Event ReportsPublished on Feb 23, 2010
India is the third largest coal producer and the coal industry one of the oldest sectors of commercial involvement
End monopoly in Coal sector by introducing competition, say experts

A workshop on ‘Coal supply and Demand in India: 2032 and beyond’ expressed concern on Tuesday, February 23, 2010, over the existing monopoly situation in the national coal sector with experts asking for ushering in competition by amending CBA (Coal Bearing Area Act, 1957.

The day-long workshop, held at the ORF campus, highlighted some of the obstacles and possible solutions to country’s energy future.

Citing viability as one of the keywords for the growth of the coal industry in India Dr D.V Kapur, Founder NTPC CMD, emphasized the importance of having a systematic approach to face the enormous energy challenge ahead in India. He was addressing the delegates to the workshop on Coal Supply and Demand organized at the ORF campus.

Mr. Sunjoy Joshi, Distinguished fellow ORF, who co-chaired the workshop with Dr Kapur, said that most countries in the world did not have clear idea about how to face looming energy challenge.

India is the third largest coal producer and the coal industry one of the oldest sectors of commercial involvement here. Over the years the industry has been privatized, nationalized and has also had monopolistic trends. The workshop shed light on some of the obstacles and possible solutions to India’s energy future.

Mr. S.K Choudhary, former chairman CIL and presently executive president Indian Coal forum gave an insight in to the supply side aspects of coal in India citing that the gap between the demand and supply side of coal was bound to increase in the years to come and highlighted several problems like infrastructure bottleneck and high ash content.

There was consensus on the fact that production had to be increased and better managed. It was mentioned that monopoly system was facing tremendous resistance and that a situation of competition must be created.

It was also mentioned that if present production rate continues, the ‘extractable’ coal supplies would be depleted in 40 years and that there would be very real constraints on putting up power plants after 2020 as power plants function for around 25-30 years after their inception Some figures were provided to project the gap between demand and supply in the years to come

TOTAL COAL REQUIREMENT    2010-2011=440 MT*     2011-12=518MT TOTAL COAL AVAILABLE          2010-2011=388 MT       2011-12=414MT *MT Million Tonne

It was mentioned that 66% of power was generated by thermal means and the Power industry used 78% of coal produced. Coal was expected to continue as the dominant sector in the power industry although there are reserves in Hydro power

FUTURE GENERATION ESTIMATES YEAR                                     GEN EXPECTED BU*                   COAL REQUIREMENT (MT) 2016-17                                      985                                                          740 2021-22                                    1290                                                          950 2026-27                                    1646                                                        1200 2031-32                                    2100                                                        1470 *BU-Billion Units 1 unit=1 kWh

The role of the Indian government was discussed and it was mentioned that the coal industry had a ‘tragic’ history as private players, having a free hand without regulation, had resorted to unviable extraction techniques aimed at easy profits. In 1973 there had been full scale nationalization which had led to the present situation with 1991-92 being a critical landmark. It was a bad time for Coal India limited as there was considerable lag in payments by the state governments. Only later was the policy of ‘cash and carry’ introduced where coal could be acquired only on prior payment, the situation started improving. There had been several reforms over the years including liberalized policy, regulatory commission conservation act. The recent National electricity policy mentions that demand side would be fully met by 2012 with Coal as main fuel and imported coal at coastal locations. The Integrated Energy Policy and the Integrated Action Plan for clean and green power were also mentioned in the same light.

Positive role played by the government was highlighted in the context of land acquisition in forested areas with the categorization of Go and No Go areas from the recent parliamentary committee which puts  81.92% of  coal rich Talcher as ‘Go area’ and overall more than 60% ‘Go’ area-mining being permitted.

The obstacles to development were and discussed and it was predicted that environment would pose as a  major challenge with present emission close 600 MT of CO2.Geographical challenges including Naxal issues in Jharkhand and Chattisgharh which have major coal fields, Land acquisition problems with employment claims by land owners, scarcity of suitable land for rehabilitation of the affected.

At some mines Pit capacity reached saturation point and there was lack of water availability which prevented processing. Method of extraction if unviable would also pose as a major challenge as deeper deposits have better amount and quality

It was also mentioned that nationalization should have been done much earlier and that government policy had not been coherent as coal should have been at the centre of the policy making, instead it has been treated as a peripheral issue.

Present problems pertaining to Acquisition, Low production and the government dragging feet on several occasions with clearances had made matters more difficult. Technological challenges were highlighted with the example of unfeasibility of techniques like coal gasification and that lack of capacity of power plants, Gap between availability and requirement in power sector was also mentioned as a major challenge. There was no consensus based acquisition of imported coal as in Korea, China and Japan with all players looking for individual gains.

There was some agreement on the specific solutions to the challenges faced. These included primarily the need independent regulators outside the government who could be a channel of single window clearance for projects and the need for the pricing to be linked to calorific value (GCV basis) which is done around the world and not on UHV as is being done in India now. It was mentioned that ‘In situ’ gasification should be employed and that there should be a blending focused coal import.

It was further mentioned that a development based approach must be adopted and Professional organizations like CII, ASSOCHAM and FICCI should come together and act in the interest of the industry for government to get a representation of public opinion.

The ORF was requested to undertake a study on simplifying implementation and operating procedures in the coal industry

Other solutions included a professional and better managed model of coal extraction and usage. Mentioning the role of Indian railways it was said that dedicated corridor for coal movement on priority could be considered. Companies like NTPC proposed to enter partial and full coal value chain. There was a suggestion for the CBA to permit private players in mining sector and that the money paid to the state governments must be used for rehabilitation.

The workshop was concluded on the note that ultimately the future lies in nuclear power however coal would be the mainstay for the next two decades and that coastal ultra mega stations must be set up with a systematic approach being adopted to provide a viable model of development.

The report has been prepared by Akhilesh B Variar, Research Intern, and ORF

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