Coal Insights May 2013 by mjunction services ltd

Chief Editor Rakesh Dubey, Tel: +91 91633 48159, Email: rakesh.dubey@mjunction.in Executive 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 Anirudha Gupta, Director, P&H JoyMining Equipment India Ltd Ashok Jain, Managing Director, Saumya Mining Ltd Deepak Bhattacharyya, Chief – coaljunction, mjunction services ltd Ganesan Natarajan, WT Director, President & CEO, Ennore Coke Ltd Lawrence Metzroth, Vice President – Analysis & Strategy, Arch Coal Inc M K Palanivel, President – All India Bulk, Samsara Group P S Bhattacharyya, Executive Director, Deepak Fertilisers and Petrochemicals Corporation Ltd S N Choubey, Head – Commercial, ABG Cement Ltd Sandeep Kumar, EIC (Secondary Products), Tata Steel Ltd Shyamji Agrawal, AVP-Central Procurement Cell, Ultratech Cement Ltd Suresh Thawani, Managing Director, Tata Sponge Iron Ltd Advertising Soumitra Bose, Tel: +91 92310 00232, Email: soumitra.bose@mjunction.in Sumit Jalan, Tel: +91 91633 48243, Email: sumit.jalan@mjunction.in Subscription Rachita Das, Tel: +91 91633 48045, Email: rachita.das@mjunction.in Toll Free No.: 1800 4192 000 1. Press 8 for publication Email: publication.tbss@mjunction.in Design Debal Ray, Sobhan Jas For suggestions, feedback and queries, please write to coalinsights@mjunction.in

EDITORIAL Dear Readers, A storm is brewing, perhaps! But then, we are used to it, aren’t we? I am talking about the threat of an industrial action hanging on Coal India Ltd. This time, the unions have promised it will be a long and hard battle. Four of the five entities are going to chalk out a war manual…you know why. An indefinite strike, of course! This time, however, they are not so much cross with the management, and in fact, not with the “helpless” government either. The real enemy has shifted camps and can’t be revealed until it picks up a stake, however small. After the TCI episode last year, the unions now seem to be scared of foreign stake holders more than they are of their traditional adversaries. This makes the battle intriguing. Somewhere, somehow, it brings the unions to the same boat that the management is in. And if the unions can really stall the process, the management shouldn’t be very unhappy. Even the government would be happy if other public sector units pick up share in the coal monolith. But the “pressure” from overseas investors in times of slowdown may be too much to escape from. Nevertheless, the government is also showing signs of hesitation. The coal ministry has reportedly said it wants the pending issues be resolved before hitting the market. That could be in the best interest of the company, but definitely not to its own advantage. The “pending” issues cannot really vanish with the change of the Comptroller and Auditor General. The government should know that best. What all this imply for the India Inc.?

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Well, the industry is not perturbed about the stake sale per se; what gives it shivers is the potential loss of production. It is becoming increasingly clear that domestic production cannot achieve growth beyond a limit, given the environmental and land constraints. That opens the door for further imports. An estimate says India has spent $15 billion on import of coal last fiscal. And that is not the only concern. The real issue is the increasing role of overseas players, yet again. That is where the whole argument comes to. Be it the stake sale or further growth in imports, the economy perhaps cannot do without an increasing presence of foreign players in its delicate energy matrix. Given the huge dependence on crude import, an increasing foreign presence in coal should not be overlooked. At the same time, we should not sulk at the slightest provocation. The government’s suggestion of PSUs picking up stake in Maharatna companies is not a bad idea, if seen from this perspective. But the real solution lies in developing the country’s own energy basket. This has been much talked about, in many forms and at various fora. But at the end of the day, they all remain ‘long term’ solutions. How long is that long term depends, more than economics, on the patience of the people! Happy reading,

(Rakesh Dubey) Coal Insights, May 2013

Contents

6 | Cover Story

28 Imported steam coal prices move in narrow range in April 29 Seaborne coking coal prices ease in May

Green diktats may bring India’s coal exploration to a grinding halt

30 India’s coal imports jump 20% in FY13, may cross 170 mt in FY14 37 Govt rules out coal sampling at unloading point 39 CIL unions to go all out to stall disinvestment 40 India excels in mining education, but needs more industry interface 42 Additional generation from coal to exceed overall generation increase in FY14 44 India’s power generation falls 2.9% in April m-o-m

Environmental roadblock will dry up future coal supply, warns CMD, CMPDI

34 | feature

Coal industry moots ‘green tax’ to fund UG mechanisation Miners to submit proposal to government to create fund for expansion in UG output

50 Shree Cement set to increase capacity to 20 mt by 2015

46 | OPINION

51 SECL revised booking norms may hit CPPs

PPP in coal: The next big thing!

