Coal Insights, December 2021

CONTENTS

6 | COVER STORY

28 Seaborne thermal coal offers remain volatile in December 29 Seaborne coking coal offers rise in December

“Coal to be the mainstay of India’s energy basket for 20-25 years.”

30 India’s October coal imports down 27% y-o-y

Binay Dayal, Director (Technical), CIL, shares insights on road ahead for coal.

31 CIL’s coal production up 4% in November 32 SCCL’s coal production up 14% in November

16 | SPECIAL FOCUS

33 Need R&D in clean tech, smart logistics: A K Jain

COP26

38 Mission Coking Coal for import parity pricing

Industry experts share thoughts on Net Zero roadmap

39 US govt arm suggests India coal power addition cap at 23 GW 43 Coal demand to touch alltime high in 2022: IEA

34 | FEATURE

47 November sponge iron production up y-o-y, m-o-m

Coal Ministry puts 24 new mines under 4th tranche

48 October power capacity addition at 1,320 MW

Further incentives for bidders in the works.

49 Coal handled by major ports up 22% till November 50 Railways’ coal handling up 25% till November 56 Coal phase-down critical but costly for Indonesia: World Bank 58 US coal production estimated to rise by 9% MMst in 2021 61 Merit Order Dispatch forces power plants to look for nearby sourcing 62 Corporate update 64 Government update 66 E-auction data 68 Port data

4 Coal Insights, December 2021

51 | INTERNATIONAL

COP26 commitments to drive coal prices up: report Investment in coal remains low amidst policy pressure.

59 | CORPORATE

Coal India sets tech roadmap to achieve 1 bt output Tech adoption to create new organisational culture.

COVER STORY

“Coal to be the mainstay of India’s energy basket for 20-25 years” 6 Coal Insights, December 2021

COVER STORY

C

oal India Ltd is undergoing a major transformation into a total energy company responsible for the heavy lifting needed to convert coal from a polluting lump of carbon to a cleaner source of fuel and chemicals. Binay Dayal, Director (Technical), Coal India Ltd has been responsible for chalking out that transformative journey since he assumed charges of this role in October of 2017. Dayal graduated in mining engineering in 1983 from Indian School of Mines and is a first-class holder of mine manager’s certificate of competency from DGMS, Dhanbad. He obtained MBA from BIT, Mesra. He joined as Junior Executive (Trainee) in Coal India and was posted at Central Saunda Colliery, Barkakana area of Central Coalfields in 1983 and since then has worked in various capacities such as head of technical services and public relations in CMPDI, regional director of CMPDI, RI – V, Bilaspur, general manager (projects and planning) in South Eastern Coalfields before taking over the charge of Director Technical (Engineering Services) at CMPDI in 2015. In an exclusive interview with Arindam Bandopadhyay of Coal Insights, Dayal shares his insights on the road ahead for the coal sector.

In view of the sweeping changes embracing the global energy matrix, how do you see the long-term prospects for Coal India (CIL), the largest provider of energy fuel in the world’s 3rd largest energy market? How is the company coping with the changing times?

Of course, there are sweeping changes embracing the global energy matrix.

International Energy Agency (IEA) advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30-member countries, 8 association countries and beyond.

India is among the 8 association countries along with Brazil, China, Indonesia, Morocco, Singapore, South Africa and Thailand. The outcome of COP26 Glasgow meeting has provided an ‘unmistakable signal’ that shall accelerate the transition to clean energy worldwide.

India has taken a pledge to reduce emission. Our country has a target of 175 GW of installed capacity for renewable

energy generation by 2022. By 2030, we have a target of 500 GW installed capacity for generating renewable energy. This needs transformation of the energy sector including coal-based power plants.

A new global energy economy is emerging with the potential to create millions of decent jobs across a host of new supply chains as well as manufacturing technology of PV modules, wind turbines, batteries, electrolysis for hydrogen and a host of other technologies.

The challenges ahead, as I perceive, are mobilising investment and finance, people centered transitions, phasing down of coal, prices and affordability, energy security and a proper mix of fuels – old and new – and of course reducing emissions with technology innovation, employment and costs for achieving Net Zero target by 2070. In the short-term, India has to see the energy demand trends up to 2030 by various sectors like industry, transport and agriculture and domestic.

The Prime Minister has announced a five-pronged strategy in COP26 at Glasgow meeting in November to achieve the feat of Net Zero Emission by 2070. These fivefold strategies for India are the following: ♦ Augment non-fossil energy capacity to 500 GW by 2030 ♦ Meet 50 percent of energy requirement from renewable energy by 2030 ♦ Reduce total projected carbon emission by 1 million tons (mt) from now onwards till 2030 ♦ By 2030 reduce carbon intensity of the economy by less than 45 percent ♦ Achieve the target of Net Zero by 2070 Coming to CIL’s perspective, we provide energy security to the nation. CIL is poised to meet the coal demand of the country.

