EDITORIAL Chief Editor Dr Mahul Brahma, Tel: +91 85840 08241, E-mail: mahul.brahma@mjunction.in Editor Arindam Bandyopadhyay, Tel: +91 91633 48016 Email: arindam.bandyopadhyay@mjunction.in Editorial Board Alok Srivastava, General Manager, MMTC Ltd Amitabh Panda, Group Director (Shipping & Logistics Operations), Tata Steel Group Anil Razdan, Energy Consultant, Formerly of the IAS, Former Secretary Power & Sp. Secretary Petroleum & Natural Gas, India Anirudha Gupta, Mining & Metals professional and former Director, P&H Joy Mining Equipment India Ltd Ashok Jain, Managing Director, Saumya Mining Ltd Deepak Bhattacharyya, Chief - Horizon 1 businesses, mjunction services ltd Ganesan Natarajan, Former Whole Time Director, Ennore Coke K C Gandhi, Joint President (Material), Shree Cement Ltd Lawrence Metzroth, Vice President – Analysis & Strategy, Arch Coal Inc P S Bhattacharyya, Former Chairman, Coal India Ltd Sandeep Kumar, Managing Director, Tata Metaliks Ltd Associate Editor Sumit Kumar Maitra, Tel +91 85840 08181, Email: Sumit.Maitra@mjunction.in Senior Correspondent Ritwik Sinha, Tel + 85840 08234, Email: ritwik.sinha@mjunction.in Balaka Ghosh Chatterjee, Tel + 85840 08190, Email: Balaka.Chatterjee@mjunction.in Analyst Sanjoy Bag, Tel +91 85840 08215, Email: sanjoy.bag@mjunction.in Business Lead Soumitra Bose, Tel: +91 92310 00232, Email: soumitra.bose@mjunction.in Advertising Soudipto Malakar, Tel: +91 91633 48243, Email: soudipto.malakar@mjunction.in Sumit Jalan, Tel: +91 83369 25981, Email: sumit.jalan@mjunction.in Subscription Niladri Kar, Tel: +91 83369 96510, Email: niladri.kar@mjunction.in Email: publication.vspl@mjunction.in Toll free number 1800 41 920 001, press 6 for publication. Design Debal Ray, Sobhan Jas For suggestions, feedback and queries, please write to coalinsights@mjunction.in
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Dear Reader, French sociologist, philosopher and cultural theorist Jean Baudrillard wrote in ‘The Intelligence of Evil’: “Things have no origin any longer and no end, they cannot develop logically or dialectically any more, but only chaotically or randomly.” A virus with a “crown” reminded me of these lines. A virus with a crown has stripped us of the normalcy and the grand narrative that directed the dynamics of every sector, every economy and every industry. And coal is no exception. And yet to find a method to this randomness, nations across the globe have been devising their own adaptive strategies for rejuvenating their economies as the world solemnly braces for “the new normal”. Amid this course correction, India has chosen is to open up the coal mining sector to free the market from the existing duopoly. It’s not that the country didn’t try earlier. But these are special times and thus warrant special measures. Allowing captive mining by private sector was aimed at breaking up that stronghold of public sector companies. The nation has been successful in implementing this strategy in telecom and aviation space. Privatisation of telecom brought down costs of data and voice, triggering a well-documented revolution. Privatisation of the aviation sector helped generate a new genre of customers, derogatorily termed as “cattle-class”, who has become the lifeline for this industry, especially during the pandemic. The coal sector was next. Unfortunately, the process of distributing coal blocks to the private sector through auctioning of captive mines had its limitations where only a handful of blocks were offered under each tranche to private sector coal users. So as the coal cycle turned, the private owners realized that it might be a better proposition to import better quality coal rather than spend money on mining infrastructure and manpower. The current strategy of commercialising coal mining is perfectly timed. The strategy of commercial exploitation of coal, will change the way we mine this fossil fuel, in terms of technology and efficiency, how we trade it, price it and take it to the end consumers. This new avenue may discontinue the archaic systems of notified prices, FSA, long-term contracts, and penalties for not lifting coal. These and many such stimulating perspectives emerged on commercial coal mining during a recent webinar, conducted by mjunction, where M Nagaraju, Joint Secretary and the nominated authority of Ministry of Coal, Yogesh Daruka, Partner-Power & Utilities, Mining, PwC were in a stimulated conversation with PS Bhattacharyya, former chairman of Coal India. We have hand-picked and put together this issue of Coal Insights with exclusive stories on the industry such as how NTPC is focusing on renewable energy generation or how Coal India has lined up major diversification or how India is planning to ramp up its renewable energy storage facilities. The endeavour is to empower you with knowledge and help you make executive decisions.
