4 Coal Insights, June 2015

COnTEnTs

21 Steam coal offers ease in June 22 CokingcoaloffersfirmupinJune 26 India’s coal output up 7.9% in April 28 India’s coal, coke imports up 11% in April-

May 30 India’s proven coal reserves rise to 131.6 bn

tons 32 CIL’s outstanding from consumers spurt to

`11,000 cr 34 CoalIndiaisnotgivenfreehandtofixprices:

Swarup 35 No national power generation capacity

addition in May 37 “Makecoalsupplytopowerplantsflexibleto

match consumption” 38 Ample pet coke availability till Q3 of 2016:

Sources 40 India’s cement output down 1.76% in April

m-o-m 46 Third round of auctions for 10 blocks in

August 48 CIL advises TPPs to blend MCL coal with

others 49 SCCL taking cautious approach in foreign

assets acquisition 50 Martin Engineering to localise manufacture of

industrial vibrators 52 Corporate updates 54 US power sector coal use to drop 7% in US 61 Renewables shine, fossil fuels falter in 2014:

BP 63 Jharsuguda-Barpali railway, international met

coke prices create buzz 65 Volvo crosses landmark of 10,000 truck

deliveries66 Thermal coal handling by major ports up

31% in April-May 67 Railways’ coal handling down 9% in April

m-o-m68 Supply data

55 | INtERNAtIoNAlAsian market could be vital for Russian coalThe dry fuel is emerging as an economic and political weapon for the country.

51 | CoRpoRAtEAdani may ship 1st vessel from Australia in 2018 Unfazed by controversy, the Group aims to start construction at Carmichael next year.

64 | logIStICSRomance and realism of Indian RailwaysV K Arora recounts the lost charm of the Railways, but nurtures high hopes for DFCs.

42 | SpECIAl FEAtUREAdding value to coal rejectsBio-methanation kindles hope for better utilisation of mounting coal rejects in India.

6 | CoVER StoRYCommercial mining: options wide openGovernment may open up coal sector in six months, but industry doesn’t look excited.

6 Coal Insights, June 2015

COvER sTORy

Commercial mining in India

Options wide openRakesh Dubey & Arindam Bandyopadhyay

The wait is over, finally!What seemed impossible a year

ago is fast emerging as a reality. The Union government has just got into the act to open up the coal sector for commercial mining, and promises to do it fast, as early as the next six months!

The trade unions are deathly quiet. So is the political opposition. Even the industry that waited long for this day largely maintains silence. The only voice that rings out is of the government. So, isn’t everybody convinced

of the move? Are there apprehensions about possible outcomes? Or, is it that the continued slackness in the economy is killing the excitement?

Whatever it is, there is no escaping the fact that the known face of the Indian coal mining industry is going to change forever. Only if…only if the history doesn’t repeat itself…!

History repeats, not in the same formStanding at the juncture of a new start, it may

not be extraneous to take a quick look back to the past. Coal mining in the country has had a long history of commercial exploitation, starting 1774, when the East India Company began exploiting the Raniganj coalfield in the then Bengal province.

For about a century the growth of Indian coal mining remained sluggish for want of demand. The introduction of steam locomotives in 1853 gave a fillip to coal mining before the production got a sudden boost from the First World War. During

Coal Insights, June 2015 7

COvER sTORy

But, before dealing with this issue of co-existence of a monopoly and competition, let us take a look at the structure proposed and methodology mooted for allowing private commercial mining in India.

A govt in haste The first concrete step, after prolonged speculation, towards allowing commercial mining in India came in the form of the new (Modi) government’s move to promulgate the Coal Mines (Special Provisions) Ordinance, 2014.

As recalled by a senior coal ministry official, the entire exercise of drafting the ordinance was done in a tearing haste to cope with the emergent situation that arose following the Supreme Court judgment cancelling the allotment of captive coal blocks.

“On the 15th of October (2014), I was called for a meeting with the law minister and power and coal minister. I was given the mandate that we now have to formulate an ordinance. It was a Thursday and we were told that the cabinent in its next meeting on Wednesday would be considering the ordinance. So we had about six days….Eventually, the cabinet meeting happened on Monday….The entire content of the ordinance was changed on Saturday morning with a meeting held at a very senior level where this concept of opening up the sector came about. That was a transformative part and therefore the entire ordinance had to be re-drawn,” said the official.

Afterwards, as the government went on auctioning the blocks, and tasted stupendous success too, the issue of auctioning linkages came up to rattle the industry. While everyone became concerned about the possible impact of yet another salvo, the government quietly followed up with commercial mining, and asked the industry chambers to come up with suggestions.

On June 23, apex chamber FICCI held a workshop to unveil the draft of ‘Suggested Framework of Commercial Mining’, a study done apparently at the behest of the government. The different methodologies for commercial mining, as elaborated in the approach paper, got appreciation from Swarup, who described it as a “beautiful report” to understand various dimensions of commercial mining and “a roadmap” for making it happen on the ground.

independence, production level was around 30 million tons (mt), produced entirely by private owners.