Although the old and inefficient coal-fired power plants are being retired, the demand for coal shall increase in years to come.

CIL has an ambitious target of producing 1 billion tons coal by 2025 for which new projects have been approved to cope up with the country’s demand.

The demand for coal in the steel sector is also increasing. Besides, we are committed to reduce coal imports for which we have to enhance production capacity. In a nutshell, I do feel that coal in one form or the other shall stay in the Indian energy economy for not less than 20-25 years from now.

CIL seems to have gone slow on its production growth plan. When do you expect to reach the milestone 1 billion tons of coal production? What is the reason for the downward revision in periodic targets?

CIL has always been committed to meet the demand for thermal coal in the country.

If we look into the pithead coal stock data from last three years, there was a significant rise in pithead coal stock from 9 percent of total coal production in 2017-18 to 17 percent of coal production in 2019-20.

Coal Insights, December 2021

7

SPECIAL FOCUS – COP26

Coal and Renewables: A shared goal for India towards Net Zero Sumit Maitra

C

ountry’s largest power generating company, NTPC, which has just taken the initiative to set up country’s first green hydrogen micro-grid project, a standalone fuel cell-based micro-grid with hydrogen production in Andhra Pradesh, is also contemplating not to junk its old thermal power plants given rising power demand.

These developments aptly sum up the challenge that India is now facing: how to plan for a Net Zero environment in times of growing power demand triggered by rapid urbanisation and economic prosperity.

It is well accepted that renewable electricity costs have dropped below coal costs on a levelised basis. Nonetheless, many countries around the world, including India, continue to invest in new coal power plants primarily because: (a) RE generation is intermittent and may need significant system flexibility for grid integration, (b) RE generation does not coincide with peak electricity demand periods which is in the evening for India, and (c) legacy planning and regulatory frameworks that may not fully capture the value and capabilities of RE and energy storage technologies.

In this context, the dramatic decline

16 Coal Insights, December 2021

in battery storage costs - 90 percent cost reduction at the battery pack level since 2010 - could serve as a turning point For another coal-dependent economy, Indonesia, World Bank has recommended phasing down coal and scaling up renewable energy as part of the strategy to meet Indonesia’s low carbon transition targets.

“Indonesia’s climate ambitions in the power sector need a comprehensive package of reforms and investments,” said World Bank Indonesia and Timor-Leste Lead Economist Habib Rab. World Bank has recommended strengthening power sector institutions, enabling private investments in renewable energies, ensuring the financial sustainability of the sector and promoting a just transition for all.

Impact on livelihood

Echoing the earlier findings published by National Foundation of India, researchers at the US Department of Energy’s Lawrence Berkeley National Laboratory have said in their recent study that in the near to medium term, India’s clean energy transition is likely to cause a loss of jobs in coal mining and transportation.

National Foundation of India has

predicted that coal transition in India would be “messy and complicated” with an estimated 13 million people - more than the population of at least 160 countries - employed in coal mining, transport, power, sponge iron, steel, and bricks sectors – are dependent upon coal and related sectors.

In the report on Indonesia, World Bank has suggested that the poor and vulnerable households need to be protected during key transition phases as the economy will shed jobs in the early phases of the transition though it can create more jobs in the longer term with private financing.

World Bank sees job losses reaching up to 2 million cumulatively by 2040 in the worst scenario.

Coal demand revival threatens COP26 goals

India, with a population of more than 1 billion people - and the world’s thirdlargest energy-consuming country, owing to rapid industrialisation and rising incomes – has set ambitious clean-energy targets to reduce pollution and battle climate change, all while meeting growing electricity demand. The country has committed to installing 175 gigawatts (GW) of renewable energy capacity by 2022, up from 100 GW

FEATURE

Coal Ministry puts 24 new mines under 4th tranche

protected areas, wildlife sanctuaries, critical habitats, having forest cover greater than 40 percent, heavily built-up area etc. have been excluded, the Minister added.

The commencement of sale of tender document started on December 16.

The auction shall be held online through a transparent 2 stage process, on the basis of percentage revenue share.

SBI Capital Markets, sole transaction advisor to Ministry of Coal for the commercial coal mine auction, had devised the methodology and is assisting the Ministry in conduct of the auction.