Chief Editor
Articles are invited from industry partners for publication in Coal Insights. The selection of articles is subject to scrutiny by the editorial desk and its decision will be final and binding. The copyright of the published articles will be held by the publication. Coal Insights, July 2020
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Contents 1 9 Seaborne thermal coal offers rise in July 20 Coking coal offers decline in July 21 CIL’s coal production down 11.6% in Q1 22 May coal imports down 30% on year 23 SCCL’s production down 44.4% in Q1 24 CIL sees fresh lockdowns impacts in Q2 26 Coal India eyes major diversifications 30 “Govt should auction loss making Coal India mines” Naveen Jindal 31 Railways sets transformation roadmap 34 Power companies’ earnings to fall on shrinking generation 36 May power capacity at 36.15 MW 37 May cement production down 22% 38 Cement biz may head for a bumpy ride in FY21 39 June sponge iron production up 20% on month 40 Bengal starts work on world’s 2nd largest coal block 41 Coal India, SCCL vie for Tangendco units 44 Corporates urged to sign up for RE100 pledge 46 US coal production estimated at 501MMst in 2020 47 Traffic handled by major ports down 20% in Q1 48 Indian Railways’ coal handling down 29% in Q1 49 Slurry pipeline a necessity as rail infrastructure grossly inadequate 54 CESC suffers twin blow of Amphan, Covid 56 Corporate Update 58 Government Update 60 E-euction data 61 Port Data
4 Coal Insights, July 2020
6 | COVER STORY
Commercial coal mining in India: Will the eagles dare? Nominated authority, sector experts share perspectives on commercial mining.
28 | Feature India plans to bring down RE storage costs to edge out fossil fuel Share of fossil fuel at 38.5%, power min tells IEA Summit.
32 | Feature CERC proposes market coupling in new regulations Discovery of uniform market clearing price aimed.
42 | INTERNATIONAL
Adani on track to export first Carmichael coal in 2021 Begins work on overburden removal, employs 700 people.
52 | CORPORATE
NTPC to go slow on new coal-fired plants Eyes Ultra-Mega Renewable Energy Projects in solar parks
Cover Story
Commercial coal mining in India Will the eagles dare? Sumit Maitra
6 Coal Insights, July 2020
Cover Story
I
ntroduction of commercial mining couldn’t have been timed better and has generated enough curiosity and also serious interest from investors and analysts’ community across the globe. “There is interest also from nontraditional business companies who weren’t there in the mining sector previously. They are also showing interest,” said M Nagaraju, Joint Secretary and the nominated authority of Ministry of Coal. “After the launch, we had few interactions with the business community, received number of queries so far and whatever interests we have received are also very unprecedented,” Nagaraju, the key ministry official working on the auction process, said. The reasons behind such interest are not hard to find. The current situation of oversupply and falling demand of coal is but a small blip. And when the economy recovers from the current pandemic-induced slowdown, and stranded power plants get new lease of life and begin generation, country would need coal much more than Coal India can manage to produce, believes PS Bhattacharyya, former chairman of Coal India Ltd. Commercial mining would also bring a sea-change to the way coal is handled and transacted in the country. In a duopoly situation, it’s a sellers’ market and the one-sidedness of the transactions is seen in the Fuel Supply Agreements that Coal India and Singareni Collieries sign with its customers. The FSAs would become a thing of the past, or at least get renegotiated while the coal market as a whole would largely depend upon short term transactions rather than long term transactions, believes Yogesh Daruka, Partner-Power & Utilities, Mining, PwC. “We are already seeing many companies pressurising Coal India to rework the terms of their FSAs and make them more evenly balanced,” he said. There would be more short-termed market-linked transactions on coal after commercial coal is available. There would be impact on the socioeconomic aspects also as many of the
blocks selected are in backward areas of the country. “Development of such mines would also lead to development of the backward areas of states like Jharkhand, Madhya Pradesh and Osidha,” Nagaraju said. Nagaraju, Bhattacharyya and Daruka shared their insightful perspectives on the upcoming commercial coal block auction during a recently held webinar conducted by mjunction services ltd. Need for transparency and viability
While talks of opening up the coal sector was going on for a while, the turning point came when in 2014 the Supreme Court cancelled the allocations made on discretionary basis. “So the focus of the new government was to create a transparent process. Following this, a process was formulated and auctions were done,” Bhattacharyya said. But production from captive blocks allocated didn’t yield desired results for couple for reasons. First, international coal prices were very high and bidders, all captive end users, while looking for energy security, bid somewhat irrationally high prices and later on problem started while implementing the projects. So, the challenge before the government is not only meeting transparency parameters and also developmental imparatives as the blocks need to be mined. “With this in mind the government has reviewed earlier policy and has now come up with a framework which is rational and also meets the transparency requirements,” the former Coal India head said. Need to break duopoly structure
With no major captive miners, there are only two coal miners – Coal India and Singareni Collieries – controlling 94 percent of the supplies. For a country of this side, the need for more players was felt long back. The 1993 amendment of the Coal Mines Nationalisation Act was the first step towards increasing the number of players by allowing captive mining.
