4 Coal Insights, February 2016

COnTEnTs

14 Steam coal offers marginally up in February

16 Coking coal offers firm up marginally in Feb

18 India’s coal output at 64% of annual target

22 India adds 2,280 MW capacity in December

24 India’s December cement output up 17% m-o-m

26 India’s coal, coke imports down 8% till Jan

28 India needs Rs 1,700 crore per day to build infrastructure for 5 years

30 Dignity of (contract) labour denied?

31 India’s renewable energy future looks bright

40 There is need to move beyond conventional renewables

44 Shree ki Paathssala

45 CIL Q3 net up 14%, backed by production growth

46 Power index edges down in February

47 Corporate update

50 US power sector coal consumption falls 12%: EIA

51 2016: Beginning of India’s reign over global coal industry?

58 Thermal coal handling by major ports up 13.3% in Apr-Jan

60 Railways’ December coal handling up 4.68%

62 E-auction data

64 Port data

56 | LogiStiCSVizag Port plans new `313-crore coal terminal The port is also set to become the first to run fully on solar power, says deputy Chairman, P L Haranadh.

42 | iNtERViEwgrowth in steel, cement can pull up coal demandCIL confident about 1 bn tons of production, but concerned about demand growth, says S N Prasad, Director (Marketing).

55 | iNtERNAtioNALRBCt 2015 coal exports up 5.9%Of the total exports during the year, as much as 47.47 percent or 35,787,468 tons went to India alone.

36 | SPECiAL FEAtuREocean powerEnergy tapped from the heat trapped in the ocean surface and from tides and waves can be the next big thing in renewables.

6 | CoVER StoRY“MCL strives to revolutionise the use of modern tech in mining”The miner may see a shortfall of 10 mt this year, but will achieve the 2020 target, says A K Jha, who has taken over as CMD.

6 Coal Insights, February 2016

COvER sTORy

“MCL strives to revolutionise the use of modern tech in Indian mining”

Coal Insights, February 2016 7

COvER sTORy

Excerpts:

It is perhaps a kind of homecoming for you now that you are back in the Coal India fold. How do you describe your feelings?

Interestingly, I took over as CMD of MCL on November 1, 2015 which coincidentally happened to be Coal India’s Foundation Day!

Coal India will always remain the mother organisation as I had started out in my career as a mining engineer in 1983 after completion of B.Tech from Indian School of Mining (ISM), Dhanbad. After serving for 30 years in the coal industry, I was appointed as Director, MOIL in 2013.

After two years, I am now back in the coal industry. Hence, it has been an integral part of my professional career. My tenure at Central Coalfields Limited (CCL) and Central Mine Planning and Design Institute (CMPDIL) has provided me with an enriching professional experience. Thirty years in this industry has helped me to get a ring-side view of coal mining. Coal India will always be a vital part of my life.

How do you describe the coal market scenario in India at present? How optimistic are you about the coal industry achieving

the government’s stated goal of becoming independent in coal supplies in 2-3 years?

India has huge amount of coal reserves but the demand curve of the sector is always on the rise. The Indian coal market is set to witness a great boost in the near future because of the rising government initiatives. Although there has been a drastic growth in India in coal production, the reliance on coal imports has not declined at a substantial rate.

At MCL, our primary role is to fulfill the production target fixed by the government and Coal India Limited (CIL). Hence, we focus on meeting targets and decreasing the deficit in demand and supply to prevent any insurgent price imbalance in the coal market. Coal pricing is determined by the level of demand and supply. So, if we can match supply with demand, there will be stability in the market.

Coming to MCL, what are the production and offtake numbers you are expecting to achieve this year?

The production and offtake targets for FY2015-16 are both 150 million tons (mt). With the current growth rate we are quite positive in achieving the targets. Up to January 2016, MCL’s production and

For Mahanadi Coalfields Ltd (MCL), it is both the best and worst of times. Best, because the miner is likely to emerge as the largest coal producing subsidiary of Coal India Ltd (CIL) this fiscal (2015-

16), and worst, because it looks destined to suffer a significant shortfall in production when all other miners are set to achieve their respective targets. Till January 2016, MCL ranks at the top of the chart in terms of coal output (111.07 million tons), but at the bottom in terms of targets achieved (93 percent).

The scenario may improve slightly in the coming months, but the fact remains that few other miners face constraints as heavy as MCL does. Poor quality of coal (with very high level of ash content), perennial land acquisition issues and nagging logistics problems are but few of the hurdles that the company has to face on a daily basis.