Further incentives for bidders in the works

Coal Insights Bureau

C

oal Ministry has put 99 mines on auction for the 4th tranche of auction of commercial mines under the Mines and Minerals (Development and Regulations) Act. After the successful auction of 30 coal mines in the first two tranches and upon receipt of 53 bids for 20 coal mines under tranche 13 of CM(SP) Act and tranche 3 of MMDR Act, Ministry of Coal has now launched the auction process of 24 new coal mines (9 new mines under Tranche 14 of CM(SP) Act and 15 new mines under the Tranche 4 of MMDR Act).

With coal mines rolling over from third round of commercial auctions and second attempt of second tranche of commercial auctions, there shall be a total of 99 coal mines on offer.

Out of the 99 coal mines: 59 coal mines are fully explored while 40 mines are partially explored.

Apart from 24 new mines, 75 mines are being rolled over from previous tranches.

Mines are spread across 8 coal bearing states.

These mines are spread across eight coal bearing states of Jharkhand, Chhattisgarh,

34 Coal Insights, December 2021

Odisha, Madhya Pradesh, Maharashtra, West Bengal, Andhra Pradesh and Telangana.

Under the 3rd tranche of auction launched earlier, 37 companies have bid for 20 mines against 88 mines on offer. Major bidders are JSPL, Vedanta, Tangedco, Dalmia Cement, Sunflag Iron & Steel, JSW, Nalco among others. The auction would be held from January 7.

Minister of Coal Pralhad Joshi launched the 4th tranche of auction of 99 coal mines on December 16 including 24 new mines in an event in New Delhi.

Launching the latest tranche, the Minister called upon the investors who have already completed successful bidding of coal mines to start production at the earliest for greater self-reliance in this sector.

Joshi also urged the officials to identify more coal blocks for auctioning.

There wouldn’t be any dearth of demand, Joshi pointed out arguing that for at least 30 to 40 years, coal will continue to be crucial in India’s energy sector.

The Minister urged investors to step up participation in the fully transparent auction process evolved by the Coal Ministry.

The list of mines has been finalised post detailed deliberations and mines falling under

Further incentives are being contemplated by the Ministry of Coal with focus on sustainability, the Ministry indicated during the event.

Key features of the proposed 4th tranche of auction include introduction of National Coal Index, ease in participation with no restriction for prior coal mining experience, full flexibility in coal utilisation, optimised payment structures, efficiency promotion through incentives for early production and use of clean coal technology.

Receives 53 bids for 20 mines under 3rd tranche

As part of the 3rd tranche of auction process, technical Bids comprising of online and offline bid documents were opened on December 15 in the presence of the bidders.

The auction process of 88 coal mines for sale of coal was launched by the Nominated Authority, Ministry of Coal on October 12.

The online bids were decrypted and opened electronically in the presence of the bidders.

Subsequently, sealed envelopes containing offline bid documents were also opened in the presence of bidders.

Entire process was displayed on the screen for the bidders. A total of 53 bids were received for 20 coal mines of which 16 are fully explored mines and 4 are partially explored mines.

FEATURE

Mission Coking Coal for import parity pricing Coal Insights Bureau

T

he recently formed InterMinisterial Committee including industry stakeholders to strategise augmentation of coking coal production in India has submitted its recommendations.

Based on this, the Ministry of Coal has set up Mission Coking Coal to evolve a road map for increasing production and utilisation of domestic coking coal. The main recommendations of the committee are: ♦ Identification of additional coking coal blocks for production by Coal India Ltd and private sector and auction of CBM overlap coking coal blocks. ♦ Adopting existing advance technology for beneficiation of coking coal, developing policy framework for disposal of washery rejects and middlings may be reviewed and made more elaborate. ♦ Allocation of coking coal linkages by CIL to private washeries, setting up of coking coal washeries on aggregator model basis. ♦ Suggested formulating import paritybased pricing mechanism for domestic coking coal factoring the quality parameters. ♦ Suggested having an incentive based framework to encourage steel sector for utilisation of stamp charging technology and invest into R&D initiatives for redesigning blast furnaces for utilisation of domestic coking coal. ♦ Recommended that CIL should publish mine-wise/seam-wise details of coking properties of coal on its website and purchaser may be allowed to choose from specific source. ♦ Tax incentives may be provided to the entities for manufacturing of underground mining machinery and entities engaged in underground mining.

38 Coal Insights, December 2021

Some of the suggestions of the committee are under implementation with Coal India subsidiaries using the surplus capacity of Tata Steel’s washeries and getting washed coking coal for enhancing supply.

According to the government, 9 coking coal washeries are projected with 4 already under construction phase. The new BuildOperate (BOO/BOM) washeries being set up in BCCL and CCL are using existing state-of-the-art beneficiation technology suggested by the successful bidders.

