KOLKATA (miningweekly.com) – The newly elected Indian government’s priority for mining giant Coal India Limited (CIL) would be to increase production while maintaining the corporate structure, meaning the company would not be split or privatized.

Officials in the Coal Ministry effectively placed restructuring reports on the backburner, with the government focusing on resolving "legacy issues" faced by the miner in expanding production and fast-tracking greenfield projects.

CIL’s  performance and plans have been reviewed by the government and it was established that there was significant potential to enhance production, the official said.

But at the same time, the government fully appreciated that years of neglect and absence of policy support on issues of land acquisition, delays in environmental approvals and overall inefficient systems were faced by the miner, with the solution not lying in restructuring the company, the official said, quoting Coal Minister Piyush Goyal after a review meeting.

With such a policy stance, the new Indian government, which assumed office in May, has effectively put to rest various options and proposals for restructuring CIL, ranging from privatisation to corporate restructuring.

A report prepared by consultants Deloitte Touche Tohmastsu, mandated by the Coal Ministry last year, had recommended the splitting up of CIL's holding company status.

The consultants recommended dismantling monolith CIL as the holding company and spinning off the latter’s nine operational subsidiaries into independent companies with a focus on their specific operational mining geographies.

India’s Planning Commission had over the past two years been advocating splitting up CIL and possibly going a step further and privatising CIL’s operating subsidiaries.

It rationalised the privatisation of the companies to ensure a uniform policy for the entire energy sector as the oil and natural gas sectors were open for private investments.

A Coal Ministry official said that the economic ideology of the present government did not have any definitive linkage between ownership and efficiencies of operations.

However, he conceded that the Ministry was also realistic and that privatisation of the coal sector, including the requirement of amending the Coal Mines Nationalization Act, might not be politically expedient despite the clear majority enjoyed by the government in Parliament.

At the same time, the Ministry would keep laying down specific milestones for CIL towards improving production and productivity, he said.

Last week, the Ministry laid down that the miner would need to achieve quantifiable improvements in the quality of coal produced by December 2014, with coal buyers given the right to appoint neutral quality samplers along with current joint sampling.

The miner would also have to reduce the quantity of coal sold through e-auctions this year to 25-million tonnes from 54-million tonnes.

However, even as the government pushes CIL towards increasing production, the latter continued to suffer from slippages. Its production during June 2014 was reported at 34.54-million tonnes, down from its official target of 36.54-million tonnes.

During period April to June, the first three months of current fiscal 2014/15, CIL was able to achieve production of 108.33-million tonnes against a target of 113-million tonnes.