Dialogue January-March, 2013, Volume 14 No. 3

Availability of Coal to Fuel the Power Plants in India

Alok Perti*

1.00 Introduction

1.1 The Integrated Energy Policy of the Government of India announced in 2006 gives considerable insight of the energy requirements in the country and also gives estimates of the fuel requirement for generation of power. It states that with 2003-04 as the base year, India’s commercial energy supply would need to grow at 4.3% to 5.1% annually. It is estimated that by 2031-32 power generation capacity must increase to nearly 8,00,000 MWs from the level of 160,000 MWs in 2006. Similarly requirement of coal, the dominant fuel in India’s energy mix will need to expand to over 2 billion tonnes/annum.

1.2 One of the key recommendations contained in the policy document relates to ensuring adequate supply of coal with consistent quality to the power sector. Coal accounts for over 50% of India’s commercial energy consumption and about 78% of domestic coal production is dedicated to power generation. This dominance of coal in India’s energy mix is not likely to change till 2031-32.

1.3 Under the Integrated Energy Policy it has been emphasized that domestic coal production be stepped up by allotting coal blocks to central and state public sector units and captive mines to notified end users. Coal blocks held by Coal India Ltd (CIL) that cannot be brought into production by 2016-17, either directly or through joint ventures, should be made available to other eligible candidates for development

and for bringing into production by 2011-12. The policy also recommends that needed infrastructure be created to facilitate thermal coal imports. It also recommends bringing coal under independent regulation to improve exploitation and allocation of available resource, and to regulate e-auction and coal prices. Finally it also recommends amendment to the Coal Mines Nationalisation Act 1973, to facilitate private participation in coal mining. The Eleventh Plan period is over and we need to see whether the country has moved forward to ensure adequate availability of coal for power generation or the result has been far from satisfactory and there is considerable shortage in achieving the production targets. This subject in this paper will be examined under the following sub-headings.

        (a)   Coal Production in India during the 11th Plan period (2006-07
 to 2011-12).

        (b)   Requirement of coal for the 12th plan period and the related
 production plans.

         (c)   Problems in enhancing coal production.

        (d)   Evacuation/Transportation of coal

         (e)   Exploration

         (f)   Use of modern technology

2.0 Coal production during the 11th Plan Period

2.1 In the first three years of the 11th Plan Period, the growth in coal production showed an increasing trend. Against the production of 430.83 million tonnes (MT) achieved in 2006-07, achievement in 2007-08, 2008-09, 2009-10 was 457.08MT, 492.76MT and 533MT respectively. In 2009-10 the coal production grew by 8.17% over the previous year. During 2010-11 there was no growth in production and in 2011-12 the growth in production was only 2.29%with a production of 544 MT. CAGR for the entire 11th Plan Period was only 4.81%. As per the projection made for the 11th Plan a growth of about 9% was to be achieved by the end of the plan period. The stagnation of growth in coal production during the last two years of the 11th Plan was noticed in all segments. Growth in production by CIL remained poor with an achievement of 436 MT in 2011-12 against 431.32 MT in 2010-11. The demand projected for 2011-12 was 649.87MT against which a production of about 540 MT was achieved leaving a gap of about 110MT. As far as power sector is concerned the demand was originally projected for 500 MT (460 MT for power utilities and 40 MT for captive power). This included a component of about 51MT to be imported. The supply to the power sector against linkages from CIL and SCCL was about 350-360 MT. A good quantity of coal sold through e-auction also went to power plants (e-auction in 2011-12 was about 52MT) and there was some coal obtained from coal blocks which had come into production (production from coal blocks in 2011-12 was about 37MT)

2.2 This analysis clearly brings out the fact that slowing down of the coal production in 2010-11 and 2011-12 has seriously affected the power sector, leading to under performance.

3.0 Coal availability during the 12th Plan period.

3.1 In assessing the availability of coal for the power sector during the 12th Plan period one must look first at the demand side and assess the likely requirement. For the 12th plan the Ministry of Power has proposed to commission 38,000 MWs of generation capacity on the basis of coal linkages to be provided by CIL/SCCL. About 12,000-14,000 MWs are planned to be established on the basis of imported coal and a similar capacity enhancement is expected to be commissioned on the basis of coal being obtained from coal blocks allotted to various power companies. From these three components , the one that required the main focus of the ministry of coal was the 38,000 MWs proposed to be commissioned on the basis of linkages. The Ministry of Power had projected a requirement of about 170 MT of coal for this expansion of capacity by 38,000 MWs.

