The world’s third-largest coal producer scales up to meet future demand

by rajesh nath and ajmal fawad

India’s total coal output grew during fiscal year 2018 to 675 million metric tons (mt) from 663 million mt the previous year, an increase of 1.8%. Most of the country’s coal production (84%) originates from the collieries of Coal India Ltd. (CIL).

In addition to power generation, India also requires significant amounts of coal to produce steel and cement. To meet these needs and minimize imports, the government has placed domestic coal production on a fast track, setting a target of 1.5 billion mt by fiscal year 2020. The government has set a goal of 1 billion mt of coal production for CIL by fiscal year 2020, which would be 433 million mt more than the 567 million mt it produced in fiscal year 2017. In two years, the government hopes to double current coal production levels.

CIL has eight subsidiaries: Bharat Coking Coal Ltd., Central Coalfields Ltd., Eastern Coalfields Ltd., Western Coalfields Ltd., South Eastern Coalfields Ltd., Northern Coalfields Ltd., Mahanadi Coalfields Ltd., and Central Mine Planning & Design Institute Ltd. Other state coal holdings include Singareni Collieries Co. Ltd. (SCCL), Neyveli Lignite Corp. (NLC) and Mineral Development Corp.

SCCL is jointly owned by the government of Andhra Pradesh and government of India. The Singareni coal reserves stretch across 350 kilometers (km) of the Pranahita, Godavari Valley of Andhra Pradesh with a proven geological reserves aggregating to 8.791 billion mt. SCCL produced around 62 million mt of coal in fiscal year 2017. It has 47 mines, including 18 open-cast mines and 29 underground mines. To achieve the government’s target of 100 million mt by 2020, SCCL is planning to start 20 to 25 new mines.

Coal Project Pipeline

CIL has 117 ongoing mining projects valued at Rs 200 million ($2.8 million) or more. Of that, 63 are on schedule. The largest projects include Kusmunda (50 million mt) and the Gevra expansion project (70 million mt).

An additional 129 new projects, with a targeted capacity of nearly 494 million mt have been identified, of which reports for 101 projects have been formulated. Out of these 101 projects, 30 projects with a capacity of 330 million mt have been approved.

During fiscal year 2018, six new coal mines came online: Aradhagram, Manoharpur, Gare Palma IV/8, Talaipalli, Dulanga and Pachwara North. Construction has started on a new coal handling plant at JVR open-cast mine, Sathupally in Khammam district. ALPS Coal Beneficiation Services will set up a coal washery at Chedra village in the Latehar district of Jharkhand. GPC plans to set up the Khadsaliya-I lignite mining unit at Khadsaliya, Lakhanka and Thalsar. Paras Power & Coal Beneficiation will set up a coal washery in Bilaspur, Chhattisgarh. MNH Shakti will set up a project in Sambalpur, Orissa.

South Eastern Coalfields Ltd., a CIL subsidiary, will establish the country’s largest coal washery with a capacity of 25 million mt per year (mtpy) in the Korba district of Chhattisgarh. The project would be known as Kusmunda coal washery. It will be an integral part of the Kusmunda open-cast coal mine, one of three mines operated by the SECL in Korba coalfields with estimated reserves of more than 10 billion mt.

CIL currently operates 15 washeries. Three non-coking coal washeries with feedstock capacity of 13.5 million mtpy and 12 coking coal washeries with feedstock capacity of 23.3 million mtpy. The company will set up 15 coal washeries in the next three years. Nine are thermal coal with a capacity of 94 million mtpy and six are coking coals with a capacity of 18.6 million mtpy.

CIL and Bharat Coking Coal Ltd. will set up 12 new coking coal washeries by fiscal year 2020. CIL is working to acquire coking coal assets, increase domestic production and minimize the diversion of coking coal to thermal plants. Coking coal imports could be reduced by 20%-25%.

During fiscal year 2018, CIL approved five open-cast projects with annual capacity of nearly 25 million mtpy and budgeted capital of Rs 42.6 billion ($600 million).

In SCCL, there are 20 mining projects (14 open-cast and six underground) valued at Rs 200 million ($2.8 million) and under various stages of implementation with capital costs of Rs 68 billion ($961 million). Of these projects, 14 are on schedule.

Several new mines are proposed to be opened in SCCL, including Bellampally OC-2, Kasipeta-2, Shanthi Khani continuous miner, Koyagudem OC-2 Pit-1, JVR OC2, Manuguru OCP, K.T.K. OC-2, PVK continuous miner and KKOC. They are expected to produce 1.3 million mtpy.

Three washeries, each of 1-million-mtpy capacity are in operation on a BOO basis, Ramagundam, Mandamarri and Manuguru. Three more coal washeries with 10-million-mtpy capacity are in the pipeline: JVR, 4 million mt; RG-II, 3 million mt; and Khairagura, 3 million mt.

Coal Imports

Coal is imported from other countries to bridge the gap, especially low-ash coal. Under the import policy for 1993-1994, coal was put under Open General License (OGL) and importers are free to import coal based on requirement.

