Title : COAL SECTOR IN INDIA

Date : Dec 12, 2021

Description :

Based on a News Article published in the ‘The Hindu’ on 11th December 2021 on Page Number 5

 

Useful for UPSC CSE Prelims and Mains (GS Paper III)

 

 

 

1

Introduction:

 

• In India, coal is the most important and abundant fossil fuel.
• It provides 55 percent of the country's energy requirements.
• The country's industrial history is based on domestic coal.
• In the previous four decades, India's commercial primary energy consumption has increased by almost 700 percent.
• India's current commercial primary energy consumption per capita is around 350 kgoe/year, which is significantly lower than that of wealthy countries.
• India's energy consumption is predicted to rise as a result of its growing population, expanding economy, and desire for a better quality of life.
• Given the limited reserve potentiality of petroleum and natural gas, environmental constraints on hydel projects, and the geopolitical perception of nuclear power, coal will continue to play a prominent part in India's energy landscape.

 

 

Production of Coal in India:

 

• It was feasible to increase the All India coal output to 730.354 million tonnes in 2018-19 (Provisional) with a positive growth of 7.9% thanks to a continuous investment programme and a higher emphasis on the deployment of current technology.
• To meet the demands of the consuming sectors in various locations, Coal India Limited has established Regional Sales Offices and Sub-Sales Offices around the country.

 

Coal Imports:

 

• According to the current import policy, coal can be freely imported (under Open General Licence) by customers depending on their commercial prudence and demands.
• Steel Authority of India Limited (SAIL) and other steel producing companies import coking coal to bridge the gap between demand and indigenous availability, as well as to improve product quality.
• Non-coking coal is imported by coal-fired power plants, cement factories, captive power plants, sponge iron plants, industrial customers, and coal traders.
• Pig-Iron makers and Iron & Steel industry users use mini-blast furnaces to import coke.

 

The following are the details of coal and product imports, such as coke, for the last six years:

 

• Reserves of Coal:

 

• Up until April 2018, a total of 319.02 billion tonnes of geological coal resources had been estimated in the country as a consequence of exploration carried out up to a maximum depth of 1200 metres.
• Hard coal deposits, which are scattered throughout 27 major coalfields, are primarily found in the country's eastern and south central regions. The world's lignite deposits are estimated to be over 36 billion tonnes, with 90 percent of them located in Tamil Nadu, India's southernmost state.
• Jharkhand, Odisha, Chhattisgarh, West Bengal, and Madhya Pradesh are the top five states in India in terms of total coal reserves.

 

Resources are classified into different categories as follows:

 

• The older Gondwana Formations of peninsular India and the younger tertiary formations of the north-eastern region include India's coal deposits.
• The resources are categorised as 'Indicated' or 'Inferred' based on the findings of Regional/ Promotional Exploration, where boreholes are typically spaced 1-2 kilometres apart.
• Following that, in selected blocks where boreholes are fewer than 400 metres apart, detailed exploration upgrades the resources to the more dependable 'Proved/Measured' category.
• The table below shows India's coal resources by formation and category as of 1.4.2018:

 

 

 

Coal classification:

 

 

• Coal is made up of organic materials and wood. When extensive swaths of forest are buried beneath sediments, heat from below and pressure from above cause wood to burn and degrade. The phenomena produces coal, but it takes hundreds of years to complete.
• Coal can be classified according to its carbon content and time period.

 

It can be categorised into three categories based on their carbon content:

 

• Anthracite: It is the best quality coal, having the highest calorific value and a carbon concentration of 80 to 95 percent. It has a slow-burning blue flame and is found in modest amounts in Jammu and Kashmir.
• Bituminous: It has a high calorific value and a low moisture content, with 60 to 80 percent carbon content. Bituminous deposits can be found in Jharkhand, West Bengal, Odisha, Chhattisgarh, and Madhya Pradesh.
• Lignite: It has a carbon concentration of 40 to 55 percent and is frequently dark in colour with a high moisture content, resulting in smoke when burned. Lignite deposits can be found in Rajasthan, Lakhimpur (Assam), and Tamil Nadu.
• Peat: It is the first stage of the conversion of wood to coal, with a low calorific value and a carbon concentration of less than 40%.

 

What is the state of India's coal industry:

 

• India needs to import about 213 million tonnes of coal, and some Indian corporations have purchased coal mines in other countries to secure a steady supply. India's energy needs and fiscal health are both harmed by its reliance on imported high-quality coal.

 

The terrible state of the coal sector can be attributed to the following factors:

 

• Delays in environmental and forest clearances: In the past, the environment ministry categorised ecologically sensitive areas as 'Go or No Go zones,' with no mining allowed in no go areas.
• Other clearances from the state and federal governments are also necessary.
• Problems with land acquisition.
• Insufficient technology.
• The procedure of allocating resources was arbitrary, discretionary, and opaque.
• There was no consideration of merit, and no process for determining the price of national resources.
• For more than four decades, the PSU Coal India was the only commercial miner in the country, exhibiting monopolistic tendencies in the sector. The mining industry's monopoly proved unable to meet domestic demand.
• Coal India's low productivity is still a source of concern.
• Because of tight regulatory issues, coal plants have greater operating and maintenance costs.
• India's electricity regulators do not update tariffs on a regular basis to account for increases in operating expenses as a result of regulation.
• The effectiveness of state pollution control boards in monitoring and enforcing compliance is questionable.
• India's power generation expansion has been substantially financed by the government, with many coal power stations being built with massive debt funding from state-owned banks.
• It demonstrates that overseas investment in coal-fired power plants in India has been minimal.

