Coal

Coal is one of the main sources of energy in India. Accordingly, affordable and sustainable supply of coal is inextricably linked to the goal of ensuring energy security in India.

It currently accounts for 55% to 70 % of India’s total energy consumption (CSO 2013)

DetailsMillion Tonnes
Total consumption of coal942
Domestic Production730
Imports212

Reason for high reliance on coal – non-viability of large-scale use of alternate sources of energy.

It will remain the most viable fuel for driving economic growth for many years to come

see TERI and PSA 2006; Ministry of Coal 2005; Planning Commission 2005.

About 75% of the total coal produced in India is used for power generation

Coal Reserves In India – estimated at 286 billion tonnes. It is sufficient to meet India’s demand for at least the next 100 years.                                                              (Indian Bureau of Mines (IBM 2012),

India is the second largest coal importer, despite having the world’s fourth largest coal reserves and being the second largest producer

Coal Reserves in India

coal sector, which has dominant use in three core sectors i.e. power, steel, cement.

India has 4th largest reserves of coal and holds about 286 billion of world’s some 850 billion of proven reserves.

Indian coal is classified in 2 categories i.e.

  1. coking coal and
  2. non-coking coal.

This is a usage based classification, as coking coal is essential for Iron and steel industry.

More, streamlined classification is on basis of carbon content and stage of formation.

Coal is formed by fossils of plants, trees, bushes etc. which got deposited in shallow basins millons of year ago. Later decomposition by bacteria converts it into peat, which is generally unviable to mine. After this bio- chemical action ceases and geo chemical action becomes dominant. It results in gradual development of Lignite, Bituminous and Anthracite coal.

Peat is Impure, has very low carbon content (in turn calorific value) of about 40%. Lignite, bituminous, anthracite coal has carbon content of 40-60%, 60-80% and 80-90% respectively. Remaining matter in the coal is called volatile material such as moisture, ash content and sulfur content. These are gradually removed by metamorphic process i.e. pressure and heat.

Bituminous coal has special significance because it contains Bitumen which on heating in absence of oxygen is converted into coking coal. This removes volatile material in the coal and is further heated to get Coke, which is used in blast furnaces to extract iron from iron ore.

This type of Coking coal is what India lacks, as 88 % of reserves are of Non Coking type and rest 12 % have high Ash content. Indian Coking Coal is cheap and of poor quality and imported Coking coal is expensive and good quality. Steel industry blends both to secure a moderate cost and quality.

Production From These Reserves Has Been Dismal Mainly Due To Following:

(Screening committee specified time limits for production ranging from 36-54 months from time of allocation)

  1. Delayed environment and forest clearances:
    Environment ministry Classified ecological sensitive areas in ‘Go and No Go areas’.

Total prohibition is there on mining in no go areas.

And these areas contain 30 % of total allocated mining reserves.

  1. Further there are other clearances required from State and Central Governments.
  2. Land Acquisition problems
  3. Lack of adequate Technology
  4. Consent of Gram Sabha should be mandatory before commencement of mining and Some proceeds of mining revenue should go to ‘Districts Mineral Foundation’ for benefit of affected persons and their families.

This resulted in situation where India has to import coal to the tune of 171 million tons. In comparison Coal India produced 462 million tons of coal. Some Indian companies and also CIL have acquired coalmines overseas to ensure continuous supply.

  • Until now there were restrictions on who could bid for coal mines only those in power, iron and steel and coal washery business could bid for mines and the bidders needed prior experience of mining in India.
  • This effectively limited the potential bidders to a select circle of players and thus limited the value that the government could extract from the bidding.
  • Second, end-use restrictions inhibited the development of a domestic market for coal.
  • The ordinance essentially democratises the coal industry and makes it attractive for merchant mining companies, including multinationals such as BHP and Rio Tinto, to look at India.
  • The move was overdue considering that the country spent a huge Rs.1,71,000 crore in coal imports last year to buy 235 million tonnes; of that, 100 million tonnes was not substitutable, as the grade was not available in India.
  • But the balance 135 million tonnes could have been substituted by domestic production had it been available.
  • Commercial mining allows the private sector to mine coal commercially without placing any end-use restrictions. The private firms have the option of either gasification of the coal or exporting it.
  • They can also use it in their own end-use plants or sell them in the markets. The government expects more than Rs 33,000 crore of capital investments over the next five to seven years in the sector.
  • Further, with 100 per cent foreign direct investment allowed in the coal sector, global companies can also participate in the auctions. The complete freedom to decide on sale, pricing, and captive utilisation is expected to attract many private sector firms to participate in the auction process.
  • The government expects these steps will generate employment and reduce India’s import bill.

