Need to pay attention to contractors in coal mining: report

Our Bureau New Delhi | Updated on September 27, 2019 Published on September 27, 2019

KPMG analysis shows the market size of coal contract mining likely to grow four-fold by 2030 from FY’2018

Is coal sector only about mining and companies, primarily Coal India or the flavour of the season commercial coal mining? Not really.

Coal mining also has contractors, who shoulder disproportionate volumes of activities on the ground. The number of large players in this segment is around 10-15. But, limited attention is given to them in the coal mining market.

The current market size of overall coal contract mining is around Rs 15,000 crore and is expected to become more than Rs 60,000 crore by 2030, shows KPMG and Indian Chamber of Commerce (ICC) report titled ’Contractors in the coal mining market’.

Contractors’ role in coal mining

Looking at the role played by various contractors in the coal-mining market with specific focus on mining contractors, Mine Developer and Operators (MDOs) and Active Mine Managers (AMMs), the report reveals that this market has grown by leaps and bounds over the last two decades.

According to KPMG in India analysis, the market size of coal contract mining is likely to grow four-fold by 2030 from the financial year 2018.

The need for sharing the developmental market risk between mine owners and operators and the importance of wisely defined contractual terms and eligibility criteria, was highlighted in the report.

The report mentions about the need for mine owners to be competent and balanced in drafting tender clauses to minimise value loss due to non-operation. It also discusses the need for an effective monitoring mechanism to objectively evaluate performance of contractors and how information technology can be successfully deployed to achieve results.

According to Niladri Bhattacharjee, Partner - Metals and Mining, KPMG in India said, “The Indian coal industry is multi-tiered. It goes beyond the coal PSUs or the commercial coal block owners who are receiving attention at this point of time. There is a larger market comprising contractors, equipment manufacturers, consumable suppliers etc.”

This report focusses on just three segments of contractors in the coal value chain and estimates the annual value of these three segments at over Rs 60,000 crore by 2030.The realisation of this number is, however, subject to design of balanced contracts that share risks equitably and effective contract management using industry-leading processes and systems,” Bhattacharjee said.

The market is complex because of inherent inefficiencies and unique opportunities prevalent in the Indian coal sector. So, the only tools in the hands of all stakeholders are the contract, the method through which the service provider is chosen and the extent of monitoring, the report states. “The need of the hour is to wisely design all the three for long-term sustainability of the business,” it concludes.

Published on September 27, 2019
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