(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00096R000700860001-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 21
• Document Creation Date: January 12, 2017
• Document Release Date: May 26, 2011
• Sequence Number: 1
• Publication Date: September 1, 1987
• Content Type: REPORT

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Coal Industry Goals
Obstacles to Boosting Production
Inadequate Technology
Foreign Assistance Needed
Implications for India's Economy
Implications for the United States
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Scope Note Domestic energy supplies are a critical factor in India's economic develop-
ment. To the extent that India can meet its energy needs domestically,
more funds can be transferred from energy imports to finance the country's
economic modernization. This paper looks at India's ability to exploit coal,
its most abundant domestic fuel source, to meet the country's rapidly
increasing energy demand.
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Figure 1
India's Coalfield Organization
Boundary representation Is
not necessarily authoritative
Coalfield
Mine operating area limit
0 400 Kilometers
0 Bharat Coking Coal Ltd.
? Central Coalfields Ltd.
? Eastern Coalfields Ltd.
/0 North Eastern Coalfields
O Singareni Colleries Company Ltd.
0 Western Coalfields Ltd.
STAT
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Coal: India's Energy
Answer?
New Delhi's energy strategy for the next decade is to
meet much of the nation's energy demand by expand-
ing the use of coal. Because New Delhi expects little
increase in domestic oil production, Indian planners
are relying on coal to satisfy increased energy demand
and to stem growing oil imports.' According to the
government's most recent five-year economic plan,
which began in 1985, a 34-percent rise in coal de-
mand is projected by 1990, caused in large part by the
need to fuel thermal plants producing electricity. New
Delhi plans to meet this target by modernizing mine
operations and improving management.
With an annual output of 169 million metric tons
(mmt), India is the ninth-largest coal producer in the
world. India's coal reserves are estimated at 127
billion metric tons (bmt), according to an Indian
Government survey. About 17 bmt are proved re-
serves, and the remainder are indicated and inferred
reserves.2 About 80 percent of the reserves are non-
coking coal, and the balance is coking coal that is used
in steel production. The best quality coking coal
resources, located mostly in the Central coalfields, are
limited-an estimated 12 bmt. On the basis of the
government's demand projections, we expect India's
proved reserves of coking coal to last 50 years, while
noncoking reserves are expected to last 100 years.
Coal is a close second to oil as a source of India's
commercial energy consumption,' providing about 45
percent of the total. Oil provides 48 percent, and
Indicated coal reserves are estimates based partly on sample
analysis and partly on the geological conditions in the area. Inferred
coal reserves are estimates of unexplored extensions of demonstrat-
ed resources. The estimates are based largely on the geological
characteristics of the coalbed or region.
Commercial energy consumption includes fuel used by the indus-
try, transportation, and energy sectors. It excludes domestic uses
sulfur and ash content.
The quality of coal is graded. The lowest grade of
coal is lignite, followed in increasing order of hard-
ness by subbituminous coal, bituminous coal, and
anthracite. Coal is also broadly divided into two
commodity classes, metallurgical and steam. The
term metallurgical coal is often used synonymously
with the term coking coal to designate certain grades
of bituminous coal used to make coke, a high-carbon
solid fuel that is used in the manufacture of steel. To
be suitable for coking purposes, coal must have low
Steam or noncoking coals are burned in steam boilers
of electric utilities to generate electricity. Industrial
users, such as cement plants, also use steam coal for
thermal generation. Virtually any grade of coal may
qualify as steam coal, but lignite, due to its lower
heat value, is more expensive to transport and re-
quires larger, more expensive boilers.
ment energy officials.
electricity generated by hydroelectric and nuclear
facilities supplies 7 percent. Coal production, howev-
er, has lagged behind demand targets. In FY 1987,?
India produced 169 mmt of coal against a demand of
208 mmt, with the gap bridged by imports of coking
coal and by stockpile reductions, according to govern-
The coal industry has been almost entirely in the
public sector since 1972. In 1975 a government
holding company, Coal India, Ltd., was formed with
six wholly owned operating subsidiaries. The Coal
India group accounted for 90 percent of India's coal
production in FY 1986, according to press reports.
Seven percent is supplied by Singareni Collieries
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Figure 2
India: Total Coal Production
Underground and Open-pit, 1978-86
1978-86
Company, Ltd., a joint venture between the central
government and the Andhra Pradesh State govern-
ment. A few mines owned by the private Tata Iron
and Steel Company produced the remaining 3 per-
Million metric tons cent.
Underground
mining
Coal Industry Goals
New Delhi is relying on expanded coal output to reach
its target of 5-percent average annual GDP growth in
the five-year plan that ends in FY 1990. Coal demand
is projected to increase to some 250 mmt in FY 1990.
Power generation will account for an increasing share
of the total, and steady growth is anticipated in the
use of coal in the steel and cement industries. New
Delhi projects that coal will meet more than half of
India's commercial energy consumption in the next
Coal Production and Demand
Projections, 1981-90
Million metric tons decade. The remainder will come from petroleum,
-Production nuclear, and hydroelectric sources.
Coal Deliveries by Sector,
1976 and 1986
Steel 15.8 =~ Steel 15.6
a Data for fiscal period ending 31 March of the stated year.
Projected.
` Estimated,
ment.
To meet the demand for more coal while reducing
production costs, Coal India, Ltd., plans call for:
? Greater emphasis on mechanized surface mining.
? Modernization of underground mining operations.
? Greater reliance on indigenously produced equip-
New Delhi plans to continue to emphasize increased
production from surface mines, and its efforts to boost
output from these mines have met with some success.
