Some empirical investigations on the determinants of cost behaviour in coal mining industry

Abstract

The paper describes the results of a few empirical investigations on the determinants of cost behaviour in coal mining industry through two field surveys undertaken at two different points in time. It attempts to analyse the structural composition of total average costs as also tries to delineate the inherent changes that took place over time on the basis of both cross-section analysis and time series data. It is observed that the overheads constitute a major share in the TAC, and their share gradually become increasingly larger over time in the lifespan of a coalfield. Subsequent to this, it is also noted that there is a discernible overheads cycle resulting from an extractioncycle. The paper also observes that the Wage-bill contributes more towards the rising extraction costs in the coal mining industry. In this context, it is found that there is a negative correlation between the per tonne pithead costs and the proportion of materials-bill. Inter-mine variations in extraction costs have also been explained through regression analysis by identifying some of the major causal factors such as: the underground hauling distances in the mines; output per a unit of hauling distance; seam thickness; vertical depth of the workings, OMS, etc. The findings of this empirical study will be useful in devising cost control systems, pricing and extraction strategies