In this article we will discuss about the coal industry in India:- 1. History of the Coal Industry 2. Progress of the Coal Industry 3. Problems.

History of the Coal Industry:

The commencement of coal mining dates back to the year 1774 when Mr. H.G. Heatly, the British magistrate of Chhota Nagpur, together with Mr. John Summer, applied for and obtained the privilege of mining coal in Pachete and Birhumn, 125 miles to the north-west of Calcutta.

Soon Mr. Heatly had six mines in operation which, in 1777, produced 90 tons of coal. However, Mr. Heatly was soon transferred to another district and his mining venture came to an end.

In 1814, at the suggestion of Warren Hastings, a mining engineer was sent from England to investigate the coal resources of India. He was so much impressed by the prospects that he soon undertook mining at Raniganj on his own account. Mr. Jones, the engineer, soon died and his mine was taken over by a Calcutta firm. By 1831, this company was producing 14,000-15,000 tons of coal and carrying it by boat to Calcutta.


The success of this mine led to greater activity and several new mines were opened in the Raniganj coal-field. However, the overall progress was limited because the demand for coal was small. Large-scale factories had not yet made their appearance and the ‘The East India Company’ had coal sent from England to Singapore, Madras, Ceylon for its own ships.

Moreover, the river Damodar, which carried coal to Hoogly, was so shallow that it could be used only in the rainy season and that too by small boats. Under these circumstances, progress could not have been fast. In 1846, the output of coal stood at 91,000 tons.

As in other branches of economic activity, it was the turn of the half-century which opened a new chapter in coal mining. In 1854, rail transport was provided between Calcutta and Raniganj. The factory system and its auxiliaries began to appear while the expanding railways themselves needed enormous amount of fuel.

The rapid disappearance of the forests which lined the first railway lines made wood dearer and the demand for coal became more insistent. This led to a more rapid development of the industry.


Up till 1870, Raniganj coal fields were the only ones to be exploited. In 1870, coal was mined in the Kaharbari district of Bengal and in 1874-75, Warara coal fields in the central provinces were opened up. Even so, the Bengal fields remained by far the most important.

After a temporary setback during 1870—75, when production considerably declined, the industry continued to make slow progress up to 1893-94. While domestic production was increasing, imports also kept rising on account of the rapid extension of railways and also because many of the coal fields were un­favourably situated as regards the Indian railways.

Thus, in 1880, India imported about 6 lakh tons of coal annually while none was exported. One of the greatest handicaps to a faster extension of the industry was the question of high railways- freights.

The Bengal coal fields, which produced of the then Indian production, were situated far inland. Even the sea-freights were heavy. This made it impossible for Bengal coalfields to supply coal to the west and south west of India. Notwithstanding these handicaps, the number of collieries increased to 123 in 1894, output to 2.80 million tons and the number employed stood at 43,197.


It is from 1893-94 that the industry really “progressed by leaps and bounds and outran the hopes of the most confirmed optimist”.

Famines could not affect the fortunes of the coal industry mainly because the railways, its principal consumer, far from suffering from famine, were busier than ever before in transporting food from one part of the country to another. At the same time, there was a distinct change in the policy of the govt. It was decided not to import coal, “at least to any appreciable extent.”

Accordingly, more of Indian coal began to be purchased. Efforts were also made to develop coal mines, not in Bengal where private enterprise held the field, but in the central provinces, Punjab and Baluchistan. On Warara mines alone, the govt., made an outlay of Rs. 18 lakhs up to 1899.

By 1903, there were 302 coal mines at work. Of these, 279 were in Bengal alone. The capital of joint stock companies was estimated at Rs. 240 lakhs. The output had risen from 1.3 million tons in 1884 to 7.5 million tons in 1903. In 1884, only 68.9% of the coal consumed on Indian railways was of domestic origin. This proportion gradually rose till, in 1903, 99.2% was obtained from Indian collieries. Imports of coal declined from 8.4 lakh tons in 1894 to 1.9 lakh tons in 1903; exports, first begun in 1886, increased to 4.4 lakh tons in 1903.