In 2017-2018, India’s coal imports were 208.25 mt versus 190.95 mt in 2016-2015. The share of coking coal was 22.57% and non-coking coal was 161.245 mt, which accounted for 77%.

Indonesia, with 46.01%, remains the leading supplier, followed by Australia with 22.15% and South Africa with 18.48%. They accounted for 86.64% of India imports in 2016-2017.

In 2017-2018, total exports were 1.504 mt. Bangladesh accounted for 50.41% of exports followed by Nepal (46.30%) and Bhutan (2.99%).

Geology and Reserves

India is fifth for world coal resources. It is third for identified reserves.

Coal in India is mainly distributed along the present day river valleys i.e., Damodar Valley, Sone-Mahanadi Valley, Pench-Kanhan Valley, Wardha-Godavari Valley, etc. There are 69 major coalfields located in the peninsula of India and 17 are located in the northeastern region. The bulk of the coal reserves are in the southeastern quadrant in West Bengal, Jharkand, Orissa, Chattisgarh & Madhya Pradesh.

India coal reserves estimated by the Geological Survey of India are 319.020 billion mt, up to a depth of 1,200 m, as of January 4, 2018.

Out of 319 billion mt of coal reserves, “prime” coking coal are 5.3 billion mt, medium and semi-coking coals are 27.5 billion mt & 1.70 billion mt and non-coking coals 284.6 billion mt. Most of these resources occur in Gondwanas and the balance is in the Tertiary formations.

Currently, lignite reserves in the country have been estimated at around 45.664 billion mt, most of which occur in Tamilnadu. Other states where lignite deposits are located: Rajasthan, Gujarat, Kerala, Jammu, Kashmir and Union Territory of Pondicherry.

Basically, Indian coals have high mineral matter (ash) content unlike Pennsylvanian and Carboniferous coals of America and Europe, respectively.

Coal Resources

India ranks second among the coal producing countries of the world in terms of annual coal production. However, with coal resources, it has less than 1% of world coal resources. Of the 319 billion mt of Indian coal resources up to a depth of 1,200 meters (m), about 149 billion mt are proven or confirmed. This amounts to about 9% of world proven coal resources.

Indian coals, in general, are of inferior quality owing to high ash percentage, when compared with coal available in the international trade arena. Despite this, Indian coals in general merit are more environmentally  friendly because of:

Low sulfur content;

Low chlorine content; and

Low toxic trace elements.

Additional advantages for industrial use:

High ash fusion temperature;

Low iron content;

and Refractory nature of ash.

The exploration database, created so far, is adequate for preparation of a long-term perspective plan for mining coal in the country.

Coal deposits in India are confined to eastern, southern and central parts, consisting of 27 major coalfields. The shares of overall coal resources of different states of 98.21% are: Chhattisgarh, 17.93%; Jharkhand, 26.06%; Madhya Pradesh, 8.77%; Telangana, 6.80%; Maharashtra, 3.86%; Odisha, 24.86%; and West Bengal, 9.93%.

Balance share of coal reserves is distributed over Arunachal Pradesh, Assam, Meghalaya and Nagaland.

Quality wise, resources are 11% coking coal and 89% of non-coking coal. Out of total non-coking coal: superior grades A, B and C with ash content 24% or less and; inferior grades with ash content between 24%-45%.

The Jharia coalfield is the main source of prime coking coal. Superior-grade non-coking coals are available in the Raniganj coalfield of West Bengal, Central India coalfield of Madhya Pradesh and Talcher coalfields of Orissa.

The ash of Indian coal is of inherent nature and has a high presence of near gravity material (NGM). This makes washing Indian coal rather difficult.

Conclusion

India’s mining sector has grown at a slower rate compared to GDP, resulting in a decrease in the contribution of mining sector to India’s GDP from 1.3% in 2002 to just 1% in 2012. With the current growth rate, India will require 160 million mt of iron ore imports (10% of global seaborne), 300 million mt of thermal coal imports (25% of global seaborne trade) and 70 million mt of met coal imports (20% of global seaborne) in 2025. This will create uncertainty due to high dependence on imports, with possible supply shortages depending on the global situation.

The annual growth in the mining sector in India has varied from 3% to 8%. Any effort to have unusual growth may bring environmental issues, besides safety hazards to employees and material engaged in the mines.

There is a limit to growth in this sector. A lot must be done to reach the target. Going by the country’s projection of a growth rate of 8% in GDP, it would be good if the coal sector grew annually by 12% in a consistent manner.

This can be done by opening large coal projects and making them operational in the shortest possible time. The goal is to make the country self sufficient. Opening the coal sector for commercial mining, to private investors to compete with CIL, is key.

The apex court’s decision should be an opportunity for the government to review coal sector policies and establish appropriate reforms. It is time to think, address and find the right way forward to resolve the challenges that have emerged from the cancellation of allotment of coal blocks.

Rajesh Nath is the managing director and Ajmal Fawad is the business analyst for VDMA India.