Coal Insights, May 2017

Contents

6 | COVER STORY

14 Steam coal offers ease in May 16 Coking coal price tumbles in May on low offtake

‘Sagar Port future looks uncertain’

18 India’s March coal imports down 9% y-o-y 22 SCCL reports a drop in UG output in FY17 24 Coal India’s production down 5% in April y-o-y 24 CIL’s FY18 production target revised 25 Coal unions to go on 3-day strike from June 19 25 India’s cement production in FY17 marginally down

Faced with stiff competition from other ports, Kolkata Port is devising strategies for long-term survival.

20 | FEATURE

SCCL sets minimum daily targets to boost output Company aims to produce and despatch a minimum 200,000 tons of coal every day.

28 | SPECIAL FEATURE

26 India adds 4,454 MW power generation capacity in March

Heralding new dawn for Indian nuke power

30 UJALA LED to UK by CoalMin 31 Martin unveils safe-to-service conveyor belt cleaners 35 Reviving stressed thermal power assets 41 Indian Railways’ April coal handling down 1.5% y-o-y

Experts say India is fully equipped to tap the growing nuke power plant market.

37 | INTERNATIONAL

42 Traffic handled by major ports up 6.3% in April y-o-y

OBOR: China’s new energy growth path

43 NCL gets CIL board nod for Jayant expansion

The new silk route may be aimed at safeguarding China’s supply lines of coal, gas and oil.

44 DVC pulls plug on phase II of RTPS before sell-off 45 Corporate updates 49 EnergyTech eyes scalability as growth tool 58 E-auction data 60 Port data

4 Coal Insights, May 2017

54 | INTERVIEW

SECL’s emphasis is on opening new projects The miner is confident of achieving its 2020 target, says B R Reddy, CMD, SECL.

Cover Story

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‘Sagar Port future looks uncertain’ Madhumita Mookerji

6 Coal Insights, May 2017

hese are tough times for Kolkata Port Trust (KoPT), the country’s first major as well as only riverine port, commissioned way back in 1870.

Kolkata Port, which celebrated its 146th birthday in 2016, was once the premier port of the country but since 1966-67 started facing a steady decline in its fortunes. However, due to its innate nature of innovation and adaptability and also because it is fated in terms of a geo-historical compulsion to gravitate southwards to harness its deep drafted facilities and its huge potential in respect of movement of cargo through the Inland Water Transport (IWT) mode, there had been a steady flourish in cargo and vessel handling and in other spheres of port activity from 2004-05 to 200708, with the port being positioned in the second and third slots, competing with other sea ports of the country. A lull prevailed, however, since 2008-09, with some adverse geo-morphological

Cover Story changes in the river regime, flight of POL crude cargo to a neighbouring port and competition from other ports and a huge pension payout burden. The port was also impacted by the ripple effect of the general global economic downturn, with a sharp hardening of the dollar and a decrease in coal import volumes. But not one to give up so easily, the port, which administers the Kolkata Dock System and Haldia Dock Complex, is gearing up for the future through new projects and strategies, informs S Balaji Arunkumar, Deputy Chairman, KoPT. These include a dry port at Balagarh, a channel from Nayachar to HDC, emphasis on container cargo from KDS etc. Excerpts from an interview: Haldia Port is facing an uncertain future with two impending ports, at Tajpur and Subarnarekha in Odisha, looming as possible threats in terms of cargo diversion.

What is your take on this?

Yes, Haldia has an average draft of about 7.6 metres. The other two ports are likely to allow a minimum draft of 12 metres. The larger capacity vessels will thus get attracted to the Tajpur Port. At Haldia, we receive vessels with parcel load of 25,000-30,000 tons. At Tajpur, the 12-metre draft, which has the potential to go up to 18 metres, can carry vessels with full load up to 75,000 tons, while 65,000-tons vessels can come in easily. So Tajpur Port has this added advantage as it is on the sea while Haldia is a riverine port and requires continuous dredging.

Haldia also has lockgate constraints. It can take the ships inside and outside only twice a day and not more than 5 to 6 vessels can be moved at a time because of the limited tidal window constraints. Tajpur is free of such hindrances.

We do not know yet whether Subarnarekha will have these advantages too but it is most likely to, since both ports are on the sea with almost similar situations.