52 CIL disinvestment may go ahead despite unresolved issues 52 Siemens supplies drive system for cement mill 53 Coal Controller gives facelift to Coal Directory 54 US coal consumption expected to rise 7.3% in 2013 58 Golden Quadrilateral project nearing completion 61 Traffic handling by major ports down 6.2% in April 62 Railways coal handling falls 11.9% in April m-o-m 64 KoPT targets 8 mt coal handling in FY14 66 E-auction data 68 Port data

The PPP model may help mature an industry which is at its infancy after 250 years.

55 | INTERNATIONAL

China mulls ban on low CV coal, market unfazed so far Although speculation is rife, the impact on spot coal prices may not be immediate.

56 | EXPERT SPEAK

CIL should consider setting up its own freight corridor At an investment of `5,000 crore, CIL can establish its own rail connectivity.

Call 9163348243 for more details

4 Coal Insights, May 2013

Cover Story

“Green diktats may bring India’s coal exploration to a grinding halt!” Rakesh Dubey & Arindam Bandyopadhyay

rom the outset, he is a softspoken Bengali ‘bhadrolok’, unassuming and unaffected by his high position. Probe a little and you get to see a prolific mind that runs the research backbone of the Indian coal and mining industry with characteristic aplomb. Meet Amal Kumar Debnath, the chairman-cummanaging director of the Central Mine Planning & Design Institute (CMPDI) in Ranchi, and be assured that India’s mining technology research is in good hands. In 1976, a young engineering graduate from Kolkata, Debnath refused to enrol for a course in MTech at BITS Pilani and, instead, decided to accept an offer from Coal India Ltd (CIL). In hindsight, it seemed a good decision, because he has never looked back since then. The son of a meritorious

6 Coal Insights, May 2013

and hardworking immigrant from Bangladesh who carved a niche for himself in the world of academics, Debnath went on to accept the job in the Ranchi office of Central Coalfields Limited (CCL) and, thereafter, in the mining technology department of CMPDI. The turning point in his career came when he was transferred to CMPDI’s Bilaspur unit, where he introduced pioneering methods like the blasting arrangement and short longwall in mine engineering. Over the years, his vast knowledge of mine planning and design spread far and wide and literally the entire coal sector sought his services. His came to be the final word in his area of core competency. In fact, Debnath is credited with introducing several global technologies for the first time in the Indian mining industry.

After serving as Director (Technical) for years together, he took over as CMD, CMPDI in February 2013. For someone who is a staunch believer in India’s technical capability to match the best in the world, Debnath finds the current scenario in domestic mining sector a little challenging. In a wide-ranging interview with Coal Insights, he talks about both sides of the coin, the research capability that CMPDI has acquired through the years, the ever-increasing demand from the government and industry, and the manpower constraint the exploration drilling segment is facing. But, most importantly, he stresses on the green diktats that may potentially bring exploration and expansion in the coal sector to a grinding halt!