For higher supply of coking coal in the country and to ensure it is provided at a cheaper rate, the decision to yet reduce ash percentage with upgraded technology and the price of coking coal to be linked to imported coal are measures under consideration.

Auctioning coking coal blocks

For the first time ever, four blocks of coking coal were put up for auction with no end-use restriction in the first tranche of commercial coal auction, out of which three were successfully auctioned. In the second tranche of commercial coal mines auction, six blocks were put up for auction out of which one successfully auctioned. Auctioning of blocks that overlaps with CBM deposits is also being explored by the government.

Improving quality of coking coal

Domestic coking coal has high ash content (mostly between 18-49 percent) and is not suitable for direct use in the blast furnace.

Therefore, coking coal is washed to reduce the ash percentage and is blended with imported coking coal (less than 9 percent ash) before utilisation in the blast furnace.

Over the last 4 years, only about 2030 percent of coking coal produced was washed before utilisation with average yield of 47 percent. Mission Coking Coal will

be focusing on adopting existing advance technology for beneficiation of coking coal, developing policy framework for disposal of washery rejects and middlings may be reviewed and made more elaborate.

Focus on reducing imports and growing domestic output

The vision for setting up the mission is to prepare an action plan to reduce import of coking coal which includes exploration, enhanced production, adoption of new technologies, allocation of coking coal blocks for private sector development, setting up of new coking coal washeries, R&D activities and improvement of quality parameters.

“This will give necessary boost to coking coal production in our country and strengthen in-house capabilities which thereby will help in substantial reduction of coking coal imports,” the government said in a release.

About 50 mt of coking coal is imported by the country on an annual basis and the cost incurred was `45,435 crore.

Thus, augmenting the supply of domestic coking coal would not only help in reducing the coking coal imports but also help in saving the forex and fortify foreign exchange reserves.

With the proposed measures and policy initiatives, coking coal has the potential to emerge as one of the important new business areas for CIL and other private sector players, which will contribute in multiple ways for economic development, it added.

Importance of coking coal to steel

Coking coal and steel sector have high correlation with each other. Coking coal is mainly used in manufacturing of steel through blast furnace route. The production of coking coal in the country was at 41 mt in FY19 which has increased to 53 mt in FY20.

As per National Steel Policy, the targeted steel production by FY30 is 300 mt of which 181 mt would be through blast furnace route i.e. nearly 3-fold increase is targeted in the blast furnace route steel-making capacity, which in turn will require a multi-fold increase in the supply of domestic coking coal to complement the increased steel production and limit the imports of coking coal.

INTERNATIONAL

COP26 commitments to drive coal prices up: Aussie govt report Coal Insights Bureau

G

lobal coal demand is recovering faster than rise in supplies thereby pushing up prices.

The trend is likely to continue as investments in coal would remain restricted following commitments of Net Zero by several coal-producing nations in the recently held COP26 meeting, says the industry department of Australia in its latest report on commodity outlook.

Exports remain below pre-Covid-19 peaks, but a rapid global economic recovery and cold Northern Hemisphere winter has increased demand for power generation among significant thermal coal importers.

This has led to rising pressure on inventory levels and surging prices over the second half of 2021.

“Key importers, including China and India, are now managing severe pressure on inventories after months of destocking, and Europe is also starting to face inventory shortages. However, surging prices have not led to a rush of coal investment. Investment in coal remains low amidst market and policy pressure, which has been affected by announcements in and around the recent COP26 summit,” says Resource and Energy quarterly report.

Recent commitments by a range of countries have added to uncertainties over coal investment.

“This is likely to discourage a number of major investors from responding to the recent price surge, and contribute to the likelihood that thermal coal prices will remain relatively high over the outlook period,” the report said.

High prices may in turn reduce competitiveness of coal relative to other

energy sources, risking potential reductions in its share of global power use. However, some companies and countries with existing coal mining assets are likely to see a significant benefit to profits, especially in light of the ongoing expansion of coal generation and imports in parts of Asia.

The interaction between short-term factors (recovery from Covid-19 and ongoing rollout of new coal plants in South Asia) and long term factors (new policy announcements emerging from the COP26 summit, difficulties with access to capital and insurance) could create significant volatility in prices and trade over the next two years, however policy announcements are not expected to materially impact demand over the next two years.

In volume terms, seaborne imports are estimated to have increased by 7 percent in 2021 to 1,060 million tons (mt) as Covid-19 disruptions pass.

Smaller increases are expected in the subsequent two years, with overall imports expected to reach 1,079 mt in 2023, falling just short of their 2019 peak.