Steady though not continuous progress was maintained up to the outbreak of the I world war. This was largely due to the fact that improved machinery had widely come into use while conditions for the grant of mining leases and licenses were liberalised.

The rapid expansion of railways and factory industry was another helpful factor so that by 1914, the output reached 16.40 million tons. Though the industry had expanded rapidly, it could not keep pace with the still more rapid growth of coal-consuming enterprises, namely, railways or factories. This is evident from the fact that the percentage of Indian coal consumed by railways fell from 99.2% to 95%.

The First World War:

The War gave a fresh impetus to the industry. Acute shipping difficult .s made foreign supplies almost impossible just when the railways and the war- stimulated industries needed extra supplies of coal. The govt., requisitioned large quantities of the better quality coal leaving only a limited and inferior supply for the general public. This threatened a shortage of coal and prices began to mount rapidly.

Thus started, from 1917, one of the most feverish periods of growth in the industry. In the next four years, the demand was continuously in excess of supply. The deficiency was made up partly by increased production in Bengal where some mines undertook extensions and also set up electrical installations for haulage, lighting, pumping and ventilation.

Production rose to a record figure of 20.7 million tons. In this period of hectic activity, mounting demand, and rising prices, the large European-owned Katra-jharia mine paid dividends of 120% in 1918 – 20, 160% in 1921 and 150% in 1923. Average daily wage per head, on the other hand, was a mere pittance of about 47 paise in 1916.


By the end of 1921, the boom period was coming to an end and the coal industry began to find the demand for its products gradually diminishing. Many of the industrial ventures launched during the years 1918-21 had failed and Indian industry was passing through a prolonged period of depression.

Besides, the working of their own collieries by the railways, electrification of the suburban railway lines in Bombay as well as the increasing use of electricity and oil as power source by cotton mills, had greatly diminished the home demand for coal.

On the other hand, the large increase in the number of mines during the boom period as well as the increased output due to electrical working and the use of the coal-cutting machinery led to increased supply. A bad situation was made worse by the keen competition of govt. subsidized South-African coal.

The result of all these factors was that only better quality mines and those equipped with improved plant and machinery were able to keep up while a large number of the less efficient ones were gradually eliminated.


As a measure of help, the East Indian and the Bengal Nagpur Railways granted, from 1924, a rebate of 25% on the freight of all exported coal, and, on the recommendations of the Indian coal committee, a further rebate was granted in 1925.

A Grading Board was set up to grade the quality of coal. These measures revived, to some extent, confidence among foreign buyers and the export trade in coal registered a steady revival since 1925.

The case for protection to the industry was referred, in 1926, to the Tariff Board which, in a majority report, expressed the opinion that “coal industry had benefitted to a far greater extent from the protection granted to steel than it can possible do from any protective duty on coal.”

It, therefore, decided against a protective duty on imported coal. The Minority Report and the Legislative Assembly, however, favoured a countervailing duty on the bounty-fed foreign coal. The govt., rejected the minority proposal on the ground of retaliation.


With the onset of the depression, demand for coal both at home and abroad declined. Exports came down from 6,17,543 tons in 1926 to 2,17,584 tons in 1935. Home output declined to less than 20 million tons in 1933 and prices of Indian coal from Rs.9.12/ton in 1923 to Rs. 2.60/ton compelling weaker collieries to close down while the bigger ones struggled for survival.

In this struggle, many collieries sought to reduce costs by boosting output resulting, in some cases, to “slaughter exploitation often of the best scams of coal.”

From 1936 to the beginning of the Second World War, there was a steady recovery in industrial activity in the country. Railways also carried more traffic and consumed more coal. At the same time, grant of special rebate on railway freight and port terminal charges gave a fillip to the export trade enabling the industry to recapture some of the foreign markets.

The Second World War:

With the outbreak of the War, demand for coal became brisk and the export trade surpassed all previous records. Shipments of coal during 1939—40 were of the order of 2 million tons as compared to one million tons in 1938. Output reached a record level of 29 million tons in 1940 and this was maintained in 1941—42.