 

Initiatives by the government:

 

• The Ministry of Coal launched the UTTAM (Unlocking Transparency via Third Party Assessment of Mined Coal) application for coal quality monitoring in April 2018.
• The app's goal is to increase openness and efficiency in the coal quality monitoring process, as well as bring coal governance closer to the people.
• The Cabinet Committee on Economic Affairs (CCEA) has approved a new coal linkage strategy that uses reverse auction to assure adequate fuel supply to power plants. The new strategy will aid in ensuring that fuel is delivered to power plants in a timely and orderly way.
• The Ministry of Coal has developed the Online Coal Clearances System to give its investors a single point of contact for all licences, clearances, and approvals granted by the Ministry of Coal.
• The Coal Allocation Monitoring System (CAMS) was created to track the transparent allocation of coal by CIL to States, States to SNA, and SNA to such consumers.

 

Reforms in the Coal Sector:

 

• Commercial coal mining is being made available to Indian and foreign enterprises in the private sector.
• On February 20, 2018, the CCEA approved the mechanism for auctioning coal mines/blocks for commodities sale. The move has been described as the sector's most comprehensive overhaul since it was nationalised in 1973.
• The auction will take place on an open internet platform. The price offered in rupees per tonne, which would be paid to the state government on real coal production, will be the bid parameter.
• By transitioning from a monopoly to a competitive market, this change is projected to improve efficiency in the coal business.
• It will boost competitiveness and enable for the utilisation of the most cutting-edge technologies available in the industry.

 

• Commercial coal mining is allowed, with 50 blocks to be offered to the private sector, according to announced reforms in the coal sector.
• Entry requirements will be relaxed because the regulation mandating power plants to utilise "washed" coal has been repealed.
• Instead of a predetermined price, coal blocks will be offered to private enterprises on a revenue sharing basis.
• Coal gasification/liquefaction will be rewarded with a revenue sharing rebate.
• Coal India's coal mines will auction off extraction rights for coal bed methane (CBM).

 

Benefits Expected out of this:

 

• Closing the Supply Gap: Domestic coal may only be mined by public sector businesses once coal was nationalised in 1973.
• In pursuit of this goal, Coal India Limited (CIL) increased coal production to historic levels, becoming the world's largest coal miner.
• The country's coal demand, on the other hand, grew at a considerably quicker rate. As a result, coal imports increased by 23% between 2009 and 2014.
• Commercial coal mining can help to expand domestic coal production and close the supply gap.
• Boost the economy and create jobs: Allowing commercial mining could help India meet its coal production needs, as well as give investment opportunities and save money.

 

• Because thermal power plants provide virtually all of India's electricity, this will play a critical part in guaranteeing the country's energy security.
• The impact on industries that use coal, such as steel, power, and aluminium, will be severe.

 

Win-Win Situation:

 

• The government has moved away from set tariffs and toward a revenue-sharing model, resulting in a more equal system of revenue sharing.
• When prices rise, the miner shares more with the government, and when prices fall, the miner shares less with the government. For all sides, this is a win-win situation.

 

Associated Obstacles:

 

• While reforms are aimed at removing Coal India Ltd.'s monopoly, this is unlikely to happen anytime soon.

 

• Coal India will make it harder for the current commercial coal mining regime to compete. Coal India has long-term purchase agreements with India's largest coal consumers (thermal power plants and the steel industry).
• Many firms will also find it difficult to match Coal India's ability to manage the many bureaucratic and political hurdles that come with building new coal mines.
• Coal not being washed is a problem: The elimination of the rule mandating power stations to utilise "washed" coal will have significant environmental and economic consequences.
• In 1997, the "washing" requirement was enacted, promising the use of cleaner coal in electricity generation. Despite the climatic problem, it was India's only legitimate argument for continuing to use coal as a development fuel.
• In addition, a manufacturing or power-generating unit must burn more coal, resulting in the production of noxious gases, particulate matter, and carbon emissions in addition to ash.

 

Next Steps:

 

• A single-window clearance process for coal mines is needed to make commercialization of coal easier.
• Offering projects with pre-approved clearances will speed up development and encourage industry participation.
• To guarantee that coal mines are operational in a timely manner, the government must encourage early resolution of land acquisition-related concerns.
• Furthermore, investment in initial infrastructural arrangements, which is more capital intensive than mining, can help commercial mining initiatives.
• Measures to improve the productivity of coal mines and recoveries from coal mines will be implemented.
• To bolster domestic resources, the government may consider creating funds to support overseas acquisition.
• Research and exploration operations, as well as sophisticated subsurface mass production methods, must be promoted.

 

Tags : Coal India Limited, Commercial coal mining