FUTURE OF INDIAN COAL MINING

-Ashish Singh, Ch. Rahul Patro, Vikrant Verma (8763457779)

ABSTRACT
India has large reserves of coal, the fifth-largest in the world, according to an estimate. Its
also the worlds third-biggest producer of thermal coal. The Government of India plans
to achieve a domestic coal production target of 1.5 billion tonnes by 2020an ambitious
growth from 2015s production of 612.4 million tonnes. Thats primarily because the Indian
government wants to ensure that it is able to meet the countrys power generation needs.
Indias coal industry is tied very closely with its power generation sector. The power
generation companies account for over 70 percent of the countrys use of coal. Cement is the
next biggest at 5 percent. The steel sector is also another important consumer of coal.
The Wild cards impacting coal mining are transportation (Railways), Renewable energy
capacity expectations, Imports, Private Mining, Increasing scrutiny on environmental impact.
Coal mining technology constraints: At present 8% of coal production is through
underground mining technology. If CIL has to produce even 900 MT by 2020, it would need
to plan for an increased share of production from underground mining. As shallow resources
deplete, coal would be mined from greater depths, and it would pose a challenge in the form
of technical capabilities and a longer development time period. Also, the costs of
underground mining would be substantially higher and price of such coal will need
subsidizing to compete with imported coal. Underground mining infrastructure takes longer
to develop (around six-seven years) because of which an open cast mining or contractual
mining is the only eventuality to improve production drastically in a shorter time frame.
Transportation(Railways): The increase in coal, howsoever incremental, is heavily
dependent on transportation capabilities, of which a big chunk is railways. If the railways
logistical abilities are not enhanced it is highly improbable for coal to move from mines to the
destined locations, perhaps making imports more beneficial at least for the coastal power
plants. Less transportation capabilities implies less domestic coal offtake.
Renewable Energy(RE) capacity expectations and finance: RE power is not a base load, it
is time-of-day sensitive and cannot be stored (at this moment, future innovation discounted),
which makes thermal electricity better reliable. If no invention take place on this field then
this may result in increasing demand of coal.
Imports: Domestic coal availability has eased considerably with record high stockpiling of
coal at pit head and plant head. Simultaneously, railways do not report any capacity shortage
on transportation. However, the imports for this year are still expected to increase. The reason
behind this is that in the world market the recently auctioned mines that are coming into
production in light of depressed commodity prices which have made it cost effective to
import than mine locally. This will in all likelihood reduce the foot off the accelerator if not
apply brakes on additional captive capacity coming online and also negatively impact further
auctioning of mines for end-use plants, spilling into lower price realisation from domestic
coal which is suffering from over supply at the moment. It is quite possible there could be a
price cut in CIL coal. This implies the private sector targets for 500 million tonne of coal may
remain a non-starter.

Private Mining: Private capacity mining augmentation within the specified timeframe is
behind schedule, and with an unrealistic compound annual growth rate of almost 60% for this
sector (to contribute 500 MT out of 1500 MT). A depressed commodity market and
favourable macro situation (with low coal prices) means pressure on imports will remain.
However, with lower output from the private sector, even a lower total domestic demand
would still leave a residual demand on the shoulders of Coal India Limited, which would
have to grow significantly.
Increasing scrutiny on environmental impact: The Indian government has put out stringent
environmental conditions for upcoming thermal plants. Going forward, it is expected that
there would be increased oversight and more stringent standards for pollution monitoring,
imposing costs on generation companies and also impacting coal quality requirements. This
can perhaps increase use of washed coal or there could be an import substitution of domestic
coal. Ministry of Environment, Forest and Climate Change would probably move for the
older public sector state/central to either shape-up or shut down. This would allow weak
plants to either be improved or be removed from the pipeline, which will help in improving
PLF (Plant Load Factors) and capacities coming online and demand growth balance could be
maintained.
5-year investment already locked in the sector: For the near future the demand sectors have
already been locked into consumption trends that are determined by technology of the
upcoming capacity and appropriate coal quality. Any changes in these parameters are not easy
hence, impervious to any policy changes at this stage however, future plants ~10 years would
be more amenable to change considering no sunk costs and greater flexibility in
commissioning new capacity. Also, reduction in future PLFs is a scenario, whereas newer
plants could displace older plants as they are more efficient and less polluting. Choice of
supercritical power plants in the future can also impact not just efficiency and tons
requirement but also type of coal (coal grade, coal quality/variance, etc.), all of which point
to either imports or washed coal.
In the backdrop of increasing coal demand and reliance on coal for power generation,
collective effort of the government, power producers, coal miners and service providers are
necessary to ensure modern and sufficient infrastructure.