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Targeting to reach 50 mt by 2027. coal coking coal offers rise in August July coal imports up 56.8% y-o-y CIL’s coal production up 11% in July SCCL’s coal production down 32% in July Min to auction more than 100 mines in near future emissions in coal-fired plants: a GE Power case study Government relaxes coal impor t norms for blending Thermal plant PLF to hit a 5-year high in FY23: Crisil India’s July sponge iron production up 12.7% y-o-y Power capacity addition up 6% in Q1 questions emission reduction capability of FGD Coal handled by major ports up 25% till July Railways’ coal handling up 20% in July triggers power crisis in China Indonesia benefitting most from India imports: Adaro German law restar ts mothballed coal plants US coal production to rise by 21 MMst in 2022: EIA coal production up 87% in Q1 up 153% in Q1
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offers witness mixed trends in August 14 Seaborne
4 Coal Insights, August 2022 CONTENTS 38 | INTERNATIONAL Queensland coal royalty hike to impact investments There is near tripling of top-end coal royalties. 18 | FEATURE Coal Ministry to auction 43 broken-up mines Decision stems from the poor response to earlier coal block auction. 21 | FEATURE Discoms’ liquidity gap crosses `3 lakh crore: ranking report Average loss is 93 paisa per unit of input energy 6 | COVER STORY Focus on coking coal in reforms 2.0 A detailed look at plans to attract investment in coking coal mining and blending. 47 |
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53 Corporate update 55 Government update 58 E-auction data 60 Por t Data
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NTPC eyes 85% jump in captive coal output in FY23
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52 Coal India EBITDA
6 Coal Insights, August 2022 Sumit Maitra Focus on coking coal in reforms 2.0 COVER STORY
The steel sector needs 60 million tons of coking coal, 90 percent of which is met through imports. Imports have been progressively going up, from 47 mt in FY18 to 57.16 mt in FY22.
Opening up of the coal sector and introduction of commercial mining have brought in significant investment into thermal coal mining which will ensure adequate availability of fuel as the country’s electricity demand continues to see handsome growth rate year after year.
Despatch of domestic coking coal in FY22 was 47.76 mt while in the first half of FY23, it was 13.66 mt, just 28 percent of previous full year achievement. Poor quality of domestic coking coal Coking coal being a critical input in steel
In contrast, domestic production has fluctuated, from a high of 60.88 mt in FY16 to 41.13 mt in FY19.
“Country’s attention over the past 10-15 years, particularly after the Supreme Court verdict in 2014, was entirely concentrated on thermal coal. The country was so besotted by thermal coal requirement for the power sector that a lot of high GCV coal, which could have gone to the secondary steel sector, has also been allocated to the power sector. Now we need to focus on coking coal,” A K Jain, Secretary, Coal
Coal Insights, August 2022 7
To bridge this anomaly, and reduce costly imports of coking coal, the government has now decided to focus on coking coal mining and its domestic availability during the next round of coal sector reforms.
Fluctuating production and rising imports
Now we need to focus on coking coal,” he added.The steel sector, by using available technologies can also explore using more of domestic high-ash coal in the steel manufacturing process. “We would consider reforms that are needed to attract investment to the steel industry for coking coal production and we welcome any suggestions,” Jain said.
Among the proposed steps, the government might consider removing the Clean Energy Cess on coking coal, he indicated.Theproposed coal trading platform being promoted by the government would also help the steelmakers get proper price discovery while importing coking coal from destinations like Australia where cases of price manipulations and distortions have been reported, Jain said.
COVER STORY
The key objective of this workshop was to gauge the interest and capability of the steel sector and mine developers to bid in coking coal block auctions and open mines integrated with washeries based on the demand-supply gap of coking coal to reduce import of coking coal. “Country’s attention over the past 10-15 years, particularly after the Supreme Court verdict in 2014, was entirely concentrated on thermal coal. The country was so besotted by thermal coal requirement for the power sector that a lot of high GCV coal, which could have gone to the secondary steel sector, has also been allocated to the power sector.
Production of raw coking coal rose sharply in the following year to 52.94 mt in FY20 before dropping to 44.78 mt in FY21.
Imports of coking & thermal coal during the last six years (in million tons) Coal 2017-182018-192019-202020-21 2021-22(Prov.)* 2022-23(Prov.)* CokingCoal47.0051.8451.8351.2057.169.88 Non-Coking Coal161.25183.51196.70164.05151.7730.05 TotalImport208.24234.35248.53215.25208.9339.93 Coke4.594.932.882.462.480.44 * Import upto May, 2022 (Source:-DGCI&S and CBIS’s website)
“The steel sector’s need for coking coal from domestic sources requires a complete end-to-end solution and we welcome your partnership. The ministry is now geared for the next generation reforms moving from thermal coal to coking coal,” A K Jain, Coal Secretary, said while addressing a workshop on coking coal organised by the Coal Ministry along with Coal India. India needs aggressive focus on increasing coking coal production to reduce import dependency, Pralhad Joshi, Minister of Coal and Mines, said in the workshop while inviting suggestions from all stakeholders for finding technology solution and using available coking coal in the country.