The first major step towards planned development of the Indian coal industry came in 1956 when the National Coal Development Corporation (NCDC), a Government of India Undewrtaking, was set up with the collieries owned by the railways as its nucleus. Also, the Singareni Collieries Company Ltd. (SCCL) which was already in operation since 1945 became a Government company under the control of Government of Andhra Pradesh in 1956, India thus had two Government coal companies in the fifties.

Over the next few years, it was increasingly being felt that the coal sector needed to boost output to cater to the growing power and steel sectors. However, the private owners were found lacking in infusing adequate capital investment. Also, unscientific mining practices adopted by some mines caused environmental damage and in some cases, major mining accidents. Finally, the rampant exploitation of labors and poor working conditions became matters of concern for the government, leading to the nationalisation of coal mines in the 1970s.

In fact, according to a top mining consultant, much of the problems related to the poor infrastructure of coal mines and their low efficiency/productivity could be traced to and should be blamed upon the bad mine plans (or, no mine plans at all) of the pre-nationalisation era. It was the rampant unscientific exploitation of resources by the then small private owners that created “a mess” in the coal sector!

As the industry stands at a crucial juncture, the mining veterans raise concerns over possible recurrence of such a mess, “may not be in the same form though”.

Death of a monopoly?For years together, any discussion about opening up of the coal sector has had boiled down to one observation, i.e. Coal India Ltd (CIL) losing its monopoly (or, near monopoly) status. For over a decade, a feeble attempt to create legal provisions for commercial mining has had been stalled by the unions on the pretext that it will spell doom for the coal monolith and its huge manpower.

Interestingly, both the unions and the industry are absolutely quiet on CIL this time around. Among the five unions of CIL, only one, the CITU backed All India Coal Workers’ Federation (AICWF) still continues to voice its protest, albeit only when pressed to comment on. The CIL management, expectedly, has no views to offer and that puts the onus on the government to clear up things.

The government, on its part, seems not to be very clear about the long term implications at this stage. However, from the recent announcements of CIL’s ambitious production target (of achieving 1 billion tons of coal by 2019-20), it is evident that the opening up does not imply embracing perfect competition.

Coal secretary Anil Swarup, asked to comment on the changing status of CIL post-competition, stood in the defence of the state-owned miner, saying: “CIL has a very definite purpose in this country. CIL’s job is to ensure that coal becomes available at a reasonable price for generation of power in this country.”

But then, won’t the continued pre-eminence of CIL defeat the purpose of allowing new entrants from the private sector? Swarup begged to differ. “If you think that (it may affect the) level playing field between CIL and others, I am not sure whether that is the right way of approaching it. The job is to ensure that coal becomes the ultimate objective. About 75 percent of CIL’s coal goes to the power sector. The government’s objective is to bring in 24x7 power and make it affordable in a manner that people are able to use it. I think CIL will continue to play a very prominent role in making available coal at a cheaper price so that power tariff does not go up.”

At the same breath, the secretary said, “We have clearly understood that commercial mining is essential in the context of meeting overall coal requirement of the country. We are looking at 1.5 billion tons of coal production by 2019-20. If that be my aim and if we are looking at CIL to do 1 billion tons, where does 500 mt come from? That’s where I was looking at commercial mining.”

While that may come as an assurance for CIL, unions and management alike, that may also pose a concern about the success of the government’s drive for commercial mining, according to some industry experts.

30 Coal Insights, June 2015

Coal Insights Bureau

India’s proven coal reserves stand at 131.6 billion tons as of April 1, 2015, according to the latest estimate by the Geological

Survey of India (GSI). The estimate takes into account coal reserves found up to the depth of 1,200 metres (m).

The current estimate shows an increase of 5.7 billion tons over GSI’s estimate of 125.9 billion tons in 2014. Total proven reserves were at 123.1 bn tons in 2013.

The increase in proved reserves in Inventory as of April 1, 2015 is mainly due to proving of coal resources in IB River (2,059.16 mt), Mand Raigarh (1,690.36 mt), Talcher

(896.35 mt), Hasdeo-Arand (432.56 mt), Wardha Valley (151.93 mt), Nand-Bander (133.98 mt), Barjora (86.52 mt), Godavari Valley (77.27 mt), Bishrampur (62.07 mt), Ramgarh (45.52 mt) West Bokaro (40.36 mt) and Raniganj (29.05 mt) coalfields.

The increased estimate corroborates geologists’ claim of abundant reserves of coal in the country and also consolidates India’s position among the countries having the largest coal reserves, along with the US, Russia and China.

However, not all of the proven reserves can be mined as the current technology available with the Indian miners allows mining up to only around 300 m.

Total reserves

India’s total coal reserves stand at 306.6 billion tons as of April 1, 2015, up from 301.6 billion tons in 2014 and 298.9 billion tons in 2013, the estimate shows. The addition to the total coal reserves in 2015 was around 5 billion tons, which was higher than 2.6 billion tons in 2014 and equal to 5 billion tons in 2013.

Of the total reserves of 306.6 billion tons, 131.6 billion tons were in the proven category, while 143.2 billion tons were in the indicated category and 31.7 billion tons were in the inferred category, data shows.

