Augmenting Availability of Coal

Inadequacy of coal supply is a fact which is to

be faced by accelerated growth of Coal Industry both in Public & Private Sectors. There is no run-away shortage as yet but the production – supply gap is increasing. The best part is that Indian Coal reserves are as under.

A. Total reserves – 267.21 Billion Tons.B. Proved reserves – 105.82 Billion Tons.

Indian coal reserves can last for 100 years easily if properly exploited.

PR China 2761 MT Indonesia 246 MT

USA 1007 MT South Africa 236 MT

India 490 MT Kazakhstan 104 MT

Australia 325 MT Poland 84 MT

Russia 247 MT Colombia 79 MT

Source Quantity % Share

Steel 9.30 2.32

Power (Utility) 296.52 73.86

Cement 9.25 2.30

Fertilizer 2.43 0.61

Loco 0.00 0.00

Export 0.02 0.0005

BRK/Others 83.22 20.73

Internal Consumption 0.72 0.18

TOTAL 401.46 100.00

Locating assured coal supply sources either entering into long-term agreement or owning a mines or combination of both.

Availability of dedicated/captive cargo vessel. Modern exclusive deep sea coal terminals. Developing mutually agreed long-term pricing

mechanism for coal supply (Like Japan, Korea) Identification of shadow fall back supply sources, in

case of emergency. Ensuring coal supply security (energy security)

through bilateral Government level understanding.

Indonesia - Best sources for power coal, but

legal complications may sometimes result in cancellation of mining lease. Geological information not reliable & not available.

Mozambique – Green field area. Port capacity limited. Moputo & Bira are the only two ports. Burnt coal and high ash coal only one coal mine. Rail infrastructure under construction.

South Africa – Limited capacity of port. Richard bay coal terminal.

Australia – High price of coal – High freight.

Coal Sector has been most regulated sector of Indian Economy, most

of it in Govt. control till 1993. However to meet increasing demand, captive coal mining is now allowed for following sectors.

1. Power2. Steel including Sponge Iron3. Cement4. Coal Beneficiation5. Conversion of Coal to Oil6. Underground Coal Gasification.7. Ministry of Petroleum & Natural gas

allots coal bearing/ blocks for extraction of coal bed methane.

Private Sector is happy that Coal Ministry has expanded the approved end uses. Industry welcomes it. It would still be better if coke making is also included as an approved enduse.

Issues on Captive Coal Block Mining

• The annual requirement should justify owning a Coal – Mine as the coal – blocks are allotted for captive use only.

• Faced with overall shortage of coal in he country, this is to be deliberated whether decision to allot coal blocks for captive use only is in national interest, specially when state owned PSUs are utilizing coal blocks allotted through State dispensation route for merchant use.

Owning a coal-block

The details of coal blocks to the extent possible must be made readily available.

• Location, extent of the area.• Geological data including quality & quantity.• Forest area or non forest area – Go Area or No-Go-

Area.• Law and order problem.• Coal Evacuation arrangements.• Availability of areas for R & R sites, OB dumping

and general information about land acquisition matters.

• Harmonious development of coal consistent with preservation of environment.

Private sector, too, is interested in harmonious development of coal consistent with preservation of Environment. JSPL’s plantation at Raigarh is an example.

Coal Consumer’s Concerns and Expectations - Owning a coal-block

Ministry of coal calls for comments from :

Administrative Ministry such as Steel, Power, Industry etc. State Government.

Coal India Ltd.

Central Mine Planning & Design Institute Limited (CMPDIL)

Subsidiary Company of Coal India Ltd.

Owning a coal-block (contd.)

Screening Committee

The Screening Committee

examines and thenapproves or rejects

them

• Objective – To bring in greater transparency and demonstrate objectivity in allocation of coal & lignite blocks.

• Mines & Minerals (Development & Regulation) Amendment bill 2008 has been introduced in Rajya Sabha on 17.10.2008.

• Hon’ble Minister for coal has already got OK signal from State Governments of coal bearing areas to go ahead with the proposed new concept of auctioning of coal blocks.

• Private Sector is watching this new development with lot of interest

Auctioning of Coal blocks through

Competitive bidding (New concept)

• Govt. will endeavour to provide all the possible data regarding each block.

• FR, Mine valuation, financial modeling – Responsibility of bidder.

• As regards coal blocks in forest and protected forest areas are concerned –Go areas & Non-Go areas will be identified in consultation with MOEF.

• Categorization of coal blocks in three categories, good, average, and reasonable is not possible by Govt.

• Competitive bidding in 2 parts, viz Technical bid and commercial bid. Bidder willing to set up industry in the same state will get preference.

• R & R Policy – National or State whichever is better will be applicable.

Auctioning of Coal blocks through

Competitive bidding (Contd…)

(New concept)

Comparison of 2 modes of Allotment

Screening Committee Route Auctioning of coal blocks – Competitive Bidding

Established system – 208 blocks have been allotted so far.

Auctioning of coal blocks will eliminate non serious players. Greater transparency.

Adoption of this route does not impose additional cost.

