Overview of Indian Coal Sector

1. REVIEW OF INDIAN
COAL SECTOR
MANOJ JHAWAR 12125027 , MBA,IIT
KANPUR

2. Coal on Global perspective
 Globally, coal resources have been estimated at over
861 billion tonne
 Coal meets around 30.3% of the global primary
energy needs and generates 42% of the world’s
electricity
 Coal production in the Asia Pacific region has
grown tremendously and accounts for over 67%
of the total production globally (2012) as
compared to about 27% in 1981 (in terms of
energy equivalent).
 In year 2012 around 6.1 billion tonne of hard
coal and 1 billion tonne of brown coal were used
worldwide

4. Brief facts about India Coal
Industry
 India has the fifth largest coal reserves in the
world.
 88% are non-coking coal reserves & 12%
coking coal reserves
 Indian coal is characterised by its high ash
content (45%) and low sulphur content
 Power sector is the largest consumer of coal
followed by the iron and steel and cement
segments

5. Demand -Supply scene
 Coal production has increased from~431 MT
in 2006-07 to ~554 MT* in 2011-12 (an
increase of 28.5%).
 Demand for coal has grown at a CAGR of
more than 7% in the last decade and has
reached around 600 MT
 Country’s total demand-supply gap (including
coking coal) at about 98MT
 India imports about 85 million tonne of coal

7. Trend in Coal consumption
Trend in
industry wise
consumption
Trends in Coal
Import

8. Trends in Coal consumption
(Industry wise)
 During 1970-71, the railways were the major
consumer of coal (15.58 MTs), followed by
steel and washery industries (13.53 MTs),
electricity generation (13.21 MT) and cement
(3.52 MTs).
 Since 1975, the electricity generation is the
biggest consumer of coal, followed by steel
industries. Estimated coal consumption for
electricity generation increased from 23 MTs
during 1975-76 to 435 MTs during 2011-12.

9.  Coal consumption has
increased in almost all industry
segments with electricity
contributing the highest
consumption clocking a CAGR
of nearly 9% over the years
from 1970 to 2011.Except
cotton industry which shows a
negative CAGR, the
consumption of coal for other
industries has gone up over the
years.
 For steel and cement sector,
coal consumption almost
remained stagnant in 2007 to
2009 due to global slump. It
recovered in 2009, but
recorded a down swing in
2010-11 indicating the slow
growth of the segment due to
global recession and European
crisis.

10. Trend in Coal Import
 Gross import of coal has steadily increased
from 20.93 MTs during 2000-01 to 73.26 MTs
during 2009-10.During this period, the
quantum of coal exported increased from
1.29 MTs during 2000-01 to 2.45 MTs during
2009-10. However, there was a decline of
5.92% in gross import and 8.89% in net
imports of coal in 2010-11 over the previous
year. The exports to neighbouring countries
increased by about 80% during the same
period

12. Important observations about Coal
import
 China & India becoming the highest gross net
importer of the coal
 India was traditionally a coking coal importer due to
unavailability of good quality coking coal for steel, but
the situation has changed in favour of non coking coal
in the past five years with non coking coal imports
rising from countries like Indonesia and South Africa.
 Further, the coal washing capacity in the country has
not increased sufficiently, due to various reasons, to
generate the required quantity of washed coal for
consumption, particularly in steel plants. This
necessitates the import of high quality coal to meet
the requirements of steel plants

13. Sector wise Coal consumption in
india 2011-12 (Source : Coal
Ministry)

14. Electricity Sector
 India is the world’s fifth largest energy consumer,
accounting for 4.1% of the global energy
consumption.
 The current per capita consumption of energy in
India is 0.5 toe against the global average of 1.9 toe,
indicating a high potential for growth in this sector
 Total electricity consumed in India approximately
80% is produced from coal

16. Steel sector
 In 2011, the world crude steel production
reached 1,518 MT, reflecting a growth of 6.2%
over 2010.
 The per capita finished steel consumption in
2011 is estimated at 215 kg for world and 460
kg for China, while that for India it is estimated
currently at 55 kg (provisional). This clearly
indicates scope for increasing the per capita
steel consumption, a factor which correlates to
the coking coal availability and production
within the country.

17. Coal demand trend of Steel
industry in India vis-à-vis Steel
production

18. Coal imports by Steel industry

19. Cement sector
 India is the second largest producer of cement
in the world
 Around 450g of coal is consumed to produce
900g of cement. Ratio of 1:2
 cement industry is the third largest consumer
of coal in the country.

