The Government’s plan to outsource production at Coal India Ltd (CIL)’s mines to private developers through tenders may be delayed with the state-run miner resisting the Planning Commission proposal.

Under the proposal, CIL, the country’s monopoly coal miner, would be required to offer ready-to-operate mines to “developers and operators” (MDOs) on 25-year contracts.

Sources say the company has opposed certain clauses in the proposal, saying it, in the current form, is tilted in favour of the contractor.

The government had been keen on awarding the first set of MDO contracts before March 31, 2014. Seven blocks (five opencast and two underground) were short-listed for the purpose.

amendments

Faced with opposition from CIL, the Plan panel, at its last meeting on November 15 (a day after Business Line put out a report “Outsourcing model may undermine CIL”), agreed to make changes to the model concession agreement it had designed for the miner at its behest.

CIL wanted to rope in private parties to speed up land acquisition and for getting various clearances.

While the Plan panel has already decided to drop the clauses on mining charges, it is still to address in full CIL’s wishlist.

To safeguard its commercial interests, CIL had wanted the force-majeure and contract termination clauses, which it said were heavily tilted in favour of the contractor, diluted.

The company also wants the contractors to share the legal and financial burden of securing regulatory clearances (mainly forest and environment) and land acquisition that together form the biggest hurdle to coal production.

“The next meeting on the concession agreement is scheduled for November 29. However, considering the complications involved, we anticipate many more rounds of discussions. Also, unless it is a win-win for Coal India and the contract miner, the plan may be spiked by the boards of CIL and its mining subsidiaries,” a company official told Business Line, requesting anonymity.

“Under these circumstances, there is little possibility of awarding such contracts this fiscal,” he added.

With the general elections set for April-May 2014, the entire proposal may remain in limbo till the new government takes over.

Mining charges

On the clauses pertaining to mining rates (to be paid by CIL to the contractor), sources said the Planning Commission has decided to scrap its proposal of dividing the costs into fixed (50-75 per cent) and variable components (25-50 per cent). There will now be only one charge.

This means the contractor will be asked to quote only one price for extracting coal.

This is more in line with CIL’s current outsourcing arrangements whereby the contractor gets paid on a per-tonne basis.

The state-owned miner has outsourced nearly half of its 452 million tonne production to such contractors.

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