“Auction of coal blocks for commercial use has attracted a great deal of attention from investors and also from non-traditional business companies who weren’t there in the mining sector. They are also showing interest.” M Nagaraju, Joint Secretary, Ministry of Coal and the nominated authority Captive failure
This experiment of giving blocks to only captive mining didn’t succeed and it was not a very acceptable model anywhere else in the world. “As captive mining didn’t meet expectations and so the power sector suffered quite a bit as there was a significant gap between demand and supply for a very long time excepting for certain periods when because of extraneous reasons, the gap wasn’t felt,” Bhattacharyya said. This situation is prevailing now as demand is low, for reasons including the pandemic. “Of the coal blocks we had auctioned in the past, only about 32 have come into production. We are trying to make the remaining blocks operational,” Nagaraju said.
Coal Insights, July 2020
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FEATURE
Coal India sees fresh lockdown stress in Q2 Discloses Covid-19 impact details Coal Insights Bureau
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ith intermittent lockdowns continuing across the country, Coal India sees uncertainties at least till September due to disruptions in power demand, logistics and shortages in manpower and raw materials like explosives, the company has said in a detailed disclosure made to the stock exchanges on pandemic impact. “Due to continuing lockdown and various guidelines issued by Central and state governments, normalcy has not been restored yet, affecting coal production and despatch. The situation in this quarter is likely to remain uncertain as some states are declaring fresh lockdown,” Coal India management told bourses. Coal production from July 1 to July 16 has been 18.05 million tons (mt) against the last year same period production 19.61 mt. “The subdued demand because of continued effect of Covid-19 has adverse impact on offtake of coal which in turn affecting the production. The coal production in some of the major mines is still affected due to high coal stock and less coal offtake,” CIL said. Pithead stock of CIL has jumped to 72.88 mt as on July 16 compared to 33.l7 mt during the last year same period. However, with concentrated efforts, a growth of 16.7 o/o was registered in OB removal during the period 1$ Jul’20 to l6tt Jul’20 compared to the last year same period. Disruptions faced during Q1
Coal India produced 121.01 mt of coal during this period compared to 136.94 mt during the last year same period.
24 Coal Insights, July 2020
The continued lockdown during this period had an adverse impact on coal dispatch from CIL. “With decrease in power demand by about 30 percent and shut down of many of the industries in non-power sector due to lockdown, the offtake of CIL decreased to 12O.62 mt compared to 153.49 mt year ago. Pithead stock on May 31 reached up to 78.093 mt during this period. The stock at Power plant end also remained high during this period. “Supply of explosives was affected due to restriction in interstate movement. The explosive supplier faced the problem of raw material and other logistics for manufacturing of explosives, which in turn affected timely supply of explosives to the subsidiary companies of CIL,” the report said. Operations in major coalfields like Korba and Ib valley were disrupted due to declaration of Red Zone in some of the areas of these coalfields. Contractual as well as departmental production during this period affected due to shortage of manpower due to restriction in movement. Downtime of the machines increased due to non-availability of spares due to restriction in interstate transport. Consignment of HEMM like dozer, grader, dumper and excavator could not be delivered on time. As there was less demand of coal during this period, efforts were made to maximize Over Burden Removal. CIL achieved OBR of 330.60 million cubic meter (mcum) during this period compared to 300.99 Mcum during the last year same period with an increase of 29.71 mcum, registering a growth of 9.8 percent.
“Due to continuing lockdown and various guidelines issued by Central and state governments, normalcy has not been restored yet, affecting coal production and despatch. The situation in this quarter is likely to remain uncertain as some states are declaring fresh lockdown.” Impact during March
CIL had produced 51.32 mt of coal during this period. Following lockdown declaration from March 25, despatch of coal was adversely affected in last week of March resulting into mounting coal stock at pithead. Coal stock as on March 31 was 74.629 mt compared to 54.155 mt year ago. Restriction imposed on movement of vehicles, badly affected supply of explosives in the mines. Further, disruption in movement affected availability of manpower, spares parts for HEMM which impacted the production at the mines. Impact on coal offtake
For the period from March 15 to March 31, CIL offtake was 29.13 mt against last year same period offtake of 32.08 mt i.e a reduction of 2.95 mt. This reduction was entirely due to Covid-19 restrictions.