3.2 The Ministry of Coal in 2007, 2008 and 2010 and approved several linkages and the coal companies had issued Letters of Assurances (LOAs) to power plants which totaled to a capacity of 1,08,000 MWs. Keeping in mind the estimated production of coal during the 11th Plan period and the 12th Plan period CIL proposed to execute Fuel Supply Agreements (FSAs) with a trigger level of 50% of the normative quantity (100% requirement for plant to operate at 85% PLF). The power producers were unwilling to accept this proposition and pressed for signing FSAs only on the ACQ (Assured Contracted Quantity). CIL continued to supply coal through an MOU arrangement which was done through a joint exercise by CIL and CEA (Central Electricity Authority). On the insistence of Ministry of Power, Prime Minister’s Office intervened and exercise was taken up to resolve this issue.

3.3 Assessment of requirement of coal for plants commissioned/will be commissioned between 1.04.2009 and 31.03.2015

3.3.1 The Ministry of Power indicated that the capacity addition to the power sector during the period 01.04.2009 to 31.03.2015 on basis of linkages from CIL would be 60,000MWs. The Ministry of Coal indicated that as per their assessment the production can reach 615 MT in 2016-17 by putting in their best effort. Keeping in mind that about 45-50 MT of coal is being sold through e-auction and the non-power sector is getting 75 MT from CIL it was assessed that about 495 MT would be available for the power sector for CIL by 2016-17. Having kept all these factors in mind the Ministry of Power in consultation with Ministry of Coal proposed that for plants commissioned before 01.04.2009 CIL’s commitment would be limited to 90% of the ACQ and for plants commissioned between 01.04.2009 and 31.03.2015 CILs commitment would be 80% of ACQ. On the basis of this the coal requirement in 2015-16 would work out to be 477 MT (presuming that all 60,000 MWs capacity is commissioned by 31.03.2015 and are operating normally). If CIL’S projection of production of 615 MT is achieved then providing 477 MT to the power sector in 2015-16 and2016-17 would not be difficult. With the intervention of the PMO it was decided that CIL would supply 90% of ACQ to plants commissioned before 01.04.2009 and 80% of ACQ to plants commissioned between 01.04.2009 and 31.03.2015.

3.4 Coal Production in the 12th Plan

3.4.1 The table below gives the details of the coal production :
                                                                                             (in million tonnes)

Coal India Ltd 436     464             556                                          615

SCCL                         51               53.10          57                         57

Others                        17.75          18               22                         23

Cap.Mining               36.15          39.20          79.60                    100

BAU- Business As Usual OPT- Optimistic

3.5 Production by CIL

3.5.1. CIL has planned it’s production enhancement for the 12th Plan period has been done as in the previous years on the basis of expansion of existing projects and starting of new projects. The table below gives a summary of expansion details :
                                                                                            
                                                                                            (in million tonnes)

Source          2012-13   2013-14    2014-15    2015-16     2016-         201 6-

Existing         31.11        27.97        25.95        24.64         23.80          23.82

projects

Completed     198.20      189.11      169.72      166.01       160.73        161.72

projects

Ongoing        232.89      260.28      181.55      298.09       314.04        333.37

projects

Future            1.90          8.29          30.52        41.64         58.83          96.13

projects

*expansion is for Business as Usual. For Optimistic production level the expansion would have to be adjusted for future projects.

3.5.2 The table clearly indicates that the proposed production of 615 MT in 2016-17 is dependent upon materializing of both future projects and more expansion of ongoing projects ( additional 37.30 MT from future projects and 19.33 MT from ongoing projects). The expansion of ongoing projects is largely dependent upon availability of land (mostly tenancy land) which has been acquired but not vacated by the tenants. The future projects which form the bulk of additional production are dependent largely on obtaining timely forest and environment clearances.

