CONTENTS
6 | COVER STORY
14 Seaborne thermal coal offers rise in July 15 Coking coal prices jump in July
Coal imports: Navigating cost headwinds
16 India’s May coal imports up 20% y-o-y 17 CIL’s coal production up 2.4% in Q1
High prices, abundant local supply to depress imports.
18 SCCL’s coal production up 64% in Q1 19 Cabinet approves revamped distribution sector scheme 28 IEA sees India power demand rising 6% in 2021 31 No power capacity addition in May 33 Cement sector sees demand revival 35 There is still a long way to go to squeeze coal out: BP
21 | FEATURE Emission intensity to drop by 54% by 2030 In December 2020 intensity fell by 21%.
37 Coal handled by major ports up 38.5% in Q1
25 | FEATURE
38 Indian Railways’ coal handling up 42% in Q1
Gujarat tops ministry Discom ranking
42 BHP sees FY22 flat met coal production on China ban 43 Glencore buys out BHP, Anglo American in Cerrejón mine 45 The UK to end thermal coal use in October 2024 48 US coal production estimated at 617MMst in 2021 51 Tata Steel commissions 2 mtpa Jamadoba coal preparation plant 52 NTPC takes big strides in solar, hydrogen energy 54 Corporate update 56 Government update 58 E-auction data 60 Port Data
4 Coal Insights, July 2021
Jodhpur entity ranks lowest.
39 | INTERVIEW
“Growing Infrastrcuture is a big opportunity for OTR Tires” Rajiv Poddar, Jt. MD, Balkrishna Ind talks about opportunities and plans.
49 | CORPORATE
Coal India gives major boost to capex Achieves 94% of capex target in Q1.
COVER STORY
Coal imports:
Navigating cost headwinds Sumit Maitra
6 Coal Insights, July 2021
COVER STORY
I
ndia’s imports of thermal and coking coal have risen sharply during April-May, the first two months of the current financial year, growing by 27 percent to 28.95 million tons (mt) and by 42.68 percent to 9.1 mt, respectively, over the corresponding period of previous year. While this growth has come on a low base of 2020’s initial period of lockdown, the fact that it has happened despite sharp rise in coal prices across the globe coupled with significant appreciation in ocean freight rates indicates the inherent strong demand for coal that is currently coming mostly from the power sector as also from other users of coal like cement and steel, which are seeing improved demand scenarios. But can coal imports maintain the tempo seen so far or will it taper off in coming months? Several indicators like coal stocks at power plants, auction premium and also undelivered auctioned coal show that while power demand continues to be strong, there is adequate stock of coal in the system and once the monsoon is over, Coal India would be in a position to speed up its output at a rate faster than what was seen in previous years. All these factors might lead to imports in the current year likely to be lower than previous year’s level of 216 mt, and may dip marginally, traders and sector experts said.
Strong upsurge in power demand
India’s peak power demand rose by 16.2 percent at 193,850 megawatts (MW) during April-June quarter of FY22 as against 166,890 MW during the corresponding quarter of the previous fiscal (FY21). Plant Load Factor improved to 58.64 percent during April-June 2021, up from 46.40 in corresponding period of FY21. “The lockdown in the country had led to a decline in the peak demand, with the highest impact of 24.9 percent decline in the month of April, 2020 as compared to corresponding figure of April, 2019. However, as the lockdown norms were gradually relaxed, the peak demand of the country started growing and had eased out to 5.6 percent in August, 2020, over August, 2019. From September, 2020 onwards, the peak demand had shown a positive growth over the same month of previous year. The peak demand in 2021-22 (up to June) as compared to previous year 2020-21 has also shown a positive growth,” R K Singh, Minister of Power and New & Renewable energy, said recently. Earlier, the peak power demand in the country during FY21 had increased by 3.5 percent at 190,198 MW, compared to 183,804 MW during the previous fiscal (FY20). Adequate availability of local coal
Despite higher demand, pithead stocks of coal with Coal India remains at elevated
International coal prices
levels at around 60 mt currently, according to sources, although down from a high of 100 mt in April. Stocks of coal with the power plants are also at comfortable levels. While there has been significant improvement in power demand in recent times, there is currently oversupply in the power sector which would keep both power prices as well as coal requirement, said analysts. Subdued auction demand
There is ample availability of cheap coal in the system indicated by the fact that coal e-auction premium on coal during the AprilMay period was just 13 percent, Indian Energy Exchange Ltd told investors recently. Also, many of the bidders had not even lifted the coal they had successfully bid for earlier. “Coal India is now pressurising auction bidders to physically lift the coal indicating that current available supplies are already adequate. Bidders have been delaying the lifting but Coal India authorities now want them to lift the coal without delay,” an auction bidder said. While 124 mt of coal was booked via e-auction in FY21, about 66 mt was actually lifted while the balance has to be taken away this year, which the bidders are largely reluctant so far. While CIL has been targeting 130140 mt of sales through e-auction this year, the present backlog might prevent it from reaching that target. Rising stocks at power plants
Source: JM Financial
Coal stocks at power plants are comfortable and have been rising in recent months. Stocks of coal at power plants have gone up from a level of 23.61 mt in early May to about 24.2 mt as on July 22 of which imported coal stocks have increased from 0.36 mt to 0.55 mt during the period, Central Electricity Authority data showed. Coal stocks at the power plants touched a high of 28.1 mt on July 2 before dropping to 24.2 mt. Imported coal stocks on July 2 was about 0.54 mt, marginally lower than 0.55 mt as on July 22.
