Coal Insights, October 2013 3

Dear Readers,

The festive season is over. The upbeat mood was briefly interrupted by the threat of a massive cyclone on the eastern coast. Fortunately, except for some damage in the coastal region, there were no massive destructions, as feared. The bad news is, there was no significant upturn in the economy.

In the coal sector, there was a real shocker no less threatening than the cyclone. In its fresh list of suspects, CBI named Aditya Vikram Birla Group chief Kumar Mangalam Birla along with former Coal Secretary P C Parakh in the coal scam. This is something unprecedented and evoked a strong reaction from India Inc.

Whatever be the implications and outcome of the CBI investigations, the writing on the wall is that it is going to further affect the future prospects of captive coal mines. And the government is expecting to garner 100 million tons of captive coal production in the next few years!

If we think the auctioning of blocks is going to solve the issue, then we need to be corrected. The real issue was delay in development of blocks and production thereof. That was why the CAG decided to release a report on the subject. That issue remains and will remain unless the government does something about expediting the statutory clearances.

Now, if you thought the CAG has washed its hands of the allocation scam, here is some news. The statutory audit body has dealt a blow again. In a recent report, CAG has put to question the outcome of the massive afforestation drive taken by the government and miners.

This issue of Coal Insights, while dwelling on the latest CAG findings, reminds readers that coal reserves in India are not an issue. What is, is whether this inventory can be mined at all! India needs to revisit its policies and curb coal imports to save the drain on precious foreign exchange.

Also, the India Coal Market Conference, which was recently organised by mjunction services limited and IHS McCloskey, has been covered in detail, with distinguished speakers holding forth on key issues plaguing coal today. For instance, the new railway projects for coal evacuation must get the Green signal from the MoEF while global steam coal prices are slated for a slow growth.

Moreover, the minor ports of India are taking huge strides and may soon surpass their major counterparts.

Happy reading,

(Rakesh Dubey)

EDITORIAL

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Editorial BoardAlok Srivastava, General Manager, MMTC LtdAmitabh Panda, Group Director (Shipping & Logistics Operations), Tata Steel GroupAnirudha Gupta, Mining & Metals Professional and former Director of P&H Joy Mining Equipment India LtdAshok Jain, Managing Director, Saumya Mining LtdDeepak Bhattacharyya, Chief - Horizon 1 businesses, mjunction services ltdGanesan Natarajan, WT Director, President & CEO, Ennore Coke LtdLawrence Metzroth, Vice President – Analysis & Strategy, Arch Coal IncM K Palanivel, President – All India Bulk, Samsara GroupP S Bhattacharyya, Executive Director, Deepak Fertilisers and Petrochemicals Corporation LtdS N Choubey, Head – Commercial, ABG Cement LtdSandeep Kumar, EIC (Secondary Products), Tata Steel LtdShyamji Agrawal, AVP-Central Procurement Cell, Ultratech Cement LtdSuresh Thawani, Former Managing Director, Tata Sponge Iron LtdAdvertisingSoumitra Bose, Tel: +91 92310 00232, Email: soumitra.bose@mjunction.inSumit Jalan, Tel: +91 91633 48243, Email: sumit.jalan@mjunction.inSubscriptionRachita Das, Tel: +91 91633 48045, Email: rachita.das@mjunction.inToll Free No.: 1800 4192 000 1. Press 8 for publicationEmail: publication.tbss@mjunction.inDesignDebal Ray, Sobhan JasFor suggestions, feedback and queries, please write to coalinsights@mjunction.in

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4 Coal Insights, October 2013

COnTEnTs

38 | FEATURE‘Co-operation from IR, MoEF a must to address demand’ CIL seeks faster implementation of logistics projects to achieve production target.

42 | FEATURESCCL’s pills for coal’s ills Single window clearence mechanism to avoid cost overruns for mining projects.

20 | INTERVIEWNMPT eyes hike in coal handling capacityThe leading on the western coast aims to increase coal handling by 57% in three years.

50 | ENVIRONMENTCAG pulls up government over Compensatory Afforestation activitiesState, Central goverment and mining sector blamed for the dismal record.

6 | COVER STORyIndia must revisit its coal policies, curb importsThe onus of failing to utilise the coal resource would fall on the policymakers and their policy logjam.

