Coal India was planning a public offer of shares but decided to concentrate its energies on getting the navratna status first. Why is it taking so long?

We did not know you have to apply for it (laughs). The country needs to give the navratna status to CIL more than CIL wanting it. Let me tell you why. Due to huge power capacity addition that is taking place in the country -- 78,000 MW in the 11th plan -- we need to accelerate our production. That cannot be done with the mini-ratna powers we have, where we can clear projects only up to Rs 500 crore (Rs 5 billion). A large chunk of our projects are larger than this, and delays could cost the country dear.

Besides financial, there would be other constraints in increasing production. Has land acquisition become difficult?

Yes. We are the second largest zamindars in the country after the railways. We have acquired more than 146,000 hectares of land so far and we need to acquire another 60,000 hectares in this five-year plan. That is a challenge.

Rehabilitation and resettlement (R&R) costs must also be on the rise...

We expect them to rise substantially. R&R used to be 5 per cent of the project cost earlier. I would not be surprised if this goes up to 15-20 per cent. That impacts projects. For instance, my NPV payments (for forests) are making my underground mines unviable. Forest clearance is a big problem in states like Jharkhand.

Production is one challenge. And so is reserves, isn't it?

We are set to run out of coal in 40-45 years, based on current reserves. We need to explore the deeper reserves. Thermal coal reserves, available in 0-300 metres range, are about 157 billion tonnes, of which 60 billion tonnes is extractable. Today we are producing half a billion tonnes and this would go to two billion tonnes in 25 years, so between now and 2031-31, we would have taken away about 40 billion tonnes of coal.The rate of increase of proved reserves at this depth is not very high. It is a very scary situation because your coal would end in 15-20 years. So, we have to intensify our search for the coal deposits deeper, and in 25 years we must have a substantially healthy mix of coal from opencast as well as underground mining, which allow you to live off these reserves for a much longer period.

In actuality though, production from underground mines is declining?

Yes. Production from the underground mines have witnessed persistent decline for the last 35 years. The reason was because we have been taking a softer option of open cast mining, which is easier to do. Increasing production from underground mines will be good for our bottomline too. Coal quality is better from such mines, and the price of this coal is 60-65 per cent more than that of opencast mines.

What is the ideal mix of underground and open cast mines?

If we look at China, it is 95 per cent underground mining. However, if we manage 50:50, it would enhance the life of my deposits by a substantial margin and we would be proving new deposits.

And are there any attempts to improve the quality of coal?

CIL has been getting flak on account of its quality, since we have been supplying coal on an "as mined" basis. It is not done anywhere in the world. Before the coal is supplied, it is washed. The present pricing and grading system discourages us to go for washing. We need to narrow down these grades so that every incremental effort in improving quality is rewarded.

How much investment would washing require?

It would be a significant investment as we increase the washing capacity from 20 per cent right now to 70 per cent in five years. It would mean an addition of 180 million tonnes of capacity and the investment is about Rs 15 crore (Rs 150 million) per million tone (Rs 2,700 crore). It would be given on build, operate and maintain (BOM) basis to outside agencies who would bring state-of-the-art technology. Investment would be done by CIL. The process should start from April.

Setting up coal washeries would be one way of utilising your huge reserves. You are also looking at a foray into power generation for the same reason?

Power generation is a forward integration for us, though returns in power generation are certainly less than those in coal mining. Power generation allows you a regulated return. But on a turnover of Rs 35,000 crore (Rs 350 billion), I make a profit of Rs 8,500 crore -- you calculate my return. That too, after losing Rs 3,000 crore from underground mines.

Your numbers must be diluting your case for an increase in the price of coal, which is, theoretically at least, your prerogative?

We have the power to increase prices, but there are other issues. Coal from captive blocks is being sold at prices which are 20-25 per cent less than CIL prices, so there is competition.

So, the private sector producers are more efficient than CIL?

They have some efficiencies, but they do only opencast mining, whereas 60 per cent of my workers are engaged in getting coal from underground mines, which accounts for only 14 per cent of my total production. We need to phase out the loss-making underground mines where you can't infuse technology, risks are high and production is low. There are about 60 such mines, which incur losses of more than Rs 3,000 crore (Rs 30 billion) per annum. These group of mines incur maximum losses but they employ about a lakh of people, while there is a shortage of people for other underground mines.