And yet, A K Jha, the new Chairman-cum-Managing Director, MCL, sounds the least perturbed. A mining engineer with three decades of experience in the Indian coal sector, Jha is happy to announce his “homecoming” after a brief stint at MOIL. In an exclusive interview with Arindam Bandyopadhyay, he shares MCL’s plans to overcome all odds and achieve its targets and, more importantly, to revolutionise the Indian coal industry with the use of modern equipment and mining methods.

offtake figures were 111.07 mt and 114.72 mt, respectively.

However, because of dearth of land availability, the issue of forestry clearance particularly due to NOC under FRA 2006 in projects like Ananta, Kaniha and Lajkura, R&R/law and order problems in projects like Hingula and Balram this fiscal, there is a chance that we could fall short of the target by about 10 mt. MCL is expected to achieve around 140 mt of coal production and offtake with a growth of around 15 percent in financial year 2015-16.

Could you please elaborate on the growth plans and production targets by 2020?

While Coal India is planning to produce 1 billion tons of coal per annum by 2020, MCL has to share a huge chunk of it, 250 mt to be precise, which is equivalent to 25 percent of the overall target. Keeping in view the new projects in the pipeline and fast acquirement of requisite clearances, we presume that we are on the right track to reach our target.

MCL has been striving to revolutionise the coal industry in the usage of modern technology. Be it the IT advancement in coal or the despatch of premium quality coal to customers, MCL will reach its prime in the years to come. About 8 silos and 7 washeries are being set up to achieve a scenario of quick despatches and supply of top quality coal. MCL has to implement several greenfield projects, along with expansion of capacities of existing mines, to achieve the above target. For coal evacuation, major infrastructures like new railway lines, multi-lane concrete roads, and several automatic rapid loading systems have to be constructed within a short span of time.

Could you tell us about the mix of old and new mines at MCL? What is the status of MCL’s mega project at Siarmal?

The inception of MCL was in the year 1992 as it was carved out of South Eastern Coalfields Ltd (SECL) but history of coal in Odisha dates back to 1837 where its discovery was made at Gopalprasad, Talcher Coalfields. In 1906, the Hingir-Rampur underground (UG) mines were opened in Ib

18 Coal Insights, February 2016

fEATuREfEATuREfEATuRE

India’s coal output at 64% of annual target till Dec

Sanjoy Bag

India’s coal production crossed 447 million tons (mt) in the April-December period of the current financial year

(2015-16). The production level achieved in the first nine months was just 64 percent of the annual targeted volume of 700 mt.

The nine months’ target in 2015-16 was 493 mt, meaning there was a shortfall of about 55 mt.

So far, nine months have passed by but the targeted production volume has just crossed the 64 percent mark and, going by this trend, many feel, it would be hard to achieve the targeted production volume of 700 mt in fiscal 2015-16.

“The country has failed to achieve the April-December target. However, it is time to be on course and try meeting the annual output target. However, it would be a herculean task to meet the shortfall during the rest of the year,” an industry source said, commenting on the production scenario.

Of the total targeted production of 700 mt, 550 mt is to be produced by Coal India (CIL), 56 mt by Singareni Collieries Company (SCCL) and 94 mt by captive coal mines.

The country’s total coal production during the month of December 2015 was 61.95 mt, up 6.13 percent over 58.37 mt achieved in December 2014, the data showed. CIL’s output in December 2015 was 52.07 mt, which was just above the targeted 51.08 mt, but higher than the November production figure of 47.47 mt.

SCCL, on its part, produced

5.74 mt and the captive coal blocks 4.14 mt in December 2015.

Captive coal output falls 34% y-o-yCoal production from the captive blocks in India fell 34.28 percent to 4.14 mt in

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Coal Insights, February 2016 31

Besides the ongoing policies and programmes of the government in renewable energy , several policy measures recently initiated to achieve this up-scaled target, inter-alia, include suitable amendments to the Electricity Act and Tariff Policy for strong enforcement of the Renewable Purchase Obligation (RPO) and for providing Renewable Generation Obligation (RGO); setting up of exclusive solar parks; development of power transmission network through the Green Energy Corridor project; identification of large government complexes/ buildings for rooftop projects; provision of roof-top solar and 10 percent renewable energy as mandatory under the Mission Statement and guidelines for development of smart cities; amendments in building bye-laws for mandatory provision of roof top solar for new construction or higher FAR; infrastructure status for solar projects; raising tax-free solar bonds; providing long tenor loans; making roof-top solar a part of housing loan by banks/ NHB; incorporating measures in the Integrated Power Development Scheme (IPDS) for encouraging distribution companies and making net-metering compulsory and raising funds from bilateral and international donors as also the Green Climate Fund to achieve the target.