Allocation process was arbitrary, discretionary and non-transparent.

There was no consideration of Merit, no Price discovery mechanism for national resources (Auction is price discovery mechanism).

Further, no ‘minutes of meeting’ were available of screening committee meetings to verify what procedure was adopted by them (every government related meeting needs to prepare Minutes of meeting, which contain discussions, viewpoints, points of disagreements and consensus etc, for transparency and future reference).

To some allocates, blocks were allotted having reserves more than their project needs. Screening Committee relied on data supplied by applicants in arriving at decision.

Law for allocation of natural resources, as upheld by Supreme Court holds that allocation can’t be done in ‘arbitrary manner’. By this same reasoning Spectrum allocation Licenses were cancelled.

Why allotments to State PSU’s were cancelled?

As we have seen that, state PSUs got blocks with no end use restriction. It means they can engage in Commercial Mining i.e. selling coal in open market. But Coal nationalization Law clearly states that commercial mining can be done only centrally owned PSUs. So they were cancelled.

Apart from this some allocations were made to joint ventures of private and public, Joint allocation of Coal Mines to consortium of companies – these were also cancelled.

UMPPs were allowed to transfer coals from or to other project, but Supreme Court held that law disallows this too.

New government has given approval to an ordinance, empowering government to take back mines and reallocating it.

Currently Coal India and other coal suppliers issue ‘letter of assurances’ to their buyers in power sector mainly NTPC, these are on the basis of ‘Milestones’ to be achieved by power producers (milestone of good conduct as buyer).

After achievement of this milestone ‘Fuel Supply Agreement’ is signed between supplier and buyer. Dominantly these supplier and buyers are only government entities; even then there is cumbersome process and mutual hostilities, mainly between Coal India and National Thermal Power Corporation.

In 1993, government created 3 separate ministries (which should be logically 1) I.e. of coal, power and renewable energy respectively. Coal minister and Power ministers held Cabinet Rank. This resulted in awkward situation in which two ministries used to work in opposite direction and which disrupted the speed of clearances, flow of information etc. There were many instances like nonpayment at time by NTPC to CIL due to allegations of low quality supplies kept surfacing. But now as Ministry of Power and coal is headed by one minister, that too minister of state, so much speedy disposal of issues are expected.

Objective – 4 fold – to increase

  1. Investment,
  2. Production,
  3. Employment and
  4. Boost to Make in India initiative

Mineral Laws (Amendment) Act, 2020 

It Amends the

  1. Coal Mines (Special Provisions) Act, 2015 [CMSP Act]
  2. Mines and Minerals (Development and Regulation) Act, 1957 [MMDR Act].

Provisions

  1. Allocation of coal blocks for composite prospecting license-cum-mining lease

It will help in increasing of the inventory of coal, lignite blocks for allocation.

  1. Provision for requirement of Approval from Centre – Done away

In cases where the allocation or reservation of coal/lignite block has been made by the Central Govt. itself

  1. Provided flexibility to the Central Govt. in deciding the end-use of Schedule II and III coal mines under the CMSP Act.

Government introduced a slew of reforms such as

  1. Easing participation norms for bidders, – More competition
  2. Eliminating end-use restrictions,
  3. Shifting from rupee per Tonne model to revenue-sharing model
  4. Government has introduced a more equitable system of sharing revenues, moving away from fixed rates to an ad-valorem system.

So when the prices go up, the miner shares more with the government and if they decrease, he shares less. This is equitable for both the parties.

  1. Permitting 100 per cent foreign direct investment in the coal sector – foreign players
  2. The eligibility criteria has been done away with, and no coal mining experience is required to take part in the auction process.
  3. Simplified the process of the mining plan approval process from 90 days to 30 days.
  4. Other relevant measures include
    1. Promoting coal gasification through rebate in revenue share, and
    2. An investment of ₹50,000 crore to create transportation infrastructure for evacuating one billion tonnes of coal from state-run Coal India’s mines.
  1. Easing of participating norms – will lead to the induction of new technology and competition in the sector. Consequently, the economies of coal-bearing states like Jharkhand, Chhattisgarh, Madhya Pradesh, Maharashtra and Odisha will also grow since all the revenue from these auctions will accrue exclusively to them.
  2. Allowing auction will lead to
    1. It will lead to introduction of new technology and completion in the sector.

Foreign players will bring investment, technology and best practices to India.

