over the price of Selected Grrde B

In the case of Grade I

if the ash content exceeds 175o but is less than 18'O - Rs.0.50 per ton over the price of Grade I

The Notificationcontains an equivalent schedule of prices per metric tonne of 1,000 kilograms. Prices are slightly differentfor production from other states. Prices are also prescribed for the sale of colke, The prices are exclusiveof cesses and sales taxes. 1_.pjTZr H Page 1

SUBSIDIES FOR DIFFICULT IFII7G COiDITIClS

The following is taken from an order of the Coal Board dated November 26, 1960:

Rate of assistance per ton of coal Coking and blendabie coal used for metal- Non-coking lurvical purposes coal … ------Rupees ------(a) Gassv nature of coal mires

(Subjectto it being established that additionalexpenditure has to be in- curred by collieriesunder this head.) 0.80 0.60

(b) Depth of shafts

No assistancewill be admissiblein the case of verticel shafts of less than 500 ft. (152.4 metres) in depth. In respect of vertical shafts which are more than 500 ft. (152.4 metres) irndepth, assistcace shall be admissible for each 100 ft. (30.5 metres) of depth or part thereof over the first 500 ft. (152.4 metres) at 0.06 0.04

No assistanceshall be granted in cases where the true gradient of the seam is less than 1 in 3. For seams with 1 in 3 or steeper true gradients,assistance shall be admissibleat 0.24 0.18

(d) Pumoing Cost

No assistanceshall be granted in cases in which the cost of pumping is less than Rs. 1 per ton (Rs. 0.98 per metric tonne) of coal raised.

i) where the cost of pumping exceeds Rs. 1 per ton (Rs. 0.98 per metric tor-ne)but does not exceed Rs. 2 per ton (17is.1.97 per metric tonne) of coal raised, assistanceshall be admissibleat 0.12 0.10 ii) wherp pumping cost exceeds Rs. 2 per ton (GRs.1.97 per metric tonine)of coal raised, assistanceshall be admissibleat 0.25 0.20 ANEEX H Page 2

Note; The expression tpuLpingcost' vill include such items of expenditure as may be determined bv-the Coal 0oard (e,g. power consumption,col consumption in boilers, depreciation,etc.) but will not include expenditure on de- watering of accumulated water or on water consumed in stowinr operations.

(e) Thinness of seems ho assistanceshall be admissiblewJhere a seam is thicker thar 5 ft. (1.524 retres). i) in case o2 seams of thic'Lnessex- ceeding 3 ft. 6 in. but less than 5' (i.e. exceeding1.067 metres but less than 1.524 metres) assistance will be ami ssible at 0.60 0.50 1i) in case of seams of thicknessequal to or lesL than 3' 6" (equal to or less than 1.067 metres) assistance will be adnmissibleat 1.20 1.00

(f) High transportationcost from pithead to railhead

Assistanceshall be granted only in cases wihere coal is despatched b-y rail and the distaice between the pithead and the nearest available loadin- point is 3 miles (4.83 kilometers) or more. In such cases assistanceshall be granted at a rate not exceeding Rls.0.10 per ton per mile or part thereof (Rs. 0.06 per metric tonne per kilo- meter or part thereof) in respect of the distance in excess of the first 3 miles (4.83 kilometres).

The scheme of subsidy mentioned above shall not be applicable to collieriesin iissamand Andhra Pradesh. In respect of collieries in the other coal fields, assistanceshall be admissibleonly to those collieries which produce coal of the Selected grades and Grade I, except in the case of high transportation cost from pithead to railhead, in respect of which assistancewill be admissible,subject to eligibility,irrespect- ive of the grade of coal. ATNNLXH Page 3

The following principles shall govern the consideration and disposal of each case for the grant of subsidy,viz:

i) It should be establishedbeyoad. reasonable doubt that the continuanceof production from a colliery to which assistance is proposed to be granted, is necessary in the national interest. The existence or absence of such national interest has to be examined and adjudged in each individual case on merits, with reference to the qua]ity of the coal produced, the level of production, the extent of workable reserves of coal in the mine, etc.

ii) It should be establishedthat applicant collieries are handi- capped by the existence of one or more of the adverse factors mentioned above and that the effect of these factors is such as to result in raising the cost of production.

iii) As the nature of the adverse factors entitling a colliery to apply for and obtain sublsidymay undergo chLnges from time to time consequenton changes in the working conditionsin the colliery, or due to other reasons, payment of assistance should, in each case and on each single occasion,be limited to a period of six months, and the continuarce of the subsidy for further periods should be only after a fresh exam,1ination of each case in the light of the changee if any, in tho cir- cumastances.For the same reason, and with a view to preventing over-payments,even though subsidymay be senctioned prospec- tivelyr,the actual payment of the amount of subsidy to individual collieriesshall be so regulated that, at no poirt of time shall any colliery be paid an amount in excess of what would be admissibleto it on the basis of the productionwhich would qualify for subsidy till that poinltof time.