The country also houses the world’s second-largest steel-making capacity, which, unfortunately, continues to rely heavily on imports.Exploration of whatever coking coal reserves that we have has not happened in a significant way while washery capacity hasn’t gone up either.
(mtpa) TypeMine ArjuniEastMadhyaPradeshSohagpurExplored10.45131.8G71.36UG ArjuniWestMadhyaPradeshSohagpurPartiallyExplored11.10110.2G7NANA Burapahar(Revised)OdishaIbvalleyExplored3.23292.0G124OC ChainpaMadhyaPradeshSohagpurExplored13.57182.3G91UG ChintalpudiSectorA1(NWPart)AndhraPradeshPranhitaGodavarivalleyExplored5.84420.9G120.3UG ChintalpudiSectorA1(SEPart)AndhraPradeshPranhitaGodavarivalleyExplored4.82347.4G120.5UG DahegaonDhapewada&Tondakhairi KhandalaCombined(NorthernPart)MaharashtraKampteeExplored9.4098.0G80.5UG DahegaonDhapewada&Tondakhairi KhandalaCombined(EasternPart)MaharashtraKampteeExplored15.62162.8G80.5UG
Coal Insights Bureau Coal Ministry has invited Expressions of Interest (EoIs) for 43 new coal mines which have been created by breaking up mines that earlier remained unsold in previous coal block auctions. To illustrate, the Arjuni block, which remained unsold in the 4th tranche in March, has now been divided into Arjuni East and Arjuni West, to be sold separately. The decision to break up these mines stems from the poor response to some of the earlier coal block auctions. Most of these mines are either fully or partlyGeologicalexplored. reserves varies from 3.23 million tons in Burapahar block in Odisha to 18.64 mt in the block Eastern Part of GorhiMahaloi. (Sq.km) PRC DahegaonDhapewada&Tondakhairi KhandalaCombined(SouthernPart)MaharashtraKampteeExplored15.43160.8G80.5UG Dharampur(NorthernPart)ChhattishgarhBisrampurPartiallyExplored8.297.9G9NANA Dharampur(SouthernPart)ChhattishgarhBisrampurPartiallyExplored18.6917.9G9NANA EasternPartOfGorhi-Mahaloi (EasternPart)ChhattisgarhMand-raigarhExplored5.30180.9G130.87UG EasternPartOfGorhi-Mahaloi (WesternPart)ChhattisgarhMand-raigarhExplored18.16619.9G130.87UG Gawa(EasternPart)JharkhandAurangaPartiallyExplored10.5636.6G11NANA
Revised coal blocks under MMDR Act Coal Block State Coalfield ExplorationStatus Area
18 Coal Insights, August 2022 FEATURE Coal Ministry to auction 43
broken-up mines
Resource(mt) GradeCoal
Coal Insights Bureau
Coal Insights, August 2022 21 FEATURE
The financial deficit in India’s power distribution sector on a cashadjusted basis is now more than `1 lakh crore with sector’s total liquidity gap at nearly `3.04 lakh crore.
This figure is nearly 1.4 times the losses recorded (on the basis of accrual accounting).
The 10th Integrated Rating Exercise covers 71 power distribution utilities comprising of 46 state Discoms, 14 Private
Thereceivables.worsening trend during the period is estimated to be partly due to the Covid-19 considering pandemic because the ACSARR gap and total losses reduced slightly over FY19–FY20 before surging again in FY21 to end at levels higher than even FY19, it said.“This financial deficit is manifesting as a liquidity crunch in the sector, with discoms’ current liabilities exceeding their overall current assets, and amounting to nearly twice the value of their current liquid assets. The sector’s total liquidity gap is nearly `3.04 lakh crore,” the report says.
The difference in these two figures was on account of further adjustments made to revenue to factor in the impact of increase in trade
Analysis of losses over FY19–FY21 shows that the deficit is widening. The absolute cash-adjusted gap during the period increased by 10 percent. This rise was almost entirely due to the sector’s rising gap between Average Cost of Supply (ACS) and the Average Revenue Realised (ARR), given the gross input energy during the period remained almost constant, the report says. The national average ACS-ARR gap grew 11.4 percent during the period, from `0.83 to `0.93 per kWh. This means on an average India’s distribution utilities are making a loss of 93 paisa per unit of input energy, the rating analysisWithoutsaid. adjusting for cash, the per-unit ACS-ARR gap was `0.69 per kWh in FY21 (excluding subsidy billed but not received, grants for loan takeover under UDAY, regulatory income).
