* Coal India fails to meet output target, Singareni beats
* Experts say Coal India's size a problem, Modi explores
* Coal India controlled by fed govt, Singareni by a state
* Singareni sees 2014/15 output of 54.5 mln T vs 50 mln T
By Krishna N Das
NEW DELHI, June 16 For a coal producer trying to
navigate India's complex federal structure, size matters. And
the smaller the better.
That harsh lesson was learnt by S. Narsing Rao, the outgoing
chairman and managing director of Coal India Ltd, the
world's biggest coal miner. While Rao has been at the helm in
the past two years, Coal India has missed its annual output
But in the six years before that, Rao led Singareni
Collieries and the company beat output targets every year. Even
though it is India's second-biggest coal producer, it is small
compared with Coal India. In the fiscal year ended March 31, it
produced a tenth of Coal India's 462 million tonnes.
Some experts say India needs more small and nimbler
companies like Singareni, rather than monoliths like Coal India,
to narrow its crippling supply shortfall - forecast to more than
double to 350 million tonnes by 2016-17.
The inability of Coal India - accounting for 80 percent of
the country's coal output - to raise production fast enough has
made India the world's third-largest coal importer despite
sitting on the fifth-largest reserves.
That is forcing new Prime Minister Narendra Modi to explore
drastic remedies like a break-up of the company, sources say.
The key reason Singareni can meet its targets lies in the
ownership of the two companies, Rao says.
While Coal India is majority owned by the central
government, Singareni is controlled by the southern Telangana
state. Since the federal government can do little without the
consent of the states, it is easier for the likes of Singareni
to acquire land for mining, access infrastructure such as
railways and get environment approvals.
Land acquisition and access to railways are the two most
important factors for boosting coal production.
"Coal India, being a federal company, is somehow not proving
to be very successful in influencing state governments and
district administrations to positively respond to our requests.
That is the challenge," Rao told Reuters.
"Singareni being a state government company, it is much
easier to do that."
State resistance has, for instance, hampered Coal India's
plans to build railway lines connecting remote mines. Rao has
said previously that better transport connections could raise
the company's output by 300 million tonnes per year.
Rao has quit Coal India to join the government of Telangana,
a new state formed this month through the division of Andhra
Coal India's 370,000 highly unionised workforce has resisted
attempts to introduce new technologies, fearing job losses.
In contrast, Singareni, with a workforce of around 62,800,
is using state-of-the-art technologies, having pioneered
mechanisation of coal mines in India way back in 1937 using
Coal India's productivity, measured in output-per-man-shift,
was 4.92 tonnes in 2011/12, below a target of 5.54, according to
the last available Planning Commission figures. For Singareni,
which digs out a higher percentage from underground mines that
are harder to operate than open-cast mines, productivity was
3.80 tonnes, above a target of 2.67.
Singareni Chairman Sutirtha Bhattacharya said Telangana
state has promised the company full co-operation, which would
spur it to a record production of 54.5 million tonnes this
fiscal year from about 50 million in the previous year to
end-March. A tenth of India's coal reserves of about 293.5
billion tonnes is estimated to be in Telangana.
Should Modi decide to open up India's nationalised coal
sector, Singareni-like small companies could be a better fit for
local as well as foreign investors. India's president said last
week that reforms in the coal sector will be pursued with
urgency to attract private investment.
Reuters reported last month the government was exploring
spinning off some of the eight units of Coal India into
independent firms, making respective state governments equity
holders to help speed up land acquisition.
A smaller firm has some advantages, says Dipesh Dipu,
partner with Jenissi Management Consultants.
"You have better control of operations," Dipu said.
HURDLES TO GROWTH
Coal India was formed in November 1975 as a holding company.
It operates mines in Jharkhand, Odisha, Chattisgarh and West
Bengal states. The company's sales by volume are almost twice
those of industry No.2 Peabody.
Fast-tracking growth at a company of that size won't be
Credit Suisse analysts wrote in a note that despite the
resounding election victory of Modi's Bharatiya Janata Party
(BJP), governments in Odisha, West Bengal and Jharkhand are
"likely to stay non-BJP for several years, potentially hindering
And unions representing Coal India's workers plan to oppose
any move to split the company or divest stakes as many jobs
could be on the line, said D.D. Ramanandan, vice president of
the All India Coal Workers Federation.
"We know for sure this government will try hard to
restructure Coal India," Ramanandan said. "But once we come out
on the streets, neither Modi nor BJP will be able to save the
country from falling into darkness."
(Editing by Douglas Busvine and Muralikumar Anantharaman)