20. Coal demand trend of cement
Industry in India vis-à-vis cement
production

22. Major Coal Mining Companies
 Based on production data from Coal controller
organization report 2011-12, top 5 coal
producing company in terms of coal production
are :
 1. CIL (PSU)
 2. SCCL (PSU)
 3. PANEM (Private)
 4. TSL (Private)
 5. JPL (Private)

24. NCDP (New Coal distribution
Policy)
 The category of Core/Non Core sector was dispensed with
 Defence and Railways requirement of coal to be met in full
 Power and Fertiliser sector normative requirement to be
met with 100% supply
 Other sectors demand to be met with 75% of their
normative requirement
 State nominated agencies to be provided with coal to
further distribution to small and medium industries for
capacity of 4200 tonnes per annum
 Steel plants will be supplied coal, but price to be linked with
import parity
 Fuel Supply Agreement to be signed with all end
consumers lifting coal from CIL

25. Coal Sector Value Chain

26. Mining Industry’s Contribution
to the GDP

27. Captive Coal Blocks

30. Ways to increase coal supplies in
India
 Operational or sustenance issues
 Fund raising
 Performance improvement
 All the minerals are not reported as per UNFC classification
 Key administrative issues
 Long queue of mining applications pending at different
levels with the state and centre: This is a deterrent for future
investments.
 Single window clearance agency (SWCA)
 Large number of compliance reports to be filed by the
investors to CCO, state DMG, DGMS, tribunals, state and
central agencies
 Multiple registration requirements for miners,transporters,
traders and end-users

31. Ways to increase coal supplies in
India...
 Regulatory issues
 Lack of policy support for transfer of mining concessions
 Blocking of resources
 Lack of incentives for exploration
 Fiscal issues
 Poor connectivity of mining areas and poor evacuation
facilities
 Infrastructural issues
 Cadastral (Khasra) maps are either not digitised or the
geo-referencing has not been done properly. This
creates problems in lease boundary determination, thus
hampering genuine miners.

32. Challenges in increasing the
production capacity
 For CIL,179 forestry proposals are awaiting clearances and
if all approvals are secured on time, it canmore than double
its output to 1,132 MT, given that mines start production
from 2016-17.
 Majority of the coal projects have been halted and delayed
due to issues in acquiring land and strict rules and
regulations (R&R).
 Bottlenecks in domestic coal transportation and lack of
proper road connectivity further increase the challenge.
Also, availability of railway wagons and mismatch of
demand and supply of wagons and coal offtake affect
production capacity.
 Delay in mining activities at captive coal blocks and
concerns relating to theincreasing ash content of run-of-

33. Way Forward for CIL
 CIL needs to strengthen the operations in
its core area of mining
 Aggressive investment of surplus available
with CIL, may go in for new technology and
UG mining, improvement in transport and
logistics
 Switch to market driven pricing for different
consumers (regulated pricing for power
and fertiliser sector and market price at par
with other unregulated sector)

34. Way forward for Coal Ministry
 Coal ministry should attract private investment in exploration,
drilling and planning activities and also in mining through
necessary policy changes and welcome the private players
 The bore hole density from 1.5 per sq km to 15 per sq km without any forest
clearance.
 Competitive bidding for coal blocks but only after full
exploration of coal blocks
 The government has initiated the process of competitive bidding of 54 coal
blocks and Crisil has submitted its report on coal bidding guidelines. It is
under evaluation from different stake holders. The government has identified
coal blocks and segregated them so that the coal blocks come under
different categories for power, steel and state companies.
 The sooner the coal regulator is in place, the better it will be
for the coal industry

35. Way Forward for Private
Players
 Private parties to enter aggressively
through MDO route wherever available
 Coal washeries is lucrative business
option, need to partner with state or central
government, else develop captive coal
washery for own use
 Aggressively foreign asset acquisition and
exploring arbitrage opportunity, whether to
source coal to the country or trade in
global platform

36. My Recommendations
 There is a need for private players in coal mining
operations and MDO provides the best opportunity for
private players in the current scenario. e.g
 Huge investment and big push in UG mining is
inevitable for future sustainability coal mining
operations.
 Only explored coal blocks are considered for competitive
bidding for captive coal block allocation and government
should fast track the process.
 CIL needs to put all its act together for a double digit
growth in coal production, lack of co-ordination between
ministries poses the biggest hurdle.
 Exploration offers the maximum opportunity for private
players, if opened fully, coal washing the next big thing