3.6 Production by SCCL

3.6.1 SCCL is planning to step up it’s production from 51 MT in 2011-12 to 57 MT in 2016-17. The table below gives the details of production from existing and future projects.
                                                                                            (in million tonnes)

Existing            1.50             0.97             1.15              1.15               1.15

Projects

Completed        39.51           30.78           30.46            29.82             29.82

Projects

Ongoing           12.09           22.55           23.32            24.56             25.15

Projects

Future                                                       0.02              0.47               0.88

Projects

4.0 Problems in enhancing coal production

4.1 Issues linked with land

4.1.1 Like all mining activity, here also coal mining is dependent upon getting possession of coal bearing land to initiate action on ground for mining. This in turn is linked with getting various clearances before the state government give the mining lease and Director General of Mine Safety (DGMS)is duly notified by the miner about safety measures , followed by a formal permission given by the Coal Controller to open the mine. In reaching the final stage where the miner can initiate steps to start mining, the following issues need to be resolved.

           i)   For tenancy land the process of land acquisition to be followed (Coal Bearing Areas Acquisition Act / Land Acquisition Act). This involves payment of compensation and rehabilitation of displaced persons.

          ii)   For forest areas there is the need to get orders of the Ministry of Environment and Forest under the Forest Conservation Act for diversion of forest and also secure a NOC from the district administration and panchayat under the Forest Rights Act.

         iii)   Environment clearance to be obtained from the Ministry of Environment and Forest for all projects.

         iv)   Mining lease from the concerned state government.

4.1.2 With growing awareness amongst the people about various laws and their rights there is bound to be greater demands from the companies desiring to acquire land for mining by the project affected people (PAP). This has resulted in delays in getting possession of land. Some of the state governments have formulated their own Relief and Rehabilitation policies, but at times the people affected have demanded much beyond the benefits outlined in these policies. The issue of getting NOC under the Forest Rights Act initially was a serious problem because many state governments had not issued suitable instructions to the district administration. However, the companies had to make special efforts to procure these NOCs, which in many cases involved virtually visiting households and obtaining their signatures, despite instruction from government. Apart from the time consumed this involved avoidable additional cost. The requirement of holding Gram Sabhas with 50% attendance was often difficult and repeatedly convening the Gram Sabha was time consuming.

4.1.3 As far as forest clearance was concerned, it is well known that the government’s adoption of the go, no-go policy resulted in a near complete stoppage of processing of applications for forest clearance for almost 18-24 months. However, the central government has now officially declared that the go, no-go policy is abandoned and that each case will be considered on it’s merits. The state governments have thereafter started processing the applications. In the case of forest clearances it has been noticed that the government has not followed a uniform policy. Forest clearances have been given for diversion of forest in some cases where the density of forest is very high (Moher and Moher Amlori) and permission in some cases have been denied where densities are lower (some cases in Chattisgarh’s Hasdeo Arand area). This non-uniform policy will lead to giving the project proponents to indulge in litigation.

4.1.4 As far as environment clearance is concerned, the Ministry of Environment and Forest should normally not take more than 6 months, but the single step of having a public hearing seems to take anything between 6 months to 3-4 years. Secondly MoEF seems to be adding newer conditions, without adequate notice, for awarding clearances. In 2010 MoEF suddenly announced that no environment clearances would be given to projects in areas having the Composite Environment Pollution Index (CEPI) above 70. This affected seven (7) coalfields where several expansion projects had been taken up by CIL. Subsequently, on acceptance by MoEF of environment mitigation plans prepared and submitted by the state pollution control boards for areas having CEPI above 70, the government started giving EC. Further sometimes in 2011the government decided to accept proposals only after maps of the project area are authenticated by designated state agency. Since the state governments had no such responsibility earlier it took quite some time for some of the state governments to put the mechanism in place, which entailed further delays. Furthermore, in March 2011 the MoEF issued an instruction that forest and environment clearances will be given sequentially (ref- SC ruling in Lafarge case). This affected many projects which had only a small forest area as mining could not be started in non-forest area because environment clearance which was not given till forest clearance was not awarded.

4.1.4 The role of state government in facilitating clearances for forest and environment is critical. Secondly in rehabilitation of project affected persons the support of the state government is necessary and they play a significant role not only in identifying areas for resettlement but use their influence to facilitate shifting of populations.

4.2 Coal Evacuation and Transportation

4.2.1 The evacuation and transportation of coal to the end user is important because coal cannot be stored and if not done adequately and timely it can severely affect production. Lack of adequate infrastructure to evacuate coal from mine pitheads has in the past constrained production in several mines.