The output from surface mines accounted for just over
half of total coal production last year compared with
only 28 percent in 1977, according to Indian Govern-
ment statistics. By 1990, New Delhi projects that
surface mining will account for more than 60 percent
of coal output.
New Delhi calculates that surface mining has a much
higher recovery rate at a considerably cheaper cost.
More than 90 percent of the coal in the bed can be
recovered from a surface mine compared with about
50 percent from an underground mine. It costs rough-
ly twice as much to mine a ton of coal underground as
from the surface, according to Indian Government
statistics.
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In contrast to surface mining, output from under-
ground mines has been stagnant. The production of 71
mmt in 1986 was only 4 percent higher than in 1981.
Some 55 percent of India's coal reserves, however, lies
in seams more than 1.5 meters in thickness at a depth
of 600 meters or more. As a result, officials of Coal
India, Ltd., which owns most of the underground
mines, are urging the use of modern equipment and
technology to increase the output of those mines.
new tech-
niques, particularly long-wall mining,' will boost pro-
duction from undergound mines by 10 percent annu-
ally by 1995.
India's coal sector faces many production constraints
including inadequate technology, power shortages,
low labor productivity, and underinvestment. Al-
though New Delhi has taken steps to overcome these
obstacles, progress has been slow.
' Long-wall mining machines shear coal from a long, straight coal
face (up to about 200 meters) by working back and forth across the
Inadequate Technology
New Delhi must adopt up-to-date technologies before
coal output can expand to meet the demands of the
next decade. According to Indian estimates, 95 per-
cent of underground mining is done by manual tech-
niques-hand-picking or drilling. Loading is also by
hand into baskets carried to small mine cars. Difficult
geological conditions in India's underground mines
(sandstone roofs, spontaneous combustion, thick
seams, and gasiness) probably will preclude the use of
some modern mining techniques and hamper modern-
ization efforts, according to the press. New Delhi
would prefer to use indigenously manufactured equip-
ment so as to reduce costs and to provide domestic
employment opportunities. Domestic firms, however,
have difficulty supplying high-quality equipment on
time due to resource allocation problems and trans-
portation bottlenecks.
Electrical Power Shortages
Frequent interruptions in the supply of electrical
power have been a major constraint on coal produc-
tion. At the same time, the lack of sufficient coal
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supplies has stymied the production of electricity. The
availability of electrical power in some mines in the
Bihar and Bengal areas has been boosted by the
construction of a few small power facilities, or captive
power plants, specifically for mine use. We believe,
however, that New Delhi will have to build additional
units-now under consideration-to provide sufficient
power to enable existing coal-mining equipment to
function at capacity. Some of the shortages could be
alleviated by the installation of high-voltage transmis-
sion lines. Twenty-two percent of India's electrical
energy transmitted through the country's grid is lost
because of inefficient equipment, according to Indian
statistics.
Low Labor Productivity
The growth in coal output has been slowed by inade-
quate training, overstaffing, rampant absenteeism,
and poor labor relations. India's coal sector productiv-
ity, which is measured in terms of output per manshift
(OMS), is low compared with other major coal-
producing countries. In West Germany, for example,
the OMS in surface mines averages more than 3.3
tons compared with 1.2 tons achieved by Coal India,
Ltd., in 1985, according to press reports. Even mines
that have a high degree of mechanization suffer low
output because the equipment is in use only about 15
percent of its desired operating time, according to US
Embassy reporting. Much of the equipment's exces-
sive downtime is caused by a combination of poor
planning and deployment and a lack of skilled opera-
tors and repairmen. We believe shortages of mining
engineers and technicians able to cope with more
sophisticated equipment have resulted from manage-
ment's failure to train or retain qualified personnel.
Insufficient Investment
The inability of the domestic coal industry to generate
sufficient investment capital will be a major obstacle
to financing the new technologies needed to increase
production. Because the government has kept prices
artificially low to satisfy consumers, the industry is
suffering severe financial losses and cannot meet its
operating costs, let alone generate investment capital.
Higher coal prices would promote more efficient coal
use and mobilize resources for investment, but we
believe popular opposition to higher prices will prevent
Law-and-order problems pervade the coal industry in
eastern India and continue to hamper New Delhi's
plans to increase production. According to US Em-
bassy reporting, the coal sector employs more than
700,000 workers, and the government estimates that
more than 25 percent are unproductive. Politicians
and party officials featherbed by pressing industry to
hire workers to develop voting blocs for themselves,
according to press reports. Links between local labor
unions and the political parties hamper efforts to deal
with overstaffing as well as other labor problems.
Local union officials, who are not always coal miners,
are sometimes obstinate because they seek promi-
nence that can further their political careers, accord-
ing to the press. For example, feuding among state-
level parties has started or prolonged strikes, and
disputes by Communist-led unions have sometimes
been initiated to embarrass New Delhi.
Strikes and slowdowns are a major obstacle to
improving mine production. Between 1983 and early
1986 the loss of potential production of coal was
more than 500,000 metric tons because of strikes,
according to government statistics. Rivalry among
small unions and competition for leadership within
larger ones encourage militant demands and make
minor disputes over wages, bonuses, working condi-
tions, or productivity requirements more difficult to
resolve. Management's ability to enforce labor disci-
pline is limited by the absence of support from
government authorities.
Violence among competing labor groups-prompted
in large part by an Indian "mafia --has not only
reduced output and interfered with rail transport but
also victimized workers and led to hundreds of
murders a year, according to press reports. Union
leaders profit personally from lending out union
funds and acting as labor contractors for construction
and transport projects in the coalfields. They bribe
police, arrange the transfer of bureaucrats who want
to clean up corruption, and obtain political protection
from state and central government politicians.
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Figure 6
India: Coal Sector Operating Balances
Before Subsidies, 19852
wG