However, in 1943, due to scarcity of labour, outbreak of cholera, and inadequacy of machinery for mining, production some what declined. To deal with the shortage of labour, govt., allowed women to work underground as from 24 November, 1943 and also permitted the import of some urgently needed machinery to ensure increase in production in the shortest possible time.

In order to regulate the demand for and supply of coal, the govt., under the Colliery Control Order promulgated in 1944, took over the entire planning, production, distribution of coal and the fixation of its prices, High prices prevailing during the war brought high profits, the Index of profits (1939 = 100) reaching 124 in 1943 and 171 in 1947.


Wages, however, remained ridiculously low as is evident from the fact that the earnings of miners working underground rose from 0.60 rupees per day in 1939 to Rs. 13 in 1945.

Progress of the Coal Industry:

In view of the importance of coal as a fuel for a variety of industries and also as a raw-material for industries like iron and steel, the industry began to draw greater attention in the post-independence period. The First Five Year Plan did not contain any specific programme for coal production because it was felt that the capacity already established was capable of meeting the likely increase in demand.

The second plan, with its emphasis on industrial and transport development, accorded a high priority to coal production. On the basis of the coal requirements of the industrial and power programmes envisaged in the Second Plan and the traffic expected to be carried by the railways, a target of 60 million tons production was set. This meant an increase of 22 million tons over the production reached in 1955.

The order of increase was such as could not be met merely by the expansion of production from existing collieries. It also required the opening of new mines.

Having regard to the capacity of existing collieries and also keeping in view the industrial policy of the govt., which reserved the establishment of new units in the public sector, a quota of 12 million tons of additional production was allocated to the public sector, leaving the balance of 10 million tons to be raised in the private sector.

The expansion of production from existing mines, both public and private, presented no difficulties. However, the establishment of production from new collieries made the risk of the public sector a formidable one. New areas had to be prospected and new machinery had to be imported. Both took time. Therefore, actual production of coal in 1960-61 was 54.62 million tons against the target of 60 million tons.


At the start of the Third Plan, there was an air of optimism prevailing in the industry. Keeping in view the requirements of the country, a production target of 97 million tons was set for the last year of the Third Plan—an addition of 37 million tons over the target for the Second Plan.

Of this, 20 million tons was to be raised in the public and 17 million tons in the private sector. A loan of Rs. 16.7 Cores was negotiated with the World Bank in order to meet the foreign exchange re­quirements of the private sector for expansion, modernisation, and rationalisation.

However, owing to a set back in the programme for industrialisation, the delay in implementing extension of steel plants, and the Railway’s scheme of dieselization, the target of coal production had to be slashed to 76 million tons against which even the modest production of 68 million tons was found to be in excess of demand.

Accordingly, the govt., decided to remove all controls on the consumption of coal and to discontinue any subsidy for the use of the furnace oil.

Production Trends in the Coal Industry

Problems of Coal Industry:

One of the major problems facing the industry was that the production was concentrated in small and uneconomic units. In 1965-66 for example, 31% of the mines produced only 1% of the total production while only 24% of the mines produced roughly 74% of the output.


As a rule, the larger mines had lower cost of operation than the smaller ones. As the Tariff Commission (1966) pointed out, these uneconomic units could exist only “on account of natural advantages or unhealthy practices”. It was, therefore, desirable to amalgamate the smaller units so as to make bigger viable economic units.

Another problem was that of idle capacity in the industry, especially in the case of coal of coking and non-coking varieties of medium grades. This could have been well put to use if the railways had carried the coal to centres where it was required.

Mention may also be made of the loss of overseas markets. Till 1954, India exported considerable quantities to Burma. Ceylon, Hong Kong, Singapore, South Korea, Pakistan, East Africa and Japan. Just at a time when the demand for coal in the overseas markets was at its highest, the govt., prompted by a fear of coal shortage, imposed an export duty on coal.

What was more, towards the end of the Second Plan, i.e. 1961-62, export of coal to Ceylon and Burma were disallowed. Consequently, other countries like Australia and South Africa stepped in and captured the Indian Overseas markets.

The loss of overseas markets was a great set back to the expansion of the industry in the Third Plan when the expected home demand also did not come up owing to the failure of Consuming industries.