Coal Mining Sector : Challenges and Reforms

Coal Mining Sector : Challenges and Reforms

Question: Commercial mining in India is being actively pursued by the Centre. Discuss the challenges that lie before the coal sector and the reforms needed.

A. Challenges

• Though India has the fifth largest reserves of coal across the globe, it lacks the ability to meet domestic demand

• Since the fiscal 2004, coal import has grown in the country at the CAGR of 25%.

• Projections indicate India’s coal import requirement will be greater than 200 MT at the close of the 12th 5 Year Plan

• Majority of the coal projects have faced obstacles and delays due to land acquisition issues as well as strict rules and regulations

• Bottlenecks in domestic coal transportation and lack of infrastructure such as proper road connectivity are other challenges

• Delay in mining activities at captive coal blocks and rising ash content of run of the mine coal are further roadblocks

• Current shortage of coal is at 84 MT and the same will rise to 300 MTPA in medium term

• Capacity augmentation from captive coal blocks was dismal and import is mainly reliant on availability of coal in the international market

• As per projections, India is the second largest consumer of coal. Further, there is a projected 300% increase in coal fired generation capacity over the next 11 years for India from 95,000 MW to 294,000 MW

• Demand and supply gap will widen in 2030 as Asia is projected to consume 77.7% of total consumption and produce 73.8% of international coal production

• The demand and supply gap is expected to widen in 2030 as Asia Pacific is expected

• Coal shortage has led to underutilisation of installed capacity apart from shortfall in power generation

• Coal contributes to 1.5% of the GDP of the nation

• Unavailability of coal will significantly impact power generation in the company as well

• Carbon pricing may impact demand internationally

B. Suggested Reforms

• Investment in the coal sector should be encouraged by the sector through timely incentives and security of tenure

• Ways of performance improvement in mining operations are also important

• Pending mining applications at state and centre level need to be resolved; single window clearance system should be adopted

• Multiple registration requirements for miners, traders, transporters and end users should be done away with. There should be a single point registration facility

• Improvements in technology and innovation are also of integral importance

• Regulatory reforms and timely clearances for mining projects is a must

• Incentives for exploration should be provided

• Efficient utilisation of reserves as a must

• Use of scientifically proven mining technology is also a must

• The correct mining methods must be followed and percentage extraction in mines should be closely monitored by the government

• The biggest problems being faced regarding quality of coal are:

- Increased production from lower seams
- Lower liberation size
- Low washability index

• Quality of coal needs to be improved through washing to reduce the environmental impact, enhance coal quality and increase process efficiency.

• Transportation facilities and infrastructure such as road and rail networks must be improved

• There should be enhanced connectivity across mineral zones and infrastructure projects driven by PPP model

• Doubling of rail routes near coal bearing areas where movement is higher is a must; enhanced port capacities are also imperative

• 1973 Coal Nationalisation law should be done away with; policy of captive mining in 1993 to compensate for CIL shortages was also ineffective

• Mine allocation should be transparent and there should be no compromise on accountability. For instance, SC made the decision to cancel all but 4 of 218 captive coal blocks on grounds of legal infirmities

• Centre needs to give up on captive mining and bring in commercial mining

• To reap the fill benefits of merchant mining, competitive pricing benchmarked against imports is vital

• Specialised entities are needed for coal supply and evacuation with washers and novel dry processes

• Logistics need to be effe actively managed and eco-friendly technologies must be adopted across the coal value chain

Facts and Stats

• Indian coal is of one of the following kinds:

- Lower to medium grade coal
- High ash
- Low moisture
- Low sulphur

• India faced a shortfall of 200 MT last year

• That is 40% of the production capacity of CIL