Supply is expected to largely match demand in 2022, the report said.

India’s coal imports to continue growth trajectory

India’s coal imports are expected to continue growing with both demand and domestic supply set to expand.

“With post-Covid-19 recovery now well underway, Indian thermal coal imports are expected to rise. Imports of Indonesian coal have risen especially rapidly in recent months, as Australian coal has lost some of its price advantage. While imports have

“Key importers, including China and India, are now managing severe pressure on inventories after months of destocking, and Europe is also starting to face inventory shortages. However, surging prices have not led to a rush of coal investment. Investment in coal remains low amidst market and policy pressure, which has been affected by announcements in and around the recent COP26 summit.” become more expensive, India has thus far avoided any significant power shortages,” the report said.

Pressure on imports may ease over coming months, as power generators attempt to cut back usage amidst urging from the Government for India to become more selfreliant. However, domestic supply is yet to grow to a level that could noticeably curb import pressure.

Indian Government is also seeking to reduce dependency on imported coal by providing greater access to domestic deposits.

The Government is conducting auctions

Coal Insights, December 2021

51

CORPORATE

Coal India sets tech roadmap to achieve 1 bt output Coal Insights Bureau

C

oal India (CIL) needs to go for transformative adoption of technologies as it targets to achieve 1 billion tons (bt) of production by 2023-24 enabling the mammoth organisation achieve safer working conditions through improved underground communication, automation, more sophisticated transportation systems, and emergency response measures by integrating technology into mining projects, the Technology Roadmap for the coal sector created by CMPDI says.

The technological transformation journey will impact mining operations, safety and productivity, environmental protection and opportunities for women, the document said.

The objective of the roadmap issued for comments from experts and stakeholders aims to implement new technologies and build digital infrastructure to support current and future ramp-up for the mines.

This involves a strong, multi-speed backbone information technology and infrastructure system that allows rapid deployment of new technologies. Creation of such system would require access to newage ecosystems (e.g., start-ups, established vendors, research institutes, etc, the document said.

“The technological transformation will also entail creation of a new culture in the organisation. A new way of thinking will be inculcated in the entire organisation,” it said.

The roadmap proposes setting up a technology transformation team to drive impact and sustain the program with established centres of excellence.

A robust tracking and change

management mechanism will be deployed to ensure timely resolution and delivery.

Planned technology adoption roadmap for key areas

Underground mines

“The technological transformation will entail creation of a new culture in the organisation. A new way of thinking will be inculcated in the entire organisation.”

Drilling blasting process for coal preparation shall be discontinued.

existing employees who are to carry the technology transformation at the UG mines with sufficient coal reserve potentiality at the mine leasehold.

Longwall mining

Centralised control room

Longwall mining has advantage of high recovery, lower operating cost, easier to supervise, works under weak roofs. Longwall is applicable in preferably flat and uniform (dip less than 12 degree) & Deposit size large areal extent & uniform thickness.

Centralised control room for each mine shall be established for maintenance, monitoring, and supervision.

Phasing out of SDL/LHD

In-pit crushing & conveying should be introduced in phased manner in all big opencast mines with flatter gradients.

In pit crushing of coal is generally found to be economical in high-capacity opencast mines where reasonable lead distance and lifts are involved.

Depending on individual parameters, it can achieve full or partial replacement of trucks for material transport within and out of a mine.

Discontinuation of blasting

Side Discharge Loader/Load Haul Dump to be phased out from all underground mines.

Task force to oversee this in existing mines.

Continuous miner Continuous Miner/bolter miner /RH/LW/ SW/HM shall be introduced in underground mine for cutting coal wherever applicable Amalgamation Small mines are to be amalgamated to larger mines to make the mines profitable with high mechanisation.

R&D initiatives For liquidation of coking coal from deep UG mine, R&D initiatives shall be taken up. For new backfilling technologies in underground mines such paste fill, aqua fill etc.

Technology transformation cell A dedicated team of persons having acceptability towards UG mechanisation culture positively need to be made from

Opencast mines In-pit crushing & conveying

Shovels & dumpers size upgradation The largest dumpers deployed internationally are 400 ton at present. The 42-cum bucket capacity rope shovel at Gevra OCP in SECL is the biggest rope shovels deployed in CIL and elsewhere in India.

Internationally, the largest rope shovel deployed is of 63 cum bucket capacity.

High Capacity HEMM has less specific fuel and other resources consumption, less pollution, dusts, less dispersion because of bulk handling and less number of exposed people.

Coal Insights, December 2021

59

70 Coal Insights, December 2021