An average Discom is making a loss of 93 paisa per unit of input energy, the 10th Annual Integrated Rating and Ranking of Power Distribution Utilities says.
Discoms’ liquidity gap crosses `3 lakh crore: ranking report
Over FY19–FY21, for example, the recorded accrual gap averaged `0.74 lakh crore.
During the rating exercise, the absolute cash-adjusted gap or the losses in India’s power distribution sector have been calculated for the first time. Over FY19–FY21, this gap averaged nearly `1.04 lakh crore.
Coal India not to go ahead with short-term imports
The Gencos have also been asked to keep monitoring the situation closely, the power ministry has said. About 80 percent of coal produced domestically is supplied to power sector. Some thermal power plants are designed for exclusively using high GCV imported coal while other TPPs have also been importing coal for blending purposes for various reasons.
And, the coal import slide by imported coal-based power plants was 46.14 percent to 18.89 mt due to significant rise in internationalDomesticprices.coalproducers stepped in to meet a large extent of the resultant gap with the bulk of supplies from CIL.
“In FY13 it was 7 percent, which has been brought down to 1 percent in FY22,” the ministry twitted. India’s power demand grew by 1520 percent in energy terms from August/ September 2021 onwards. The domestic coal supplies increased, but not enough to meet the Bydemand.April-May 2022, the gap between the daily consumption and daily arrival was 1.2 lakhs tons per day. Stocks were declining at that rate. Central and state Gencos and IPPs floated their own separate bids for imports.
FEATURE Government relaxes coal import norms for blending
Power Ministry through August 1 advisory has brought down the blending percentage norm for imported coal to 5%.
In order to address increased coal requirements following recent surge in power demand, Ministry of power issued an advisory on April 28 for power plants to import 10 percent coal for blending purpose.Theministry through its latest advisory to state governments and state Gencos and Independent Power Producers has decided that henceforth, states/IPPs and the ministry of coal may decide the blending percentage after assessing the availability of domestic coalDomesticsupplies.
Defending imports
In terms of the advisory of the Government, CIL floated open tenders for import of coal for the period from July 2022 – June 2023 for supply to the willing powerhouses and awarded the assignment to the successful L1 bidder through the aforesaid tender. Coal imports for domestic coal-based power plants, for blending purpose, had shrunk by 22 percent to 8.10 mt in FY22 compared to FY21.
Coal Insights Bureau Power ministry has relaxed the norms for import of coal for power plants with improvement of stocks. Gencos are now free to decide on the quantum of imports for blending against the earlier mandate to compulsorily import 15 percent of their requirement. The Parliamentary Standing Committee on Energy has also suggested the government to reduce the import of coal and increase the domestic production to meet the demand.
Power ministry has defended imports for blending purposes saying that imports for blending has always been happening in India, which was gradually being brought down.
CIL has no plan to refloat the indent-based short-term import tender for 2.146 million tons of coal, which was initially won by Adani. Also, some of the Gencos which had earlier expressed their intention to buy imported coal through CIL tenders have now expressed their desire to step back, according to sources.Thetotal import of thermal coal during FY22 was 151.77 mt as against 164.05 mt imported in the previous year, registering a decease of 7.5 percent.
Even in the first two months of FY23April and May - import of thermal coal has decreased to the level of 30.05 mt from 32.91 mt imported during the corresponding two months in the previous year.
Advisory to NTPC, DVC Ministry of Power through an advisory of August 1 to NTPC and DVC has brought down the blending percentage norm for imported coal to 5 percent.
Coal Insights, August 2022 27
As per the advisory issued in April, the import of coal could be made by the powerhouses through their own means or through coal import to be made by Coal India Ltd Accordingly,(CIL). CIL was advised by Ministry of Coal to act as a central agency for import of coal for willing consumers.
coal is supplied to Gencos at notified prices except IPPs and are revised onlyOnperiodically.theotherhand, the international price of coal varies frequently based on demandsupply situation, shipping and logistic considerations and other international factors.Inrecent times, the international price of coal has shot up steeply. Various central Gencos, state governments and state Gencos are involved in the import of coal each year and the rates at which they import coal are not shared by them with the Ministry. However, overall coal import data obtained by Ministry of Coal from DGFT for past years shows that the average price/ rate of imported coal is always higher than that of the domestic coal.