Coal Insights, July 2021
7
FEATURE
India emission intensity of GDP to drop by 54% by 2030 Coal Insights Bureau
I
ndia’s emission intensity of GDP could drop by 54 percent by 2030 above 2005 levels, against the stated commitment of 33-35 percent reduction with its enhanced ambition of 450 GW of renewables by 2030, says a joint report by the Carbon Tracker and Council on Energy, Environment and Water. In Nationally Determined Contributions (NDCs) adopted in 2005 through the Paris Agreement, India committed to reduce the emission intensity of GDP by 33–35 per cent by 2030. In December 2020, India was able to reduce the intensity by 21 percent over 2005 levels, the Environment, Forest and Climate
Change ministry had claimed then. India, the only G-20 country with policies and performance compatible with a target of 2 °C warming, gave a boost to its renewable energy sector at a much earlier stage of economic development and when the electricity system was far smaller than what happened in China. Now with its enhanced ambition of 450 GW of renewables by 2030, it can further improve its emission intensity. “Consequently, the risk of stranded assets, while substantial, is still smaller in India…other emerging markets can also avoid the trap of long-lasting fossil energy assets as well as of foreign currency-linked indebtedness,” the report said.
In Nationally Determined Contributions adopted in 2005 through Paris Agreement, India committed to reduce the emission intensity of GDP by 33-35% by 2030. In December, India was able to reduce the intensity by 21%. It might touch 54% by 2030 with adoption of 450 GW renewable energy target.
India’s progress on household electricity access (1980-2020)
Source: CEEW
Coal Insights, July 2021
21
FEATURE
Gujarat tops power ministry Discom ranking Rajasthan ranks lowest among 41 entities
Unveiling of the rating of Discoms by Minister of Power and New & Renewable Energy R K Singh
Coal Insights Bureau
A
ll the four power distribution companies in Gujarat — Uttar Gujarat Vij Company Ltd. (UGVCL), Madhya Gujarat Vij Company Ltd. (MGVCL), Dakshin Gujarat Vij Company Ltd. (DGVCL) and Paschim Gujarat Vij Company Ltd. (PGVCL) — have secured first four positions with highest rating of A+ in the Ninth Annual Integrated Rating conducted by Union Ministry of Power. All the Gujarat’s Discoms have secured A+ rating. Discoms of Haryana - Dakshin Haryana Bijli Vitran Nigam Limited and Uttar Haryana Bijli Vitran Nigam Limited – have secured 5th and 6th ranks with ratings of A+ and A respectively. Discoms of Punjab, Maharashtra, Mangalore and West Madhya Pradesh have been ranked 7th to 10th in that order.
In the annual rating of state Discoms, West Bengal State Electricity Distribution Company Ltd (WBSEDC) has been ranked 17th with a rating of B+. Jodhpur Vidyut Vitran Nigam Ltd has been ranked lowest with C rating. The ratings are conducted for evaluating performance of state power distribution utilities based on a range of parameters viz. AT&C losses, cost efficiency, financial performance, sustainability, regulatory, reforms, and government support. The Integrated Rating exercise is carried out on an annual basis since 2012 as per the methodology approved by Ministry of Power. The exercise covers 41 states distribution utilities spread across 22 states. Rating agencies ICRA and CARE are the designated credit rating agencies. Power Ministry mandated Power Finance Corporation (PFC) to co-ordinate with the utilities, rating agencies & MoP during the rating exercise.