4.2.2. About 52% of coal off-take from CIL is through rail, another 15% is through MGR (merry go round) and the remaining is by road and conveyor (only 3% is by conveyor). The fact that about 70 million tonnes of coal was stockpiled at the pitheads in CIL on 01.04.2012 is a clear indication that there is a big gap between production and movement /evacuation. There are several coal mines in Central Coalfields Ltd (CCL) Mahanadi Coalfields Ltd (MCL) and South Eastern Coalfields Ltd (SECL) where production had to be suppressed to avoid losing coal at the pitheads. In the year 2012-13 there has been a marked improvement in the availability of rakes from railways showing an increase of about 10-12%. Since most of the additional coal production is going to the power sector it will be transported mostly by rail except in case of pithead plants. The demand on the railway would be to sustain an annual increase in rake loading to the extent of at least 10-12%. This in turn would require the railways to strengthen it’s infrastructure in the major coalfield areas. The main areas which need improved rail infrastructure are the North Karanpura in CCL, Mand-Raigad in SECL and Ib valley and Talcher in MCL. There are already rail projects in these areas and there is an urgent need to ensure that the proposed rail lines are constructed as expeditiously as possible, preferably during the12th plan period.

4.3 Exploration

4.3.1 During the 11th Plan a target of 18.61 lakh meters of drilling for detailed exploration was fixed against which CMPDIL achieved 19.24 lakh meters. The target for promotional drilling for the 11th plan was 7.5 lakh meters but only 5.94 lakh meters was achieved. While no forest clearance is required for promotional drilling which gives only an indicative idea of the reserve there is a need for getting forest clearance for forest areas to undertake detailed drilling. Getting forest clearance for detailed drilling is proving a big bottle-neck in exploration. At present the MoEF has allowed only 1.5 boreholes per square km which is alright for promotional drilling but very inadequate for detailed drilling which is essential if a project has to be formulated. The Ministry of Coal has requested MoEF to increase this limit to 15-20 boreholes per sq. km. The Ministry of Environment and Forest had set up three demonstrative projects in Odisha, Chattisgarh and Madhya Pradesh to study the impact of detailed drilling on the flora and fauna. The preliminary results of these projects indicate that the disturbance to the flora and fauna is minimal but as yet MoEF has not taken a final view. This is constraining exploration and in turn delaying project formulation and further exploitation for increasing production. To ensure that projects are prepared well in advance there is a need to enhance the target for detailed drilling in the 12th plan. For CIL blocks the Target for 12th plan is 30.521 lakh meters (9.465 lakh mts departmentally, 40,000 out-sourced (state govts), 2.98 lakh mts through contracted drilling under MOU and 17.676 lakh mts through tendering). In non-CIL blocks the target for drilling has been fixed at 19.027 lakh mts.

4.3.2 The coal bearing areas in the country are about 17,000 square kms. So far about 12,000 sq.kms has been explored which has established a discovery of about 293.50 billion tonnes of coal reserves. In the 12th Plan the proposal is to cover another 2,500 sq kms with promotional exploration.

4.4 Use of Modern Technology

4.4.1 Another factor which affected coal production by the largest coal company, CIL, is the slow progress in modernization. The company has not been able to procure equipment in time to replace or have additions. High capacity heavier equipment is required to enhance mining capacity and procurement of HEMMs has been a serious problem in CIL. The procurement of 240 or 190 ton dumpers has been delayed by several years mainly because of complaints leading to cancellation of tenders or non-delivery by the successful bidder. The malady seems to be deep rooted. There is an urgent need to reduce manual methods of mining both in open caste and underground mines. In the case of open caste use of better and higher capacity machines should increase more expeditiously. In the case of underground mines the use of long wall wherever economically and technically feasible should be introduced. Underground mines which are manually operated with very low production should be closed.

4.4.2 In CIL there are no mines where there is a real time monitoring system. There is a need to modernize the monitoring systems which will enhance management capabilities and support the managers in ensuring optimum utilization of equipment apart from reducing pilferage and theft. Utilization of equipment in CIL has generally been much below the manufacturer’s prescribed levels. CIL has itself fixed utilization norms much below the optimum level.