Cover Story Excerpts: Let’s start from you graduation. What emotions marked your entry into a new career path in the Indian coal sector? I passed out from the Indian School of Mines (ISM), Dhanbad, in 1976 and received a job offer from Coal India (CIL). I had been selected by BITS Pilani for its MTech programme. However, I did not want to join the institute, as I thought this would only lead to a career in teaching in which I was not interested at that juncture. Thus, 1976 October, I joined CIL’s subsidiary, Central Coalfields (CCL), at its Ranchi office. Thereafter, I was posted in the Argada area of CCL. I remained there for almost four years and it was a challenging work environment because of an acute shortage of mining engineers around that time. I was given a large project to work on but with very few supervising officials. It was a small team, comprising a supervision manager, a senior mining engineer and me! So, naturally, for me it was a huge learning experience. After two years, I appeared for the Director General of Mines Safety (DGMS) examination and passed with a first class. The post of a first class colliery manager required four years of experience. Then I was shifted to the Bansgoda underground mine to work on the Sirka project. Here, stowing was a huge challenge since there were no plans regarding this. I was given the charge of designing the stowing plan. After studying the entire process, and with the help of another official, I was able to successfully implement it. At this juncture, I met a senior friend, who worked with CMPDI. I was interested in planning and design too and decided to appear for an interview with CMPDI. I successfully cleared the interview and joined its mining technology department. In those days, CMPDI’s employee strength in planning and design was quite thin. But this was a pivotal department for the implementation of CIL’s underground mining technology. Dr P N Singh was my boss. I remember, we had introduced in CIL almost all the

8 Coal Insights, May 2013

On his priority list Increasing the drilling target is one of my focus areas and the second is increasing exploitation of coal bed methane (CBM) and shale gas. The third focus area is to equip all the laboratories with the latest equipment. But, still, among all these, the main target is to increase drilling.

new technologies prevalent at that time in the US, Russia and Poland, particularly in underground mining. Please tell us about your growing-up years, i.e. the period before joining ISM? My story begins from my father’s coming over to Kolkata from across the border. My father, Prafulla Chandra Debnath, came to Kolkata from Bangladesh in the 1930s, much against the wishes of his parents. He struggled a lot in order to pursue his higher studies, which was the sole focus of his India sojourn. My father had three brothers and we owned quite a bit of property in Bangladesh. My father, however, was not interested in agriculture and earned the wrath of my grandfather, who warned him that, in such a scenario, his son would be cut off from his inheritance. Thus, when he arrived in West Bengal, he had no stable source of earning while he pursued his studies. Many relatives and friends came to his help. But, still, he had to do odd jobs to earn that extra bit to pay his bills. Ultimately, he became a professor in the physiology department of Presidency College. He passed away in 1970, the year before I cleared my Higher Secondary exams. We are six brothers and I am the youngest. All of us inherited our father’s inclination towards achieving academic excellence. I

studied electrical engineering at Jadavpur University. It was a charged environment that we grew up in under the shadow of the Naxalite movement. And then came this offer from the Indian School of Mines (ISM) and I shifted to Dhanbad and this is how I entered this domain. Apart from hard work, what factors helped you to achieve success? Who are the people that influenced your career? From the very start, I was interested in the planning aspects of mining because it is the first key step. During the course of time, I met two people who helped shape my career. You can call them my gurus: Dr P K Chakraborty and N D Agarwal. I always referred to them whenever I ran into difficulty with regard to designs. Without their influence and help, perhaps, I would not have been that successful. Planning is particularly an area where, unless one gets feedback or technical inputs from other experts, it is difficult to hone one’s skills. S P Mathur, the then director of CMPDI, also reposed a great deal of faith in me. He gave me the opportunity to plan a longwall mining, which I think, at that time, was the first project to start with a capacity of 1.5 million tons per annum (mtpa). So that was my starting point. Then came a sea-change in my career

Cover Story

On reclamation of mined land It should be looked into if you can give this land back to the land owners after mining of coal because, after mining, CIL has no interest in the land. The job of reclamation should be handed over to an agency or institute recognised by a state or the central government. There are quite a few specialised organisations doing good work in this area. when I was transferred to the regional institute at Bilaspur in 1998 as I stayed there till 2007. This was again a very important learning period in my life. These nine years were fantastic. For all the key top officials of that time, mine was the final word on matters pertaining to planning and designing of mines. From tender preparation to site selection, I was always in full charge. I introduced pioneering methods like the blasting arrangement and short longwall. I also introduced low capacity continuous miners, with a new concept of tender on cost-plus basis. It was introduced for the first time in India. Under the cost plus system, the vendors so selected bring their equipment and operate on risk-andgain-share basis with capital investment from South Eastern Coalfields Ltd (SECL) or CIL. In case of the low capacity continuous miners, projects are developed on fully cost factor where we give the panels, but outside panels, i.e. ventilation system and coal transportation, will be the responsibility of the concerned company’s project officers. Within the panel, the coal extraction and discharge of coal to a certain point was their duty. We did this recently in Muraidih, which has been awarded to us. In addition, three more mines were awarded through the similar route. Another project is in the pipeline at Bharat Coking Coal Ltd (BCCL), where T K Lahiri, the BCCL CMD, has taken many new initiatives. The computation of the cost on a per ton basis,