Whereas, the minimum depth in Haldia is about 4.2 m, the depth in some critical areas in the upper reaches of Hooghly river between Hugli point and Kolkata is only about 3 metres. With the tidal rise, we get an additional advantage of 4 metres at Haldia and about 5 metres for Kolkata vessels. Thus, together, we can provide an annual average draft of about 7.6 metres to Haldia and about 7.2 metres for Kolkata.

The lockgate allows us to maintain a steady higher depth inside the basins and ships, after docking, are not affected by the receding tides. When the ship enters, we open the outer gate, take the vessel inside, and thereafter, close the outer gate. We pump in more water to raise the level in the lock to match basin level and bring the ship inside. Reverse pattern is followed when the ship moves out.

Along with Tajpur, Subarnarekha and the logistics hub coming up at Dhamra Port, how much reduction in cargo volumes could Haldia be looking at?

Our estimate is 30-40 percent.

But KoPT has a plan B in place of cutting a channel through Nayachar to increase the draft level at Haldia?

The Nayachar Cut will allow induction of more current into the Haldia channel and will thus increase the viability of Haldia Port. The cut is expected to raise the Haldia draft by almost 1.0 metre. The depth at Haldia is receding due to westward encroachment of Nayachara Island and other morphological changes and we are increasingly spending more money on dredging. Thus, the Nayachara Cut, besides providing higher draft, is expected to decrease the dredging cost. But, more importantly, it will increase the life of the Haldia Port. However, it will not be viable to spend in making the Nayachara Cut once the Tajpur Port comes along, offering a minimum 10.5 m draft in the first phase.

Haldia has good rail connectivity but Tajpur too will have similar good rail links.

So, what strategies do you have in place to save Haldia?

Kolkata Port Trust’s demand is that it should be given a majority 74 percent stake in the Tajpur Port special purpose vehicle (SPV) so that profitability of Kolkata is not affected.

KoPT has a share of 74 percent for the proposed Sagar Port with the West Bengal government holding the balance 26 percent.

For the Tajpur Port project too we want a shareholding pattern of 74:26 for Kolkata Port and West Bengal government respectively. Now it is learnt that the state has agreed to give the 74 percent to KoPT and retain the balance 26 percent. However, official communication is expected.

The SPV for the Sagar Port, ie, Bhor Sagar Port Limited, it seems, will now take care of the Tajpur Port.

In that case, what is the future of the Sagar Port? Does the project stand abandoned?

Well, this project does not seem to be progressing further. We are awaiting further communication on this project from the state government.

Why was the Sagar project not moving ahead?

The Public Investment Board of the Government of India, while approving financial grant for Sagar Port, had laid down some conditions which include commitment from the state government that it will give first right of refusal to Bhor Sagar Port Limited in case it decides to set up or permit any new port in West Bengal.

As Tajpur Port is being planned by the government of West Bengal, we await a commitment in this regard.

But since the Nayachar project does not seem to be such a viable plan B, then what is the reason for going ahead with this `3,000-crore investment?

No, the Nayachar Cut is required for the maintenance of Haldia Port. The entire industrial township of Haldia is based on the port. There are several captive industries located in the Haldia hinterland which can be traced back to almost 40 years. If the vessels stop coming to Haldia then these industries dependent on these

Coal Insights, May 2017

7

special FEATURE

Heralding new dawn for Indian nuke power Kingshuk Banerjee

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rmed with tested indigenous technology, India is poised to expand its nuclear power generation capacity in a big way. Experts are hopeful that with the help of this rather less costly technology, New Delhi could garner a sizeable portion of the global nuclear reactor construction market in the coming years too.

When the Narendra Modi government took over the reins three years ago, it was made clear that days of excessive dependence on fossil fuel would be over. And accordingly when the plan of a generating capacity of 1 lakh megawatt (MW) of solar power was announced, the world at large was not surprised at all. Rather, that decision was perceived as New Delhi’s firm conviction on Green energy.

Three years down the line, there came another defining moment for the Indian power sector with the government announcing plans for 10 more nuclear power plants of 700 MW each which would surely strengthen the base for less dependency on fossil fuels in the near future.

The global nuclear power sector is also in a vortex where countries like Russia and China are racing ahead, surpassing traditional

leader US. With New Delhi joining the race and countries like Japan and Ukraine tilting their energy mix towards nuclear fuel, pundits are hopeful of a rejuvenation of this sector.

According to the World Nuclear Association (WNA), India could be a leading nation globally by 2050 when its 25 percent installed power generating capacity would be from nuclear power.

