Indian Coal Industry 2008

Abstract

India is the third-largest producer and consumer of coal in the world. With proven reserves of 257.38 billion (Bn) tonnes, coal is one of the most abundant sources of energy in the country. In 2007, coal accounted for 51 percent of the primary energy consumed in the country.

The coal industry is a highly-regulated industry which gives it a monopolistic character. Only governmentowned/ managed/controlled companies are eligible to mine and trade coal without the restriction of captive consumption. Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL) account for nearly 92 percent of the total coal produced in the country.

The industry is also characterized by inelastic demand. The technologies prevailing in the major coal-consuming sectors like power, steel and cement are coal-based, thus rendering the substitutability of coal as a fuel in these industries difficult at least in the near future.

Coal mining is fraught with high risk, making safety issues critical for the industry. In addition, as mining has tremendous impact on the environment, therefore environmental clearances play an important role in the industry.

Though India has the fourth-largest proven coal reserves in the world, Indian coal is of poor quality. Nearly 83 percent of the Indian coal is of non-coking variety with high ash content. Of the 456.4 million (Mn) tonnes of coal produced in FY08; power, steel and cement sectors accounted for 77percent, 4 percent and 3 percent, of the offtake respectively. The domestic offtake by the power and cement sectors have grown at a CAGR of 6.79 percent and 4.03 percent, respectively during the last five years while that by the steel sector has seen a decline of 2.03 percent.

The offtake of coal by different sectors is governed by coal distribution policy. In October 2007, the new coal distribution policy was introduced. As per this policy, 100 percent requirement of sectors like power (non-captive), fertilizer, defence and railways will be met at pre-determined prices. For other sectors, 75 percent of the requirement will be met at the pre-determined prices. Companies having an annual requirement of more than 4,200 tonnes will need to enter into Fuel Supply Agreements (FSAs) with CIL/subsidiary companies while others will need to enter into FSA with agencies as notified by the state government. E-auction of coal has been reintroduced for the benefit of small consumers who cannot enter into long-term contract due to small requirements.

In FY08, India imported approximately 50 Mn tonnes of coal, of which coking coal constituted 57 percent. The major source of imported coking coal is Australia while for non coking coal Indonesia is the dominant source. The close proximity of Indonesia with India compared to other source countries gives Indonesian coal a freight advantage over others. India also exports a miniscule amount of coal to countries like Nepal, Bangladesh and Bhutan. Demand Growth

As per the Expert Committee on Road Map for Coal Sector Reforms, a shortfall of 100 Mn tonnes of thermal coal is expected in the country by the end of FY12. To meet this demand-supply gap, the Government is looking at various alternatives e.g. FDI, acquisition of overseas coal block, captive mining, faster project approvals, better technology etc. An area which calls for major improvement is coal logistics, in both rail and port. At present, both rail and port infrastructure are severely stretched, with the average waiting time at the Indian ports reaching 4.12 days and 4.89 days in FY07 for non-coking and coking coal, respectively. Coal beneficiation is being encouraged to release the already stretched railway capacities.

CARE Research expects the coal demand in the country to increase to 574 Mn tonnes by FY10, growing at a CAGR of 7.58 percent in the next two years.

For in-depth analysis and CARE' s view on the future of this sector, please refer to the exhaustive Report on Indian Coal Industry by CARE Research.

Table of Contents

Chapter - 1 Introduction

• 1.1 Coal formation
• 1.2 Types of coal
• 1.3 Importance of coal
• 1.4 Uses of coal

Chapter - 2 Coal mining methods

• 2.1 Surface mining
• 2.2 Underground mining
  • 2.2.1 Room and Pillar method
  • 2.2.2 Longwall Mining method
• 2.3 Coal mining methods in India

Chapter - 3 Coal mining in India

• 3.1 Evolution
  • 3.1.1 Nationalization on coal mines
• 3.2 Current industry structure

Chapter - 4 Industry characteristics

• 4.1 Highly regulated
• 4.2 Monopolistic
• 4.3 Inelastic demand
• 4.4 Seasonal supply
• 4.5 Highly risky
• 4.6 Environmental issue
• 4.7 Duty structure

Chapter - 5 Regulations

• 5.1 Coal distribution
  • 5.1.1 Current coal distribution policy
  • 5.1.2 Coal distribution prior to October 2007
• 5.2 Coal pricing & trade

Chapter - 6 Global demand supply position

• 6.1 Global supply
  • 6.1.1 World coal reserves
  • 6.1.2 World coal production
• 6.2 World coal consumption
• 6.3 Major coal exporting/importing countries

Chapter - 7 Domestic coal supply

• 7.1 Domestic coal reserve
• 7.2 Type wise & category-wise coal resources
• 7.3 Major coal producers in India

Chapter - 8 Domestic coal demand

• 8.1 Offtake of coal
• 8.2 Sector -wise coal offtake
  • 8.2.1 Demand from power sector
  • 8.2.2 Demand from steel sector
  • 8.2.3 Demand from cement sector
• 8.3 Import of coal
  • 8.3.1 Coking coal imports
  • 8.3.2 Non coking coal imports
• 8.4 Export of coal
• 8.5 Coal logistics
  • 8.5.1 Modes of coal transportation
  • 8.5.2 Cargo handling at Indian ports- Coal
  • 8.5.3 Transportation cost

Chapter - 9 Industry outlook

• 9.1 Demand projection
  • 9.1.1 Projected coal requirement of the power sector
  • 9.1.2 Projected coal requirement of the steel sector
  • 9.1.3 Projected coal requirement of the cement sector
  • 9.1.4 Total coal requirement of all sectors
• 9.2 Demand vis-a-vis availability as per ‘Coal Vision 2025'
• 9.3 Demand vis-a-vis availability as per ‘Expert committee road map on coal sector reforms'