5.0 Way Forward

5.1 The main consumer of coal is the power sector and today they face a crisis due to inadequate availability of domestically produced coal. While import can help, but to seek long term arrangement for supply of coal from overseas sources is becoming more and more difficult in the face of an uncertain and fluctuating market. As it appears that the demand for thermal coal for generation of power will outstrip the availability of domestically produced coal. Therefore there is an urgent need to enhance domestic production to the maximum extent which is economically and technically feasible. If one takes the available reserves in the country then raising the production to levels which can well cater to the domestic needs doesn’t seem to be out of reach. Despite all these issues it is also necessary that the Ministry of Power also has a relook at the electricity tariff policies. A provision for allowing a pass through of fuel cost if the fuel is obtained from CIL/SCCL and not otherwise tends to create distortions in the coal market. In case a pass through is allowed then source of fuel should not be of any consequence.

5.2 The various factors which adversely affect coal production in the country have been outlined in this article. A few suggestions on how the government can improve the situation are given below:

          1)   The procedures for seeking forest and environment clearances should be streamlined. Application for these clearances should be made online and any changes proposed must be notified at least six(6) months in advance. Time schedules fixed for giving clearances should be strictly followed. The whole process should be clear to the project proponent and the examination should be transparent. All presentations made before assessment committees and decisions taken by the committees should be put on the web site of MoEF within three days of the meeting of the concerned expert group.

          2)   The coal companies (CIL and it’s subsidiaries) should frequently revise their Relief and Rehabilitation policy with the intention of making it more liberal with sufficient delegation of powers to individual company boards to take decisions more suited to the local requirements. This would facilitate land acquisition and speedier rehabilitation of the PAPs.

          3)   Increase drilling capacities to discover more reserves. The capacity for detailed drilling also needs to be increased for enabling preparation of more coal mining projects. MoEF should quickly examine the reports of the pilot projects taken up in the three identified locations and consider enhancing the limit of 1.5 boreholes to 15 boreholes per sq.km. of drilling without seeking forest clearance.

          4)   Improve the procedure for seeking NOC from Gram Sahba and the Collector.

          5)   Railways should make all-out effort to strengthen their infrastructure in the three potential coalfield areas so that coal evacuation in the 12th and 13th Plan periods is enhanced considerably. The railway also needs to strengthen infrastructure for movement of coal from the ports.

          6)   the government coal company, CIL needs to revamp it’s procurement procedures, which today is a major hindrance to procurement of HEMMs. CIL also needs to revise it’s norms for utilization of machinery and raise it closer to the internationally accepted norms. Simultaneously CIL also needs to modernize monitoring systems with an attempt to have real time monitoring in as many mines as possible.

5.3 This article will remain incomplete if a word about development of coal blocks given to various companies either for end use or commercial mining is not addressed. The problems faced by the companies allotted coal block are similar to those faced by the CIL/SCCL, i.e. delay in environment and forest clearances, land acquisition, getting prospecting or mining lease from state governments. However, it may be noted that amongst the companies allotted coal blocks, the performance of Public Sector Undertakings (PSUs) has been particularly bad. This is obviously going to happen since these companies (mostly power companies) do not have any domain knowledge of mining and they have to resort to outsourcing of this activity. Since there are not many good private mining companies in India the process becomes even more difficult. Foreign companies are generally shy to take up mining activity in India as they are not very keen to just be contractors for production of coal. The state mining companies could have been promoted and encouraged to take up coal mining. In fact several companies of the like of SCCL could have been set up in states which have large reserves of coal. This would have created some competition and expertise outside CIL.

References:

   1.  The annual plan and the 12th five year plan of the Ministry of Coal.

   2.  Integrated Energy Policy, 2006

   3.  Coal Mines Nationalization Act,1973

   4.  Coal Bearing Areas Acquisition and Development Act, 1957

   5.  Government directive issued to CIL dt 17.02.2012

   6.  CIL performance report, October 2012

   7.  EIA notification vide S.O. 1553€ dt 14.09.2006, general condition for EC application

   8.  F.no. 11-9/1998-FC(pt) dt 03.08.2009 , Diversion of Forest land to Non-Forest purpose under Forest (Conservation) Act 1980 –ensuring compliance of the scheduled tribes and other Traditional Forest Dwellers (Recognition of Forest Rights )Act 2006

   9.  F.No. 2-1/2003-FC dt 21.03.2011, Government for amendment of guidelines (enforcing sequential approval for FC and EC)

10.  Central Pollution Control Board, Comprehensive Environmental Assessment of Industrial Clusters, Ecological Impact Assessment Series EIAS/5/2009-10