Indian scene: New focus on nuclear energy

A few days ago, the Union Cabinet chaired

by Prime Minister Narendra Modi cleared the proposal for creation of additional 7,000 MW of nuclear power capacity. As per the Union government, 10 nuclear power plants, each having 700 MW capacity, would be set up, using India’s indigenous pressurised heavy water reactor (IPHW) technology.

The plants could be set up by Nuclear Power Corporation of India on its own or with a joint venture with state-run companies like NTPC. Making it the flagship project of the Make-In-India initiative, it is being hoped that this new thrust would generate 70,000 crore worth of new demand in the Indian manufacturing sector, resulting in generation of direct as well as indirect 33,400 jobs.

Terming the IPHW technology as safe, the experts are of opinion that this would optimise locally available material for construction and locally available uranium could also be used. Though the operational costs might be higher this lacuna could be offset by factors like relatively higher safety aspects and stable and secured raw material supply.

As per experts, India should be exploring for uranium, in the south-central region specifically, because it is estimated to have approximately 20,000 tons of uranium deposits in a handful of areas within the region. In fact, exploration and research of uranium deposits was launched in January 2016.

The purpose of the exploration was to identify and evaluate uranium resources required for the implementation of atomic energy programme for India.

As per the Central Electricity Authority (CEA) data, with the commissioning of the 1,000-MW second unit of the Kudankulam power plant on March, 31, 2017, India’s nuclear power generation capacity was 6,780 MW on that date. Another 6,700 MW of projects are under construction which could be completed within 2022. This new proposal of 7,000 MW would be icing on the nuclear cake.

According to CEA data, Out of 326,848.53 MW of installed capacity as on March 31, 2017, coal generated capacity was 192,162.88 MW and total renewable power generation capacity was 57,260.23 MW. In other words, in the total energy mix, coal was 58.79 percent and renewable a mere 17.52 percent at the end of 2016-17.

Clusters of nuclear reactors across the world

28 Coal Insights, May 2017

INTERNATIONAL

Project a concern for India

OBOR: China’s new energy growth path Kingshuk Banerjee

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s the Chinese reincarnation of the ancient silk route actually a way to safeguard its supply lines of coal, gas and oil in the long run as well as a smart move to penetrate into virgin markets to utilise its excess steel in mega infrastructure projects? Though this move, would Beijing try to rejuvenate its rather sluggish economy as well?

Ever since this $124-billion mega scheme, christened as ‘One Belt One Road’ surfaced in a September 2013 afternoon in the Kazakh capital of Astana, fierce debates are raging across the globe to find out the real agenda behind this initiative. Keeping in mind the Chinese infrastructure initiatives in some Latin American and African nations, where all-inclusive Chinese packages have been thrust upon the recipient country (meaning the infrastructural projects are constructed and later on serviced by Chinese firms only), some are terming OBOR as a mere extension of those projects, albeit on a much bigger scale. Needless to say, this kind business initiatives have started drawing ire of the local population and business communities, which, as the experts have rightly pointed out, could be counterproductive in the longer run.

On the other hand, India has voiced its open opposition regarding the ChinaPakistan Economic Corridor (CPEC), an integral part of OBOR. India clearly stated that no country can accept a project that ignores its core concerns on sovereignty and territorial integrity. The highway runs through a territory now called GilgitBaltistan which is part of Pakistan-Occupied Kashmir (PoK).

Experts are of the opinion that the CPEC linking with the South Baloch Port of Gwadar could present various kinds of political and military problems for India

in the long run. Gwadar is, in fact, another part of the Maritime Silk Route (MSR) and an integral portion OBOR. According to experts, China is building ports in the Indian Ocean region, christened as ‘String of Pearls’ which could be used for strategic military purpose as well. Sensing the impending Chinese Naval dominance in its own backyard, experts are voicing concern for India.

Moreover, as they have pointed out, 5 out of 6 road and rail connectivity initiatives undertaken under this mega scheme are somehow linked with energy procurement and shipment. The 7th initiative covers the long sea route from Eastern China to the Persian Gulf, christened as MSR, which is again one of the prime coal, oil and gas transportation global routes, carrying $5 trillion worth of trade annually.

And part of MSR is South China Sea. Stretching from Singapore and the Strait of Malacca checkpoint in the southwest to the Strait of Taiwan in the northeast, the South China Sea is one of the most important energy trade routes in the world. Almost a third of global crude oil and over half of global liquefied natural gas (LNG) passes through the South China Sea each year.