FEATURE
India plans to bring down RE storage costs to edge out fossil fuel
Sumit Maitra
I
ndia has decided to promote renewable energy storage facilities so that their costs comes down and effectively out compete fossil fuel, power and new and renewable energy Minister RK Singh recently said at the IEA Clean Energy Transitions Summit. “We feel that we need to bring the price of storage down and once the price of storage comes down, then pure economics of scale will edge out fossil fuel form of energy,” Singh told the global virtual conference attended by dozens of countries including world’s biggest energy consumers – including China, US and also EU countries. International Energy Agency’s first Clean Energy Transitions Summit discussed how to bring about a sustainable and resilient recovery from the Covid-19 crisis and achieve a definitive peak in global carbon emissions. “This Summit proves that international dialogue and collaboration can bring great
28 Coal Insights, July 2020
value. It was an opportunity to inform, support and inspire each other. Now, it is time for all of us to get to work – building back our economies, bringing our citizens back to work, ensuring that 2019 was the definitive peak in emissions and building towards the resilient and sustainable energy systems of the future,” said Fatih Birol, the IEA’s Executive Director who chaired the meeting. Edited excerpts of Power Minister RK Singh’s comments:
“We are living through extraordinary times as mankind is facing its biggest challenges. We are looking at ahead recovery beyond this challenge although I don’t see clearly as to when we will overcome
“Our country has made a pledge that by 2030, 40 percent of our energy will come from fossil fuel. We are almost close to that at 38.5 percent.” this challenge until unless a vaccine is successful and made available. I think it will be futile to look back and think what we could have done differently but what this calamity has done, atleast which everybody will agree, is that it has brought home is that we are living in one world and we and we sink or swim together. And it is in that perspective that we have to look at environment challenges facing this world and I am thankful to Dr Fatih Birol, International Energy Agency’s Executive Director for bringing up the issue of energy transition. In our country we have made it very clear that environmental challenges are of paramount importance. Our country has made a pledge that by 2030, 40 percent of our energy will come from fossil fuel. We are almost close to that at 38.5 percent. We are going about meeting environmental challenges in two ways: one is energy transition and the other is energy efficiency. We have highest rate of growth of renewable energy in the world. We had set a target for ourselves of establishing 1,75,000MW of renewable energy by 2022. Now if you take the capacity which has been installed and under installation, they are very close at 1,33,000MW. IEA World Energy Investment 2019 has rated India as the fastest growing energy market.
FEATURE
CERC proposes market coupling in new power market regulations
Coal Insights Bureau
P
Market Coupling Operator means an entity as notified by the commission for operation and management of Market Coupling.
ower sector regulator Central Electricity Regulatory Authority has come out with a detailed power market regulations introducing concepts like market coupling that involves uniform price discovery through pooling of bids across various power exchanges to achieve optimal utilisation of transmission systems.
Objectives of Market Coupling
What is Market Coupling
2) Optimal use of transmission infrastructure
The Central Electricity Regulatory Commission (Power Market) Regulations, 2020 says Market Coupling means the process whereby collected bids from all the power exchanges are matched, after taking into account all bid types, to discover the uniform market clearing price for the Day Ahead Market or Real-time Market or any other market as notified by the Commission, subject to market splitting.
32 Coal Insights, July 2020
1) Discovery of uniform market clearing price for the Day Ahead Market or Real-time Market or any other market as notified by the Commission 3) Maximisation of economic surplus, after taking into account all bid types and thereby creating simultaneous buyerseller surplus Functions of the Market Coupling operator
1) The Market Coupling Operator, with the approval of the Commission, shall issue a detailed procedure for implementing
Market Coupling including management of congestion in transmission corridor, the timelines for operating process, information sharing mechanism with the Power Exchanges and any other relevant matters. 2) The algorithm for enabling Market Coupling shall be developed and managed by the Market Coupling Operator and implemented with the approval of the Commission. 3) Market Coupling Operator shall create and maintain a document on its website providing detailed description of the algorithm used for price discovery. The description shall include bid types, details of how the algorithm results in maximisation of economic surplus taking into account various bid types and congestion in transmission corridor, which shall be updated with
FEATURE
Power companies’ earnings to fall on shrinking generation
Coal Insights Bureau
E
arnings of power companies are likely to decline by up to 20 percent due to lower generation, low incentives, fall in merchant rates and one off discount offered to the discoms, Emkay Research said in a sector report. First quarter earnings are expected to be disappointing with demand and generation across India falling significantly by around
34 Coal Insights, July 2020
18 percent during the period largely due to subdued power demand during the lockdown. Demand across the Commercial & Industrial (C&I) segment was halted completely during April-May as industries and offices were shut. June saw minor recovery in demand, which fell 11 percent on year against a decline of 22 percent and 14 percent on year in April and May respectively. Thus, PLF was down
across stations but availability picked up due to improved inventory levels. Growing outstanding
The moratorium on bill payments has impacted Discoms’ collection efficiency. This has impacted the Discoms outstanding to the gencos, which increased to 1.26 trillion as on May against `950 billion in March. Deficits remained largely flat at 0.4 percent,” the report says.
62 Coal Insights, July 2020
Tear along the dotted line
Tear along the dotted line
