Policy Watch: Commercial Mining of Coal

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Policy Watch: Commercial Mining of Coal


Opening up commercial coal mining for Indian and foreign companies in the private sector the Cabinet Committee for Economic Affairs approved the methodology for auction of coal mines/blocks for sale of the commodity on 20 February 2018. The move has been defined as the most ambitious reform of the sector since its nationalisation in 1973.

Analysis:

  • Coal accounts for around 70 % of India’s power generation. Other modes of power generation used are hydro, wind, solar, biomass, nuclear, gas and diesel.
  • The move for energy security through assured coal supply is expected to gain attention from major private players like Rio Tinto, BHP, Vedanta, Anglo American, Glencore and Adani group.
  • The auction will be done on an online transparent platform. The bid parameter will be the price offer in Rupees/Tonne, which will be paid to the State government on the actual production of coal.
  • This reform is expected to bring efficacy into the coal sector by moving from an era of monopoly to competition. It will increase competitiveness and allow the use of best possible technology in the sector.
  • Till now, the Public Sector Undertaking, Coal India was the only commercial miner in the country for more than four decades. The Maharatna company accounts for around 82% of the coal production in India. It produced 554.14 million tonnes of raw coal in 2016-17.
  • Productivity of Coal India is still a concern. Coal is a very crucial raw material which is used in power sector and also in cement and metal sectors. So, there needs to be some benchmarking against the competitive players in the market.
  • Options of captive mining were given in the past. Captive coal mining means the coal is taken out by a company (mostly steel producing and electricity generating) for its own use and it won’t be able to sell it in the market. But it is better to bring these players directly and in a transparent way into commercial mining. Captive mines have not been productive as a steel producing company may not be good at mining coal.
  • India despite having a huge amount of coal reserves, imports a lot of coal, spending billions of dollars. This is because India chose monopoly for mining domestic coal, which is incapable of meeting domestic demands. For this reason, captive mining was allowed but, it proved to be inefficient. So, there is need to bring in commercial mining by other companies that will allow them to sell the coal in open market.
  • In long term, India needs to look at coal to gas, coal to liquid and ultimately coal to fertilizers & chemicals. China has already put up a lot of coal gasifiers. Coal gasification is the process of producing syngas (CO, H2, CO2, CH4 and H2O) from coal and water, air and/or oxygen. This can be used for electricity generation, converting syngas to gasoline and diesel, converting methane to LNG, etc.
  • Mining in India has been very inefficient as mainly open cast mining is done. Deep underground mining is not always done. But once competition comes into picture, underground mining will be done. This requires a lot of safety precautions and their enforcements.
  • Indian coal is high in ash content, but it is very low in Sulphur. So, coal beneficiation should be done to reduce the ash content and improve its grade. This will reduce the transportation cost of the coal which is done mainly by railways.

Conclusion:

The arrival of private players in the coal mining practices can bring a lot of better things     in picture. More efficient mining, better efficient of the given mine, going deep underground and better quality of coal can be produced. This shall be helpful for the Indian economy and power sector in particular.