Interestingly, additions to the total reserves in 2015 were lower than the increase in the proven category, as there was a drop in the inferred category.

Of the total reserves in 2015, the share of proved reserves is 42.9 percent, while that of indicated and inferred reserves are 46.7 percent and 10.4 percent, respectively.

India’s proven coal reserves rise to 131.6 bn tons

fEATuRE

Difference between coal reserves (in mt)

Inventory as on proved Indicated Inferred total

1.4.2015 131,614.07 143,241.10 31,740.39 306,595.56

1.4.2014 125,908.94 142,506.29 33,149.22 301,564.45

Difference 5705.13 734.81 -1408.83 5031.11

42 Coal Insights, June 2015

Arindam Bandyopadhyay

It is often said, in the context of rampant use of pesticides in agriculture, that for India’s teeming masses, dying of

starvation is no better than dying of toxic food. In other words, in a country of 120 billion people, quantity has always scored over quality and the coal industry has not been any different. For years together, the focus has been on producing and burning more and more of the dry fuel, while little attention was given to cleaning that coal known world over for its high ash content.

However, once the ruckus over volume

diminishes, attention gets diverted to quality, and new challenges pop up. In case of coal, as growth in production has resumed, voices are being raised on making washing mandatory. But what will the country do with the huge volume of coal rejects that will be generated in the process of beneficiation?

Generally, coal rejects are used in fluidised bed combustion (FBC) plants for power generations, but such plants face several challenges. In fact, some industry experts believe, managing rejects is going to be the biggest problem in the coal sector in the future. In this context, a Visakhapatnam-based technology company

Adding value to coal rejects

sPECIAL fEATuRE

Bio-methanation may address problem of the future

has come up with a novel solution called “bio-methanation” of coal rejects. What makes the process remarkable, apart from the technological innovation, is that the solution is available even before the problem has emerged…!

Coal rejects to mountThe importance of coal beneficiation has been discussed in different fora for years together but little was achieved as old washery units faced gradual decay due to poor upkeep and new units were hard to come by. The delay in the setting up of new units could be blamed on the lack of genuine interest from Coal India Ltd (CIL) and coal consumers alike, according to industry sources.

In such a scenario, the Ministry of Environment and Forests came up with directives prohibiting transport of coal with more than 34 percent ash beyond a distance of 1,000 km from the pithead. The notification came in the late 1990s and the percentage was fixed after studies done by DuetscheMortanConsult (Germany) and Mott. Macdonald (UK), which indicated that Indian coal when cleaned to 34 percent ash, would, in general, retain 95 percent or more of energy. The distance criterion, however, was later revised downwards to 750 km (at present). From June 2016, this will be further reduced to 500 km.

To estimate the amount of rejects that will be produced due to the changes in the criterion, it is important to know how much coal is being transported to a distance of more than 500 km. The data on the current break-up of coal transportation is not available, but previous estimates indicate that around 50 percent of total coal despatches in India are meant for plants located beyond 500 km, implying that this 50 percent coal must conform to the 34 percent ash norm.

Over the last few years, due to limited efforts on linkage rationalisation and various strategic planning by miners and consumers, the share of coal being despatched to long distances is expected to have come down. As mentioned, the current figure is not readily available, but one can make educated guesses. As Railways carry about 60 percent of the coal despatches by the two major state-owned miners, CIL and Singareni Collieries Company Ltd (SCCL), it can be construed that at least 40 percent of total off-take is

Coal Insights, June 2015 55

only Russian coals are marching ahead in the global seaborne trade, but coal is being treated as a tool of diplomacy as well.

Here the story unfolds on a chilly January morning in Southern Siberian town of Kemerovo, the heart of the Russia’s coal producing region of Kuznetsk basin. Braving the chilly winds and icy flakes amidst the soft glowing winter sun, the then Prime Minister, Vladimir Vladiovich Putin, was busy in conversation with few coal miners along with a handful of high officials.

In fact, Prime Minister Putin was on a pre-election tour on that January 2012 morning. Keeping the goal of getting a six-year presidential term in the March 4 polls in mind (in which he rode to triumph with a thundering margin), Putin, who has been at the helm of power since 2000, was testing the

Asian market could be vital for Russian coal

Kingshuk Banerjee

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness,

it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us”: Thus were the opening lines of A Tale of Two Cities by Charles Dickens

Dickensian dilemma! On one hand, economic sanctions imposed by western powers are pushing the nation to the brink of disaster with inflation riding high and black clouds of unemployment looming large. With the crumbling of the

rouble, the much-needed oil revenue is falling far behind, leaving the giant Russian industry gasping for breath. The Ukraine crisis has added more burden on the economy as this former Soviet state is the originating point for natural gas supply pipelines to the majority of the European nations. The war clouds over Ukraine have pushed everything in the doldrums, making the energy-revenues-dependent Russian economy on the edge.

Worst of timesOn the other hand, the very crumbling of the rouble has helped open the doors of opportunities for the Russian coal industry. Seating on the world’s second largest coal reserves, Moscow is gradually comprehending the power of black gold. Not

InTERnATIOnAL

74 Coal Insights, June 2015

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