KOLKATA | Aug 10, 2017: Coal India will shut nearly 100 unprofitable mines over the next two-three years.Of this, 37 will close operations this year. Last year, Coal IndiaBSE -1.69 % closed down over 15 mines. A recent study showed that about 15 mines are highly profitable and 90 others can be made profitable.

“We have engaged Indian School of Mines and expertise of Singareni Collieries to chart out a roadmap for the set of 90 mines,“ a company executive said. “They would submit their study soon on the basis of which we would either merge a few of these mines with existing ones or change the method of operations in these mines.“

He said opening new mines and shutting unviable ones is a continuous process. Coal India began with 750 mines but now has 394. Low grade coal extracted from mines that produce less than one million tonnes a year are generally considered unprofitable as the scale of operation in them do not support the cost involved visà-vis the price its coal fetches.

“Cost of operations at underground mines is also very high,“ he said.

Coal India has also been recently hit because the Coal Controller of India downgraded 50% of its 394 mines, meaning they are fetching lower prices for the coal produced compared to what they were fetching in 2016-17.

“Downgrading of mines has also hit viability of a large number of mines, which are now being considered for closure,“ another Coal India executive said.

Coal India expects a hit of about Rs 10,000 crore annually as a result of downgrading. The Coal Controller has also decided to keep a constant vigil on the quality of coal Coal India delivers and would be conducting regular studies on the quality of coal it is delivering visa-vis its declared grade.

Increasing salaries and wages of workmen have also added to the costs to coal, which has affected viability of a few mines. At present, more than 50% of the cost of production is workmen salaries.

(Source: http://economictimes.indiatimes.com/)