  1. Opportunity for Investment in Commodity Business.
  2. where domestic supply falls short of the demand, opening up an opportunity to substitute 135 MT coal imports.
  1. A transparent and efficient auction process will attract investments, boost competition & benefit consumer
  2. Immediate visible impacts have been
    1. In 2014 – Critical stocks with the Power Plant was for only 7 days. Now they have 30 day stock on average.
    2. From being a heavy importer of coal, India is now 2nd largest producer of coal – at 729 million tonnes (MT) in 2019-20.

Government should try to remove any road blocks in conducting the auction process. For instance, a major issue faced by the bidders is lack of clarity on payment of stamp duty, which differs from one State to other.

Ministry of Coal has started Commercial Auction of coal mines on revenue share basis.

  • In order to arrive at the revenue share based on market prices of coal, National Coal Index (NCI) was conceptualized.

What is the NCI?

The NCI is a price index which reflects the change of price level of coal on a particular month relative to the fixed base year.

  • The base year for the NCI is FY 2017-18.
  • Rolled out on 4th June 2020.

The aim is to have an index that will truly reflect the market price of coal.

Benefits:

  • For taxation purpose, the Coal Index will be the base indicator.
  • For future calculation of upfront amount and intrinsic value of mine, this Index will be helpful.
  • For calculation of annual escalation (monthly payment), this index can be basis.

Coal Bed Methane

It is natural gas which is found in coal seams in absorbed form. It is similar to natural gas found in in oil & natural gas blocks (both are CH4). It is clean pipeline gas and can be used almost without any processing.

Why it is important to extract CBM?

  1. Methane is hazard in Mines. Being poisonous, it can cause serious harm to miners. So it is better to extract this in advance.
  2. Methane is very potent greenhouse gas (about 20 times than CO2). So it shouldn’t be let escape to environment when it can be captured.
  3. It is very viable resource. It has good calorific value and about half the emissions that of coal.

Coal Bed Methane Policy is in place from 1997. 4 rounds of auctions have taken place allocating 33 gas blocks. Commercial production has started in some blocks.

Director General of Hydrocarbons, Coal India Ltd and Ministry of Oil and Petroleum cooperate for CBM policy. For its extraction well is dug through which water in the coal seam is taken out. It results in reabsorption of methane in pores and through same well CBM is taken out.

Carbon Sequestering – This is technique for ‘enhanced coal bed methane recovery’. Here CO2 will be pumped in to coal seam. Coal has better absorption capacity of CO2 and it will result in more desorption of CBM.

Coal Gasification and Liquefaction

This gives Methane, Hydrogen, Carbon monoxide by combination of Coal, Water and oxygen. These products can be used for power generation and industrial processes. Oxygen and water is pumped in seam which decomposes coal in above products and these are extracted through a well.

Same way, under liquefaction coal under heat and pressure is converted in high value petrochemical. However this is expensive process and only viable if prices of oil is high.

Government has made projects of underground coal gasification and liquefaction eligible to be treated as captive for allocation of coal mines.

Coal liquefication also called Coal to Liquid (CTL) technology is an alternative route to produce diesel and gasoline

Transitioning from Coal

Alternatives

  1. Hydropower
  2. Solar energy
  3. Natural gas
  4. Biomass

Efforts in direction of Alternatives

National Mission on use of Biomass in coal based thermal power plants

Biomass Cofiring

It refers to the concurrent blending and combustion of biomass materials with other fuels such as natural gas and coal within a boiler, which reduce the use of fossil fuels for energy generation and emissions without significantly increasing costs and infrastructure investments.

Benefits of Cofiring: 

  1. It decreases the use of fossil fuels and hence mitigate greenhouse gas emissions.
  2. Coal and biomass cofiring accounts for the relevant advantages of a relative ease of implementation and an effective reduction of CO2 and other pollutant (SOx, NOx) emissions to the atmosphere.
  3. Cofiring biomass with coal may record no loss in total boiler efficiency after adjusting combustion output for the new fuel mixture.

Challenges it poses

  • Roadmap for workers and communities dependent on fossil fuels
    • Employ about 2.24 lakh workers.
    • In addition to it –
      • contract employees working for mine development operators (MDOs),
      • captive mines under private players,
      • employed in coal transportation activities
      • employed in coal-consuming sectors like power, steel, sponge iron,
    • The challenge in transitioning coal workers in India is also in factors like education, skill levels, willingness to migrate, and caste.
  • Revenure
    • coal accounts for about 40 percent of total freight revenues — not to
    • GST compensation cess from coal on Coal (FY 2020) – Rs 29,200 crore
    • A transition away from coal must account for the loss to the state and district exchequer.

Clean Coal Research

National Centre for Clean Coal Research and Development

at Indian Institute of Science (IISc)-Bengaluru

Set up by Department of Science & Technology, as a national-level consortium on clean coal R&D, led by IISc.