Chapter - 10 Challenges & Road Ahead

• 10.1 Meeting demand-supply gap
• 10.2 Bringing better technology
• 10.3 Promoting clean coal technologies
  • 10.3.1 Coal beneficiation
  • 10.3.2 CBM related activities
  • 10.3.3 Underground coal gasification (UCG) related activities
  • 10.3.4 Coal liquefaction related activities
• 10.4 Reducing coal cost
• 10.5 Improving mine safety
• 10.6 SWOT analysis of the industry

Chapter - 11 Major players

• Annexure I. Definition
• Annexure II. State-wise distribution of coal reserve
• Annexure III. Grades of coal
• Annexure IV. Trends of fatal & serious accidents in CIL coal mines in India
• Annexure V. Labour productivity
• Annexure VI. Sector-wise allocation of coal blocks (Dec 07)
• Annexure VII. Abbreviations

FIGURES:

• Figure 1.1 Formation of coal
• Figure 1.2 Types of coal
• Figure 1.3 Price predictability
• Figure 1.4 Prime energy consumption
• Figure 2.1 Coal mining methods
• Figure 2.2 Room & Pillar mining
• Figure 2.3 Longwall mining
• Figure 3.1 Industry structure
• Figure 4.1 Pit head closing stock of raw coal FY07
• Figure 4.2 Trends in custom duty & Import of non-coking coal
• Figure 4.3 Trends in custom duty & import of coking coal
• Figure 5.1 Domestic coal price
• Figure 6.1 Estimated recoverable coal reserves
• Figure 6.2 Major coal producing countries
• Figure 6.3 Major coal consuming countries
• Figure 6.4 World coking coal export growth
• Figure 6.5 Major HCC/ SSCC Suppliers (2000-2006)
• Figure 6.6 Major coking coal exporters
• Figure 7.1 Geographical distribution of coal reserves in India
• Figure 7.2 Coal & Lignite resource in India
• Figure 7.3 Proved coal reserves in India
• Figure 7.4 Trend in production of coking & non - coking Coal
• Figure 7.5 Source-wise coal production
• Figure 8.1 Sector-wise offtake of coal
• Figure 8.2 Mode-wise breakup of installed capacity & electricity generation in India FY 08
• Figure 8.3 Offtake of coal to the power sector
• Figure 8.4 Domestic crude steel production & coal offtake to the steel sector
• Figure 8.5 Total import of coking coal in India
• Figure 8.6 Total Coal imports
• Figure 8.7 Indian metallurgical coal imports by source FY07
• Figure 8.8 Indian non-coking coal imports by source FY07
• Figure 8.9 China' s coal exports & imports
• Figure 8.10 Modes of coal transportation in India
• Figure 8.11 Type-wise coal handled at the Indian ports
• Figure 11.1 Total annual production of CIL subsidiaries
• Figure 11.2 Annual production of CIL subsidiaries by type of mine
• Figure 11.3 Labour productivity of CIL subsidiaries
• Figure 11.4 PAT of CIL subsidiaries

TABLES:

• Table 1.1 Sustained availability
• Table 1.2 Percentage of Coal - based electricity generation out of total electricity generated.
• Table 3.1 Company - wise production for FY08
• Table 4.1 Comparison of coal v/s other fuels
• Table 4.2 Duty structure on imported coal FY09
• Table 6.1 World recoverable/ proved Coal Reserve
• Table 6.2 World coal production
• Table 6.3 World coal consumption
• Table 7.1 Coal reserves of India
• Table 7.2 Type-wise and category-wise coal resources
• Table 8.1 Sector-wise offtake of coal
• Table 8.2 Indonesia ‘s coal export potential
• Table 8.3 South Africa coal export potential
• Table 8.4 Australia' s coal export potential
• Table 8.5 Coal exports from India
• Table 8.6 Coal traffic at major ports in India
• Table 8.7 The average turnaround time for coal at the major ports in India
• Table 9.1 Crude steel production (National Steel Policy)
• Table 9.2 Projected non-coking demand from non captive power utilities
• Table 9.3 Projected non-coking demand from captive power utilities
• Table 9.4 Projected requirements of coking coal of the steel sector
• Table 9.5 Non-coking coal demand from sponge iron producers (FY03-07)
• Table 9.6 Projected requirements of non-coking coal by the sponge iron producers
• Table 9.7 Projected non-coking coal requirement of cement sector
• Table 9.8 Total coal requirement of all sectors
• Table 9.9 Demand vis-a-vis Availability as per ‘Coal Vision 2025'
• Table 9.10 Demand vis-a-vis Availability as per the Expert Committee on Road Map for Coal Sector Reforms
• Table 10.1 Present Coal Beneficiation Capacity
• Table 11.1 Bharat Coking Coal Ltd. (BCCL) Financials
• Table 11.2 Eastern Coalfields Ltd. (ECL) Financials
• Table 11.3 Central Coalfields Ltd. (CCL) Financials
• Table 11.4 Northern Coalfield Ltd. (NCL) Financials
• Table 11.5 Western Coalfields Ltd. (WCL) Financials
• Table 11.6 South Eastern Coalfields Ltd. (SECL) Financials
• Table 11.7 Mahanadi Coalfields Ltd. (MCL) Financials
• Table 11.8 North Eastern Coalfields Ltd. (NEC) / CIL Financials
• Table 11.9 Singareni Collieries Company Ltd. (SCCL) Financials