Auctioning will drive up the coal cost and may render coal block unviable.

As 100% prediction of coal reserves, geology & grade is not predictable, the investor does not come under severe strain.

Auctioning may lead to coal blocks being purchased by financially strong parties.

More participation, high popularity of the system.

For faster returns, the block allottee may resort to selective mining and environment degradation my be more.

Allotment of one coal block to more than 1 party is possible,

Alternatives Govt. may charge allocation fee, rather than resort to auctioning.

Suggestion: Till such time legal formalities are over, the earlier mode of screening committee route may be continued.

• Great improvement in allocation.

• 209 coal blocks have been offered so far till date

• Maximum number of coal block have been allotted in

2006, 2007, and 2008.

• The number of coal block allottees is 291 because 45 blocks

have been allotted to more than one party.

Mining Blocks

– Any improvement in Allocation

Note: Geological reserves correspond to date of allocation and subject to change during approval of Mining Plan.

Sector End Use No. of Blocks

Geological Reserves

(BT)

% Share (Block)

ALL INDIA

POWER 92 27.751 44.3

IRON & STEEL

64 9.701 30.3

CEMENT 8 0.495 3.0

Comm. Mining

43 6.966 21.4

Coal to Oil 2 3.000 1.0

Grand Total 209 47.913 100.0

Allocation of coal blocks

till 07/10/2009

Year-wise Allotment of Captive Coal Blocks as on 31/03/2009

0

10

20

30

40

50

60

1993 1995 1997 1999 2001 2003 2005 2007

Year of Allotment

No. ofCoal Blocks

2009

Production Trend from AllocatedCoal Blocks vis-à-vis Projections

20.71 3 2.95 3 4.46

9

13.6211

17.6115

21.2525

30

86

73

95

104.08

0

20

40

60

80

100

120

98

-9

8

99

-0

0

01

-0

2.

05

-0

6.

06

-0

7.

07

-0

8.

08

-0

9.

10

-1

1.

11

-1

2.

No of Blocks Production (Mill.T)

Company Actual 07 -08 First yr of XI PLAN

XI Plan (2011 – 12)

XII PLAN (2016 – 17)

DEMAND 550.00 731.00 1125.00

Availability(Raw Coal Production)

CIL 379.46 520.50 664.00

SCCL 40.60 40.80 45.00

Others 39.94 118.70 346.00

Total 497.00 680.00 1055.00

Gap 93.00 51.00 70.00

Planwise Demand - Availability Projection

• Employment claim by land losers irrespective of quantum of land.

• Scarcity of suitable land for rehabilitation site.

• Disagreement amongst members of the family of land losers regarding employment claim and validity of documents.

• PAP resist against shifting to rehabilitation site.

• Demand of higher rate of land compensation in excess of CIL R & R policy band LA & CBA Act.

• Coal Block owners tend to acquire land at differential rates

Land Acquisition Problems

• Long chain of processing proposals for FC should be simplified.

• FC is given in 2 stages. One time final clearance may be adopted.

• Excessive demand of compensation for forest land by State Governments. Demand should be as per F C Act, 1980.

• Dispute over ownership of land between the forest and Revenue department.

• Most of the cases, proposals are pending more than 3 to 5 years.

• There is a need for reducing the time involved.

Environmental Issues

Development of Captive Coal Mining Projects.

Main reasons : - Besides Land, forestry and environmental problems other factors are: -1. Lack of margin of profit in sponge iron industry in particular and

Iron & Steel Industry in general.2. Tendency to sell the company owning the coal block and making

quick profit.3. Awaiting relaxation for merchant sale of coal or to shift allocation

from sponge iron to power.4. State Governments sitting over ML applications and not

forwarding the same to Central Government either due to unwillingness or due to absence of popular Government.

5. Grant of “prior approval” of Central Government for M.L. by State Government is in fact not required because block has been allotted by Central Government only.

Yearwise Import of Coal

during last 10 years

Statistics apart, there is gap of only 6% in thermal coal and 70% in coking coal. There should be unrestricted import of coal and import should be completely exempted from custom duty.

• Nation needs coal for 3 prescribed sectors, viz, power, Steel & Cement. Hence block allottees should be permitted to change over from one sector to another at least once depending upon economic viability factor.

• CBA (Act) 1957– should be applicable for LA to acquisition of land by PVT. Sector allocatees. Contract labor act should be amended to permit outsourcing of mining activities.

• MOEF may be requested to honour the land mark decision and GO & NO-GO areas must be published.

• In order to conserve our forests, Coal India may be advised to peg. coal production at a level of 600 million tons and Singareni at 60 million tons. Private Sector allocatees must be helped in practical way. Rest of the requirement of coal many be imported from countries like Indonesia, Australia, South Africa, Madagascar, Vietnam, and many other countries.

• Workable coal reserves of India will last for only another 40 years. Hence, there should be greater emphasis on conservation of coal.

• Coal imports should be exempted from custom duty.• Nodal agency to provide assistance to private sector mine developers

should be created in Ministry of Coal.

Conclusion

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