10 Coal Insights, May 2013

against operations, which are on a per ton basis, is a huge turning point at CIL. Which is the most crucial project you have undertaken so far? There are two parts to it: opencast and underground projects. As far as opencast projects are concerned, the Gevra and Dipka projects of SECL come to my mind. Gevra was a large project, which, when I left, had been planned up to 35 mtpa while Dipka was planned up to 25 mtpa. The EMP clearance of such big projects was done by us. I had informed the authorities at that time that the mines could produce much more. But evacuation of coal from such big projects is an issue, because, ultimately, the coal has to come out of the mined area. Today, many projects at Mahanadi Coalfields (MCL), Western Coalfields (WCL) and SECL etc. face this problem. If we can arrange a particular evacuation system in four projects, i.e., Talcher, IB Valley, North Karanpura and MandRaigarh, CIL can immediately start evacuation of up to 250 million tons (mt) of coal per annum. The Ministry of Coal has taken up the matter with the Ministry of Railways, while we have also taken up the issue. There was a series of meetings with the Railways which seem to have yielded some results. CIL has repeatedly said if the Railways does not have the funds, it is willing to incur all infrastructure-related costs. I am talking about Shivpur-Tori and the Gopalpur

tracks. For North Karanpura, CIL had earlier paid the Railways more than Rs 100 crore. Now, let me come to the second part of the answer. As far as underground mining is concerned, I would like to name the Churcha project under SECL, especially from the point of view of R&D. The planned capacity at this mine was one mtpa. It was designed well but there was pressure to increase the capacity by another 300,000400,000 tons. Other than Churcha, two other projects under SECL are also good projects that were planned by me. One particular mine plan was rather difficult…perhaps in the Jamunakotma area. Its ventilation system was difficult but I did the planning anyway. It was difficult because two mines needed to be joined by an integrated ventilation system and many people had said during the presentation that this would not be possible. But the then CMD of SECL had said, ‘Debnath is here, I have full confidence in him and he will do it’. It was felt that air may not pass through in a particular way. Ultimately, the drive was erected, the fans installed and the mine was successfully integrated. Highwall was another project at SECL in the Sharada area, which was an immense experience. This was executed right from the tender document to the selection of vendors. It is now successfully producing 1,500 tons of coal per day and that too, on a cost-plus basis. What will be your priority as CMD of CMPDI? I felt there were a lot of things that needed to be done at CMPDI and I took the initiatives. My first aim was to improve the drilling performance. You know, nowadays, our drilling performance is being monitored on a daily basis not only by the Ministry of Coal, but the Prime Minister’s Office (PMO) as well. In 2012-13, our drilling was 563,000 metres compared to the targeted 482,000 metres. Actually, we could not do the drilling as per our own expectations because of issues related to outsourcing, but we had achieved the departmental target.

Cover Story

CMPDIâ&#x20AC;&#x2122;s bouquet of services Exploration

CMPDI has over 500 coal exploration projects to its credit over different terrains, which has resulted in proven 80 billion tons of coal. It has the experience of exploration activities in Tanzania.

It undertakes baseline environmental data generation, EIA, EMP and monitoring various factors related environment.

Planning & design

Mining electronics

CMPDI has comprehensive experience in dealing with mining projects having geostructural complexities. It has planned about 700 projects for an additional capacity generation of over 500 million tons of coal per annum. CMPDI has developed expertise in the reconstruction of mines, conversion of underground mines into open cast, mining in rugged terrain, etc.