Call 9163348243 for more details

24 Mundra Port aims to handle 200 mt cargo by 2020

28 Minor ports take major steps34 Steam coal prices steady in October36 Metallurgical coal loses heat in October43 ‘Coal enquiries yet to pick up’ 44 CIL launches roadshows for FPO45 Indian power sector’s capacity addition at

1,365 MW in Sept 47 India’s cement production falls 4.49% in Aug

m-o-m 48 Pet coke market dynamics set to change 55 Private generators shine through power

sector darkness 56 Excon 2013 to boost heavy equipment

sector 57 More distribution points are in the pipeline59 ‘Mining equipment demand declining’ 61 Is the global steam coal market losing

steam? 64 SEA change: South East Asia emerging as

major coal consuming region66 US coal consumption expected to rise to

936.2 MMst in 2013 67 A ‘loss’ cause 70 Track changes: Railways facing MoEF

roadblocks on coal projects75 Traffic handling by major ports up 2.33% in

April-September76 Railways’ coal handling edges up 1.17%

m-o-m in Sept

6 Coal Insights, October 2013

COvER sTORy

India must revisit its coal policies, curb imports

Coal Insights Bureau

After the w o r l d was formed

and the water bodies filled, God sprinkled minerals across the land masses. Some of these fell on Indian shores and turned black. Centuries later, when these black materials were put to use, the Indian planners re-designed the economy banking on the abundance of this mineral resource. But then, much of it was pilfered and wasted and major portions couldn’t be extracted as they were slightly below the ground. Whatever little was burnt as fuel was done so inefficiently and for idle purposes. All these led to costly imports of the mineral from overseas locations that had

experienced similar endowments. Then, one day, it was found that the whole economic system has become uneconomic due to the dependence on the imported material!

If someone wrote the history of the coal age in India, the above narration could be a likely

synopsis. To any coal historian,

the onus of failing to utilise the resource

would fall on, more than anyone else, the

policymakers and their policy logjam. The measures

taken to increase production growth have more often than not

proved self-defeating with one proposal contradicting yet another. All in all, it would

not be an exaggeration to say that the biggest hurdle to coal production and utilisation in India has been the government’s self-restricting policies. It is time the powers that be revisits these to curb outgo of precious foreign exchanges, say experts.

8 Coal Insights, October 2013

Coal, coal everywhere

It would be hardly an exaggeration to say that India’s current growth prospects depend on a single fuel, ie, coal. While the transport sector cannot but depend on imported crude oil, industrial growth is largely dependent on the supply of coal, domestic or otherwise.

India’s coal reserves have increased by more than 20 billion tons in the last three years, roughly the proven reserves of Indonesia, the world’s largest coal exporting country. Total proven coal reserves in India stood at around 123 billion tons as of April 1, 2013, according to estimates by the Geological Survey of India (GSI). At the current level of production, the reserves are likely to sustain for more than two centuries, compared to the global average of 112 years.

India has around 10 percent of the world’s total proven coal reserves. This is slightly below the 12.5 percent share of China, the top producer of coal in the world. Given the huge difference between the production levels – India produces around one-sixth of Chinese output – India’s coal reserves are expected to sustain much longer.

“For India, coal reserves are not a problem. There are doubts over the authenticity of the GSI estimates, as some of the agencies and researchers raised objection to the measurement methods used for such estimation. Nevertheless, the fact remains that there are huge reserves of coal in the country. This is unlike countries like Indonesia, where depleting reserves may cause a concern, sooner than later,” said a coal industry veteran.

“However, that is only half the story told. The real issue is, as is well known, whether these rich reserves can at all be mined!”

Not all coal to be mined

Ever since the coal sector was nationalised, miners in India have had taken recourse to the easy way of surface mining, which is not only cheap, but also requires little or no technological skills and is a less risky proposition. The share of underground mining has steadily reduced over the decades and continues to decline till now. Whenever there have been discussions on reviving underground mining, at the governmental or industry levels, the primary opposition has come from Coal India Ltd (CIL), the largest supplier of the fuel in the country. On rare occasions, CIL even made announcements of training its focus on the underground segment but, in reality, such declarations never fructified. Post listing of its shares, CIL finds little justification in going for the costlier option of underground mining.

One implication of this fascination

COvER sTORy

For India, coal reserves are not a problem. There are doubts over the authenticity of the GSI estimates, as some of the agencies and researchers raised objection to the measurement methods used for such estimation. Nevertheless, the fact remains that there are huge reserves of coal in the country. This is unlike countries like Indonesia, where depleting reserves may cause a concern, sooner than later. However, that is only half the story told. The real issue is, as is well known, whether these rich reserves can at all be mined!

123.181

142.631

33.1

Proved Indiacated Inferred

India’s coal reserves (bn tons)

Source: GSI

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