“The near tripling of top-end royalties has Officer,Henry,ininvestmentregimes,highestonewhatworsenedwasalreadyoftheworld’scoalroyaltythreateningandjobsQueensland,”MikeChiefExecutiveBHP
Queensland coal royalty hike to impact investments
The Queensland coal operations comprise of BHP Mitsubishi Alliance (BMA) assets in the Bowen Basin in Central Queensland, Australia. BHP had earlier decided to retain its New South Wales Energy coal operations until the cessation of mining in 2030 subject to relevant approvals.
“The recent changes that have been announced to the royalty regime make any significant investment in that business more challenging, both from a returns and risk perspective,” Mike Henry, Chief Executive Officer, BHP told analysts.
Metallurgical coal Production by BHP-Mitsubishi Alliance
BHP’s Queensland metallurgical coal production, otherwise, delivered strong underlying performance for the June quarter in the face of significant wet weather.
Coal Insights Bureau
At spot metallurgical coal prices, the effective pre-tax royalty rate has increased by approximately 7 percentage points to 19 percent.“This further cost pressure will discourage investment, operational growth, job creation and local business spending across the state. The new tax damages Queensland’s reputation as a stable place to invest, and will make it harder for the state to compete against other global jurisdictions in attracting major new investments that would deliver longer term value to communities and the state economy,” the company said.
The near tripling of top-end coal royalties has worsened what was already one of the world’s highest coal royalty regimes, threatening investment and jobs in the coal-rich Queensland state, mining major BHP has said.
38 Coal Insights, August 2022 INTERNATIONAL
Coal Insights, August 2022 47 Coal Insights Bureau
State-run power major NTPC Ltd plans to ramp up captive coal production this year to 26 million tons (mt), mining 85 percent more coal than 14 mt produced in FY22.
NTPC has proactively taken initiatives to pursue fuel security for its current as well
Current development pipeline (in MW)
commercialisation of Pakri Barwadih mine in 2019 and Dulanga mine in 2020. Talaipalli mines has also started production while mining operations has started at Chatti Bariatu mine in April 2022. NTPC has 7 coal blocks with combined Peak Rated Capacity of 71 mt.
♦ Talaipalli: Coal extraction commenced in November 2019; 0.41 mt of coal produced in FY22 (FY21: 0.81 mt); Contract awarded for Talaipalli West Pit Mine Operator Assured coal supply
“Our coal mining team has been doing fantastic job in ramping up the coal production and there has been increase of 27 percent by achieving 14 mt of the coal production,” Singh said. Ramping up captive production has helped NTPC meet the growing energy needs.
“So there is quantum jump which is coming. We are targeting to reach 50 mt by 2027, this will help in reliable fuel supply to our power stations,” Gurdeep Singh, Chairman & Managing Director, NTPC Ltd, told analysts during a conference call.
NTPC eyes 85% jump in captive coal output in FY23
“There jumpquantumiswhich is coming (in captive coal production). We are targeting to reach 50 mt by 2027, this will help in reliable fuel supply to our power stations,” Gurdeep
NTPC coal mining portfolio consists of estimated geological reserves of 5 billion tons and ultimate mining capacity of 71 mtpa. Its growth path has widened with
Captive coal asset portfolio
NTPC’s captive coal production has grown more than 60 percent in Q1 FY23 with ultimate mining capacity of 71 mtpa target. Cumulative expenditure of `7,964 crore has been incurred till FY22. In recent times, mining operations has started in Chatti Bariatu in April 2022 with operations in Kerandari and Badam coal blocks are expected to start in FY24, the company said in a presentation to investors.
♦ Dulanga: Mine declared commercial w.e.f. October of 2020; 5.39 mt of coal produced in FY22 (FY21: 3.12 mt) 1.49 MMT of coal produced in Q1FY23 (Q1FY22: 0.86 mt)
“We have ensured the fuel supply and we have been able to meet the grid requirement. This has been done by arranging maximum possible coal supplies from the domestic sources, ramping up the coal production from captive mines, and sourcing imported coal to ensure that the no station is starved of fuel,” Singh said in a post-earnings conference call. In FY22 NTPC produced nearly 14 mt of coal in FY22 registering growth of 27 percent over FY21. “We have achieved highest-ever first quarter production of 4.24 mt in Q1 registering growth of 61 percent over the Q1 of the corresponding last year, which was 2.61 mt. Further, we expect to commence production from Kerandari and Badam mines in early FY24,” Singh said.
Director,ChairmanSingh,&ManagingNTPCLtd.
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♦ Pakri Barwadih: Mine declared commercial w.e.f. April 2019 from which 8.32 mt of coal was produced in FY22 (FY21: 7.07 mt); 2.57 mt of coal produced in Q1 of FY23 (Q1FY22: 1.60 mt)
62 Coal Insights, August 2022