iv) In case of the collieriesworking more than one seam/section of a seam subsidy shall be adLissible in respect of each seam/sectioni of a seam which qualifies for subsidy in respect of the adverse factors and at the rates prescrioed in the pre- cedinb paragraphs. In the case of collieries producing more than one grade of coal, the B3oardshall ensure that subesidy is recommendedand granted only in respect of such of the grades of coal as will actually qualify for subsidy. Necessa-y steps shall be talen by the Board, if necessary in collaborationwith the Coal Controller'sorganizaticn, to kee) a reliable and accurate record of the output of coal which will qualify for subsidy in each case. Iiopayment shall be mEde in any case except on the basis of the verified tonnage of coal as recorded by the Board's inspecting staff and accepted by the Board. Page 4

v) The Board shall cause collieriesto which subsidyis granted, to be inspected at such intervals and in such nianner as may be prescribed by them, to ensure that the conditions subject to which subsidy is granted are being fulfilled ty the collieries. In particular,in the case of mines which have been declared as being gassy, and which have been ordered by the Inspectorate of iines to undertake safety measures pertaining to gassiness, subsidy should be granted only if the colliery actually complies with the orders of that inspectorateto the satisfactionof that Inspectorateand of the Coal Board. vi) In cases where two or more of the adverse factors mentioned above co-exist, subsidy shall be admissiblein respect of each such adverse factor at the rates prescribed for it above. ANNEX I, Page I

LLI~~~~~~~~~~~~~~~~~I

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I \ ii,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C s~~~~~~I ANNEX 1, Page 2

l ~~~~INDIA

PROPOSED CENTRAL ROPEWAYS l RANIGANJ FIELD

Puo'pose topewoyt

| dl Proposed central dumps

Railways

l 2 * 5 0

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MAY 196 ANNEX J

ANALYSIS OF PRIVATE COMPANIES PARTICIPATING IN THIRD PLAN EXPANSION PROGRAM (Tons '000)

Increaseby Methodof Production No. of No. of Production (Years ended March 31) Increase by Type of Coal Expansion of New Sinkings in New Sinkin's in Aeency, Group or Company I! Companies Collieries 1961 1966 Increase Coking Blendable Non-Coking Existing Minies Existing Mines Proximate Areas

Andrew Yule & Co., Ltd. 5 21 4,389 5,723 1,334 138 797 399 770 204 360 Bird & Heilgers Co., Ltd. 4 9 2,234 3,361 1,127 662 68 397 1,031 96 MacNeill & Barry Ltd. 1 9 1,914 1,934 20 (17) 96 (59) (90) 110 Turner Morrison & Co. (P) Ltd. 1 5 1,796 2,137 341 159 126 56 341 - Karamchand Thapar & Bros. (P) Ltd. 8 13 1,639 3,232 1,593 1,079 - 514 1,593 The Tata Iron and Steel Co., Ltd. 1 1 1,322 1,480 158 158 - - 158 - Chanchani & Worah (P) Ltd. 6 7 945 1,783 838 101 - 737 754 84 Shaw Wallace & Co., Ltd. 2 6 927 1,956 1,029 - - 1,029 229 - 800 K. Worah & Co., Ltd. 7 7 471 1,362 891 (56) - 947 184 250 457 West Bokaro (P) Ltd. 1 1 425 605 180 180 - - 180 - The Samla Collieries Ltd. 1 4 421 660 239 - - 239 117 - 122 The Hindustan Inv1stment Corporation Ltd. 2 3 417 886 469 _ - 469 321 - 143 Jalan's Group 1 2 392 430 38 - - 38 38 - Jardine Henderson Ltd. 1 4 382 1,595 1,213 1,213 - - 1,213 - Martin Burn Ltd. - 1 3 304 1,326 1,022 1,022 - - 86 - 936 The Selected Satgram Collieries, Ltd. 1 1 271 342 71 - - 71 71 - N. M. Varma's Group 4 4 171 432 261 72 - 189 182 20 59 The New Selected Dhori Colliery Co. 1 1 153 483 330 - - 330 330 - The Parasea Collieries Ltd. 1 1 131 325 194 - - 194 (131) - 325 The Central Provinces Syhdicate (P) Ltd. 1 1 120 540 420 - - 420 420 - The Porascole Coal Co. 1 1 89 616 527 - - 52? 127 400 Ojha and Parkhani's Vishveswari Khandra 1 1 33 480 447 - - 447 447 - The New Churulia Coal Co., Ltd. 1 1 20 300. 2.30 - - 280 280 - The Kuardi Coal Co., Ltd. 1 1 - 550 550 - - 550 300 250 Kottadih Colliery 1 1 - 300 300 - - 300 - 300

Others 60 65 4,465 7,597 3,132 316 32 2,784 1,999 466 667

Total 1311 23,431 40,435 17,004 5,027 1,119 10,858 10,950 2,180 3,874 Less Reduction in Production of Other Collieries (158) (158) (158) _ _ (158)

Net Increase in Production 1 4 , 4.2869 1 8 1792 2180 3.874

1/ This tabulation lists individually in order of present production every group or company with a present production or a planned increase in excess of 250,000 tons per year; the remainder are grouped under "Others". j/ This project has been enlargeu _ubsequent to the preparation of the industry's program and is being financed separately by the Bank.