The beginning: Astana speech

The ball was set rolling 4 years ago when the then-newly elected Chinese President, Xi Jinping, first outlined his concept of the ‘New Silk Road’ in his speech at the Nazerbayev University in the Kazakhstan capital of Astana.

In that September 7, 2013 speech, Xi had said, “To forge closer economic ties, deepen cooperation and expand development space in the Eurasian region, we should take an innovative approach and jointly build an ‘economic belt along the Silk Road’. This will be a great undertaking benefitting the people

of all countries along the route. We may start the work in individual areas and link them up over time to cover the whole region.”

Browsing the pages of the ancient silk route history, Xi said, “Over 2,100 years ago during China’s Han Dynasty, a Chinese envoy Zhang Qian was sent to Central Asia twice with a mission of peace and friendship.

His journeys opened the door to friendly contacts between China and Central Asian countries as well as the Silk Road linking east and west, Asia and Europe. Shaanxi, my home province, is right at the starting point of the ancient Silk Road. Today, as I stand here and look back at that episode of history, I could almost hear the camel bells echoing in the mountains and see the wisp of smoke rising from the desert.”

Historically, the Silk Road or the Silk Route was the network of trade routes from 150 BC to 1450 AD that connected the Asian continent from east to west, from Japan and the Korean peninsula to the Mediterranean Sea. The name derives from the lucrative trade in silk but a by-product of the international commerce was cultural and technological diffusion.

The OBOR is geographically structured along 6 corridors and a maritime route. The six corridors run from Western China to Western Russia; from Northern China to Eastern Russia via Mongolia; from Western China to Turkey via Central and West Asia; from Southern China to Singapore via IndoChina; from South-western China to and through Pakistan; and, from Southern China to India via Bangladesh and Myanmar. The MSR would stretch be from coastal China to the Mediterranean via Singapore–Malaysia, the Indian Ocean, the Arabian Sea, the Strait of Hormuz, etc.

Now, 4 years down the line, when the concept of the new Chinese silk route started unfolding its journey of implementation, nostalgic romanticism has been replaced with cold economics in the global power corridors and after the initial euphoria, every nation is now trying to gauge the pros and cons of the project.

Huge financial risk?

Now with the first OBOR summit over in Beijing, where China tried to showcase the benefits of its grandiose plans before the global stage, this very question has started

Coal Insights, May 2017

37

Interview

‘SECL’s emphasis is on opening new projects’

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R Reddy, the Chairman-cum-Managing Director of South Eastern Coalfields Limited (SECL), is a distinguished and experienced mining engineer, who graduated in mining engineering from the Kothagudem School of Mines, Andhra Pradesh, in 1981 and received his M.Tech degree in opencast mining in 1992 from the Indian School of Mines (ISM), Dhanbad, where he had also been awarded a gold medal. He obtained his First Class Mine Manager’s Certificate of Competency (Coal) and also a Diploma in Industrial Relation and Personnel Management (DIRPM) from Nagpur University. He joined Coal India Limited (CIL) in 1981 and worked in different capacities in various mines of Western Coalfields Limited (WCL) and Central Coalfields Limited (CCL). As General Manager of Dhori, Argada and N K Area of CCL, he contributed a lot in opening up of new opencast mines and in solving many industrial relations problems. It was due to his sincere efforts that the Purandih Greenfield OC of CCL could be reopened after a gap of nearly 10 years. He was selected as Director (Tech) (Project & Planning) of Eastern Coalfields Limited (ECL) in 2014 prior to his present post. In a free-wheeling interview, he tells Madhumita Mookerji that coal will continue to dominate the power sector though its share may decline due to climate change issues. Also, as part of the 1 billion tons production target set by the government for Coal India by 2020, SECL will strive to ramp up its volumes to 239.60 million tons (mt) within this time frame.

54 Coal Insights, May 2017

What do you feel about the current coal market scenario in India? Do you think South Eastern Coalfields (SECL) is on track to achieving the government’s 1 billion ton target set for Coal India (CIL)?

There is a huge requirement of coal as the demand for power is on the rise. In the recent past, the coal market has changed substantially with increased attention being paid to issues like quality, price and environmental concerns.

However, coal will continue to dominate the power sector and in meeting the total energy needs of the country. Its share may decline in light of the challenges posed by climate change issues.

In future, we need to concentrate on adoption of new/upcoming environmentfriendly clean coal technologies (CCT) in

62 Coal Insights, May 2017

Tear along the dotted line

Tear along the dotted line