Putting speculation of breaking up state behemoth Coal India to rest, Power and Coal Minister Piyush Goyal has said the new government will not split the world's largest coal miner but will work to smoothen the edges and improve its performance.
The new government wants to fix the coal sector quickly to ensure uninterrupted electricity supply across the country.
Coal is the cheapest fuel and is used to generate more than half of India's power.
India is home to the world's fifth-largest reserves of coal but delays in environmental approvals, land acquisition problems and inefficient systems have made the country the third-biggest importer.
Banker-turned-politician Goyal, 50, believes the problems can be fixed by keeping Coal India Ltd (CIL) as one company.
"We have been assessing the performance of Coal India in great detail and I think there is a lot of potential to smoothen the edges and enhance the production at different mines," he said.
He saw great strength and benefit in keeping CIL, which accounts for 80 per cent of India's coal output, as one company instead of converting its seven units into independent entities to unlock value and increase efficiency.
"I think while that can enhance the valuation of the company on the stock market, I don't see that (combined holding) as an impediment to good performance," he said.
CIL, which missed its output target of 482 million tonnes by producing 462 million tons of coal in 2013-14, has seven subsidiaries -- South-Eastern Coalfields Ltd, Mahanadi Coalfields Ltd, Eastern Coalfields Ltd, Bharat Coking Coal Ltd, Central Coalfields Ltd, Western Coalfields Ltd and Northern Coalfields Ltd.
South-Eastern Coalfields and Mahanadi Coalfields together account for more than half of the company's total output.
CIL was established in 1975 as a state-owned entity. In 2010, it sold 10 per cent of its shares in the nation's largest initial public offering. Its current market capitalisation is Rs 2,41,379.87 crore.
Explaining the pros of a holding company structure, Goyal said, "That structure is better in terms of synergy of operations, moving talent and expertise..."
The minister is of the view that one company will be able to address the issue of rationalising coal linkages, which help in planning supplies.
Linkages should be made more efficient so that mines supply coal to the nearest power plants, helping to save freight costs, which can be passed on to consumers, or to reduce losses of discoms, the minister added.
In January last year, the coal ministry invited consultants to study the restructuring of Coal India.
Another challenge for the new government is addressing the issue of coal quality, over which state-run NTPC and Coal India have locked horns on several occasions.
"Some of the problems in these companies were genuine. It only needed application of mind to resolve," Goyal said, adding that the companies are now working in tandem.
Quality checks acceptable to both parties have been drawn up and the Coal India board has been asked to take a final view on the matter, Goyal added.
Electricity generating stations had sought quality checks or coal sampling at points where coal was unloaded.
"We are going to permit third-party inspection (at the unloading point also). As the customer is the king, he should have the right to appoint the inspection agency. However, Coal India will verify the antecedents and capabilities of the inspection agency," the minister said.
As an initial experimental measure by the government, the same agency will conduct quality checks in respect of public sector units and state units.
The findings of this three-month study will then be considered to find out how to move forward for other plants.
NTPC refused to sign fuel supply agreements with Coal India last year because it felt the mining company's supplies were of inferior quality.
The Power and Coal Ministry has also asked Coal India to reduce the quantity of fuel sold through e-auctions and make that portion available to power plants.
The company has been directed to limit e-auctioning of coal to 25 million tonnes this year from 57 million tonnes.