The details of year-round achievements of the Ministry of New & Renewable Energy are as follows:

India’s renewable energy future looks bright

Coal Insights Bureau

India, by increasing five-fold the renewable energy capacity target under the Jawaharlal Nehru National Solar

Mission (JNNSM), will become one of the largest Green energy producers in the world, surpassing several developed countries. The total investment in setting up 100 GW will be around `600,000 crore.

Indeed, the country is running the largest renewable capacity expansion programme in the world. The government is aiming to increase share of clean energy through a massive thrust on renewables. The year started with Prime Minister Narendra Modi’s statement that “India is graduating from megawatts to gigawatts in renewable energy production. The quote itself set higher expectations of clean energy generation in the country. The target of 20,000 MW of solar power proposed to be installed in the country has been reset by the NDA government to achieve five times more at 1 lakh MW of solar power by 2022.

The target, which looked overambitious,

now seems to be within the realms of reality with several states already witnessing a silent revolution in terms of rooftop solar power generation with the launch of net metering in the country.

As on October 31, 2015, cumulative capacity of about 38 GW of grid-interactive renewable energy capacity has been installed in the country. Confident by the growth rate in the clean energy sector, the Government of India, in its submission to the United Nations Framework Convention on Climate Change on Intended Nationally Determined Contribution (INDC) has stated that India will achieve 40 percent cumulative electric power capacity from non-fossil fuel-based energy resources by 2030 with the help of transfer of technology and low-cost international finance, including from the Green Climate Fund.

The Centre has taken several initiatives to increase the uptake of renewable energy through policy initiatives, including enactment of a national off shore wind energy policy and throwing support behind generation-based incentives and accelerated depreciation.

sPECIAL fEATuRE

42 Coal Insights, February 2016

coal will certainly rise. Right now, there are threat perceptions. But, later on, once the growth trajectory comes along, this can be taken care of.

As of now, there might be a feeling that there is a need to cut production because of huge stocks lying with power plants. But I am sure demand will rise and the government is already working in this direction. The government has already gone ahead with tendering of infrastructure projects and there will certainly be many more things in place.

Coal demand has not grown as per expectation during the past few years and there is pressure on prices all over. In such a situation how far can CIL stretch to maintain pithead stocks?Yes. The international scenario has changed a lot and crude oil prices have slipped sharply.

If crude oil softens then naturally it will have an impact on coal prices as well. In addition, there is a significant increase in gas availability.

Then we have opted for Greener energy alternatives. Actually, the growth in demand that was envisaged is not happening. The indices, based on which the demand trajectory was made, have not improved.

If the situation continues like this, then our stocks will rise and we will keep the normal stock of one-and-half or two months. We are producing, on an average, 45 million tons per month and as such we can keep stocks up to 100 million tons maximum .

Sometime in 2012, the pithead vendible stock of CIL had touched a high of around 66 million tons?But these levels were reached when CIL’s production level too was very low. If you go by that, today our production is much higher. Back then, the stocks were for almost two months and at today’s production level, stocks of two months is the maximum that we can keep and it would mean around 100 mt. Stock management is a challenging job and we cannot go on adding.

The special auction of coal conducted in November-December went on smoothly.

Excerpts:

How do you feel about the new job?I took over the assignment only yesterday, ie, February 1! It is really a challenging one against the backdrop of the current market scenario and the present growth in power demand. If we have to produce 1 billion tons (the target given to Coal India), this coal has to be sold too. Naturally, the growth in other sectors should be commensurate with our growth. There has to be synchronisation of our growth with that of the other consuming sectors. Only then that coal will get sold.

Today, with coal stocks with power plant at such levels, there is a feeling that CIL will go for production cuts. What are your views on this scenario?It is a volatile scenario as on date but which may turn around. There are many development plans of the government on the anvil. Once these take off – like smart cities etc, requirement of coal will automatically rise with the demand for steel, cement etc. The demand for coal, along with other commodities, will also increase and surely there will be an increase in power demand. Once the demand from other sectors, which are drawing coal, increases then demand for

Growth in steel, cement can pull up coal demand

InTERvIEw

Coal India Limited has been set a target of 1 billion tons of production by 2020, but the moot point is that the entire volume has to be

sold too. If that has to happen then there has to be concomitant growth in the consuming sectors as well, S N Prasad, Director (Marketing), Coal India Limited, tells Rakesh Dubey of Coal Insights in a freewheeling

interview. Government policies like Smart Cities can boost demand for steel and cement, which, in turn, can fuel demand for coal.

66 Coal Insights, February 2016

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