“The Indian Power sector will benef it from a fair and accurate assessment of the true position of the distribution sector which in turn will help in assessing and improving its performance,” Minister of Power, New and Renewable Energy, R K Singh said while releasing the ratings. A strong and eff icient power distribution sector is the key to the performance and viability of the power sector and the state power sector entities play a pivotal role in power distribution in India and the Central government is supporting the states for strengthening the distribution system necessary for providing 24x7 power supply to all households, he said. A Reforms-based and Results-linked, Revamped Distribution Sector Scheme has recently been approved by the Cabinet Committee on Economic Affairs with an aim to improve the operational efficiencies and financial sustainability of all State Discoms/ power department. The scheme envisages providing financial assistance to Discoms for strengthening and modernizing the supply infrastructure. States may access funds under the scheme for strengthening their Distribution systems. Where the Distribution Companies are in losses, the States will be able to draw funds under the scheme only if they institute measures to reduce these losses. Therefore, the funding is reforms linked. There has already been improvement in the performance of Discoms and this scheme will take the improvements further, the minster added. Rating methodology
The objective of the integrated rating is to rate all utilities in power distribution sector on the basis of their performance and their ability to sustain the performance level. The methodology adopted attempts to objectively adjudge the performance of state distribution utilities against various parameters broadly classified under i) Operational & Reform parameters ii) External Parameters iii) Financial parameters.
Coal Insights, July 2021
25
FEATURE
IEA sees India power demand rising 6% in 2021 Coal Insights Bureau
A
ssuming a return to first quarterlevel growth in the second half of the year, power demand in India could grow by more than 6 percent in 2021 and by more than 8 percent in 2022, International Energy Agency said in its latest report. In India, the third-largest electricity consuming country after China and the US, annual demand decline by 2.4 percent in 2020, with a low point in March, when demand fell by 23 percent year-on-year. India’s per capita electricity consumption of slightly above 1 MWh per year is significantly below Asia Pacific region’s average of 3.3 MWh and shows potential for future growth, believes IEA. After a strong consumption increase in the first quarter of 2021 compared with the previous year, demand fell significantly in April as Covid-19 cases surged. Half of 2021 power demand rise to come from coal
Global electricity demand will rebound
Share of coal in India’s electricity supply
Source: IEA analysis
28 Coal Insights, July 2021
strongly in 2021 and 2022, predicts IEA in its latest Electricity Market Report. After falling by around 1 percent in 2020, global electricity demand is set to grow by close to 5 percent in 2021 and by 4 percent in 2022. The majority of these increases will take place in the Asia Pacific region. More than half of global growth in 2022 will occur in China, the world’s largest electricity consumer while India, the third-largest consumer, will account for 9 percent of global growth, IEA said. In India, during the first quarter of 2021, weather-corrected electricity demand was almost 10 percent higher than in the same period in 2019. The second wave of Covid-19 that hit India by mid-April 2021 slowed the pace of the growth: although electricity demand in April 2021 was still 7 percent higher than in April 2019, this was 3 percentage points below the growth in March. In the first four weeks of May 2021, growth declined to close to 6 percent compared with 2019.
Coal’s share in India’s generation mix
“Although India’s PV capacity additions in 2020 declined by almost 60 from 2019, we expect new expansion records in 2021 and 2022 as delayed projects from previous auctions are commissioned – if scheduled projects go ahead as planned despite the Covid-19 crises in the first half of 2021.” In spite of its severity, the second wave affected Indian electricity demand less than the first wave in 2020. After strict lockdown measures started mid-March 2020, power demand sustained a decrease of 25 percent (compared with 2019) for five consecutive weeks, from the end of March to early May. Weather-related electricity demand set to bounce back in 2021
In June and July 2021, extremely hot temperatures in several regions could result in a global increase in electricity demand for cooling, IEA said. In British Columbia, Canada, a new heat record of 50 degrees Celsius was reached. Temperatures in several cities in the northwest of the US reached new all-time highs. In the Middle East, several countries registered more than 50 °C. In Asia Pacific, the first five months of 2021 have been milder on average, slightly reducing electricity demand for heating. In India, a heat wave in the early summer months increased the need for cooling.
