“Illegal franchising” in India – 2/2

I hope you have read my first article on “Illegal franchising” in India. In this article, I will touch about another set of incidents which caught my attention. This is about a public sector company called Eastern Coalfields Ltd. where my father works. As you may have guessed, the company is all about coal and is situated in a very fertile coal belt in India. Our colliery has a relatively large production rate and churns out pretty high quality coal. However, because of a wide array of socio-political and economic reasons, ECL used to face a daily loss of Rs. 2 crores (I have no evidence or proof though). A big reason for this loss was because of inefficient workforce taking huge salaries. ECL has been able to recover from this situation using a policy of hiring freeze (again, I disclaim any knowledge of evidence). I am told that they are in profit now.

ECL coal mining sites are situated at quite some distance from major town centers. Hence, ECL provides their employees with a lot of benefits including housing, medical services and schooling for children. ECL sites are typically situated in remote areas where there is no dearth of land (or water and electricity, though their relative cost is minor). This gives opportunity to lots of non-ECL employees to settle here. Some of that is okay. You probably don’t want ECL to provide/control groceries, fresh produce, banking and transportation. In many cases, people in family relation with ECL employees (often living together), take up such jobs. Things become interesting when it comes to coal mining as an “alternate profession”.

The coal sites under the control of ECL are really very rich. In our colliery, there are places where manually digging the ground for some feet leads to coal. As you might imagine, given the hiring freeze, a large settlement of people and absence of law and order enforcement, a lot of people engage themselves in illegal mining. Its illegal because the coal is the property of the Govt. of India and these people obviousy have no license or contract with the Govt. for mining. If you visit our colliery in the evening when it gets dark, you will witness scores of piles of illegal coal dug manually and set on fire (Setting on fire burns the sulfur content in coal so that later it burns without smoke). The smoke is an obvious health hazard to all the residents in ECL but the Govt. has so far not cared to do anything about either the smoke or the coal stealing.

What makes matter even interesting is that the illegally mined coal is sold at a price lesser than what ECL charges for it. It might not lure heavy lifters who require large and consistent supplies. However, the small buyers love the competition and the price drop. The important thing to note is this phenomenon of a competitive, peaceful though illegal “franchising” of coal mining happening in the total absence of law and order enforcement. ECL obviously has more problems with efficiency to keep them occupied. However, like the railways, I see an important business opportunity missed.

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One Response to “Illegal franchising” in India – 2/2

  1. Jnaneshwar Das says:

    Interesting read. Especially since it reminds me of my early years at Kajora Area šŸ™‚

    One doubt though. You said..

    “The coal sites under the control of ECL are really very rich. In our colliery, there are places where manually digging the ground for some feet leads to coal.”

    Doesn’t the grade of the coal progressively deteriorate as u mine nearer to the surface? Later on, my dad moved to Mahanadi Coalfields Limited, where the majority of mines are opencast. The grade of coal was not that great compared to the underground mines in the same region

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