CORPORATE
Coal India gives major boost to capex Coal Insights Bureau
C
oal India (CIL) is undertaking major investment projects to lower emissions, mechanise evacuation and raise mining productivity. As part of its First Mile Connectivity initiative that improves mechanisation at mine sites and also as part of its initiatives to achieve Net Zero emission, country’s largest coal miner has undertaken some major infrastructure projects and also spending heavily on mining equipment. To invest `240 crore in Jhanjra rail corridor
Coal India is setting up a 8-kilometer rail line at Jhanjra, one of the largest Underground mines in the country at a cost of `240 crore expected to be completed in the next 2.5 year’s time. Jhanjra underground mine of Eastern
Coalfields is producing 3.5 million tons (mt) with a target to produce 5 mt. “To meet target production at Jhanjra, there is a need to go for increasing mechanisation of coal evacuation with the help of Coal Handling Plant and rail infrastructure,” Coal India Chairman cum Managing Director Pramod Agrawal said recently while laying the foundation stone for the railway corridor. “The railway corridor needs to come up along with the CHP so that the investment that we are putting in is fully utilised,” he added. To spend `268 crore in Kaniha FMC project
Coal India is spending `268.05 crore in a 10 million tons a year First Mile Connectivity Project at Kaniha Area of Talcher coalfields with a target to complete it by May, 2023. The project involves setting up a Coal
Coal India CMD Pramod Agrawal inspecting the layout of the Jhanjra Rail Corridor project
Handling Plant and Rapid Loading System at Kaniha Open Cast Project, the foundation for which was laid on July 18 by Mahanadi Coalfields CMD P K Sinha. Achieves 94% of capex target in Q1
CIL during April-June quarter of FY22 has achieved 93.9 percent of its capital expenditure target set for the period, according to official data. CIL’s capex during Q1 of FY22 stood at `1,841.1 crore against the target of `1,960.08 crore set for the period. In June 2021, CIL’s capex target was set at `998.33 crore, of which it achieved 90.8 percent at Rs 906.49 crore. For FY22, CIL’s capex target is set at `17,000 crore. Inks pact to buy 11 Russian rope shovels
CIL has entered into a tie up with a Russian company for purchasing 11 20-cubic metre electric rope shovels at an estimated investment of `1,462 crore. CIL signed up a contract with Iz-Kartex, a Russian shovel manufacturing company, for installation and commissioning of the shovels after it bagged the bid through participation in global competitive tender involving reverse auction. The move is part of an ongoing process of modernising its aging heavy earth moving machinery fleet. Contract has been concluded considering life cycle cost of equipment with likely consumables and spares for a period of eight years. “This is the first major equipment procurement finalised in the ongoing fiscal so far. We are fast tracking our procurement process in a bid to strengthen our mining equipment and replace the aging machines,” a senior company official said in a statement. The delivery of all the electric rope shovels would be concluded by September 2023. Electric rope shovels play a vital role in opencast mines for loading the over burden removed into 190-tonne dumpers. All the newly contracted 11 rope shovels would be pressed into use in the OC projects of Northern Coalfields Ltd (NCL).
Coal Insights, July 2021
49
CORPORATE
NTPC takes big strides in solar, hydrogen energy
India’s largest f loating solar project of 10 MW on the reservoir of Simhadri thermal power plant
Coal Insights Bureau
N
TPC Renewable Energy Ltd (NTPCREL) has got the goahead from Ministry of New and Renewable Energy (MNRE) to build a 4750 MW renewable energy park at Khavada in Gujarat. This will be India’s largest solar park to be built by the largest power producer of the country. It also successfully commissioned India’s largest floating solar project of 10 MW on the reservoir of Simhadri thermal power plant. On July 12, NTPCREL was given the go-ahead under Mode 8 (Ultra Mega Renewable Energy Power Park) of Solar Park Scheme. NTPC REL has plans to generate green hydrogen on a commercial scale from this park. Recently, NTPC has also commissioned India’s largest floating solar facility of 10
52 Coal Insights, July 2021
MW on the reservoir of Simhadri thermal power plant in Andhra Pradesh. An additional 15 MW would be commissioned by August 2021. Further, a 100 MW floating solar project on the reservoir of Ramagundam Thermal Power Plant, Telangana is in the advanced stage of implementation, the company said. Hydrogen initiatives
Country’s first green Hydrogen Mobility project Additionally, NTPCRE Ltd has recently signed an MoU with UT, Ladakh and Ladakh Autonomous Hill Development Council (LAHDC) for the generation of green hydrogen and deployment on FCEV buses. The signing of the MoU also marked the inauguration of NTPC’s first solar installations in Leh in form of solar trees and a solar car port. The MoU will enable NTPC to help
Ladakh develop a carbon free economy based on renewable sources and green hydrogen. This is also in line with Prime Minister’s vision of a ‘carbon neutral’ Ladakh. NTPC has planned to ply 5 hydrogen buses, to start with, in the region and the company will be setting up a solar plant and a green hydrogen generation unit in Leh towards this end. This will put Leh as the first city in the country to implement a green hydrogen based mobility project. This would be zero emission mobility in true sense. NTPC has been aggressively pushing for greening its portfolio and green hydrogen project is another step towards achieving low carbon footprint. NTPC has also been promoting usage of green hydrogen based solutions in sectors like mobility, energy, chemical, fertilizer, steel etc. NTPC Vidyut Vyapar Nigam Ltd (NVVN) a wholly owned subsidiary of NTPC Ltd, has invited tenders for deploying
62 Coal Insights, July 2021
Tear along the dotted line
Tear along the dotted line