The mining electronics division is actively associated with the identification and implementation of electronics and control system for underground mines as well as opencast projects besides planning and design of communication network of subsidiaries for providing voice and data communication as part of CoalNet project. The electronics department is associated with laboratory activities pertaining to the repair and calibration of different gas detectors/monitors for underground mines based on the approval accorded by the DGMS authority as well as repairing of imported HEMM electronics cards of 120T/170T/85T dumpers, shovels, draglines and drill, etc.

Coal preparation & utilisation

CMPDI offers complete consultancy services for coal washeries and mineral beneficiation. Management services

The spectrum of management services covers techno-economic feasibility study, sizing of equipment, finalisation of equipment parameters, development of conceptual design and detailed engineering, equipment specifications, BOQ, tender documents, vendor selection, preparation of contract agreement and site supervision for construction and consultancy, and support for standardised management systems (e.g. ISO 9001 & its industry specific translations, ISO 14001 & OHSAS 18001). Research & development

CMPDI has patented its own technology through development of Special Smokeless Fuel (SSF), the domestic coke. CMPDI is the nodal agency for S&T Projects sponsored by Ministry of Coal, Government of India , and R&D projects executed by Coal India Limited. Information & communication technology

ICT division provides consultancy in various areas such as networking (LAN, WAN & VPN), database administration, web design and GIS. Environment management

The environmental laboratory is recognised by the Central Pollution Control Board, Ministry of Environment & Forests, Government of India and accredited with ISO-9001 certification.

12 Coal Insights, May 2013

Coal technology & laboratories

CT & Laboratory Services division of CMPDIL is a center for excellence in resource quality evaluation, beneficiation and proper utilisation of coal/lignite and minerals. Expert services are offered with highly skilled manpower and state-of-the-art equipment for characterisation of coal and lignite through chemical, petrographic and washability route supported by coal technologist for end use. Geomatics

Geomatics division offers its services in the field of remote sensing, GIS & GPS to the mining as well as associated utility sectors; ranging from topographical survey, excavation monitoring, mineral exploration, water resource survey to land use mapping, environmental studies, disaster and utility management. Specialised services

CMPDI provides specialised services in various areas such as geomatics, ventilation and gas survey in mines, blasting services, non-destructive testing and mine support design. Laboratory Services

Laboratory services of CMPDIL is a centre of excellence in resource quality evaluation, beneficiation and proper utilisation of coal/lignite and minerals. Coal-bed methane

This project is a mine-related CMM demonstration project, which is under implementation at Sudamdih and Moonidih mines of BCCL, in the Jharia coalfield in Jharkhand. The project having a duration of 5 years, was approved by the Government of India at an estimated cost `76.85 crore.

Cover Story Increasing the drilling target is one of my focus areas and the second is increasing exploitation of coal bed methane (CBM) and shale gas. The third focus area is to equip all the laboratories with the latest equipment. But, still, among all these, the main target is to increase drilling. You mentioned your priority areas but, according to you, which are the areas where CMPDI has not been able to perform as per its own expectations? Or may be a particular project where you wanted to take action, but could not? I was looking at something which is needed today. I will not blame anybody for this, but this is needed on every occasion. Today, we don’t get enough land for conducting explorations. We are often criticised but that is unfortunate. Where Coalgate issues are concerned, my relatives ask me whether I or CIL is involved in all this…The need of the hour is to bring back confidence to the nation. Another area of concern is the environment, and, to some extent, social issues where lots of measures are required. While speaking at various fora, I always confide that CIL has got enough surplus funds and is spending, wherever required, on augmenting production and expansion of projects. Whatever money is required to be paid to land losers is being paid at the rate of around `800,000-900,000 per hectare. Also CIL paid to the government double the amount of forest land that is required for

mining of coal for afforestation, and also a lot of money is spent on mine closures. For, say, an area of about 3-4 km, the mine closure expenditure itself would be about `300-400 crore. Where land reclamation is concerned, ultimately the objective is to bring the land back for re-use after the excavation is over. This will provide a source of income to the local people and will also be an acceptable solution for the society. If we can do it, then it’s a tremendous concept. This really needs to be effected but we should not leave this to CIL alone. Normally, in most cases, there is a dearth of funds. But, here that is not the case, because CIL has sufficient funds. And CIL also says if you need more funds, we are ready to provide that too. There are several institutes and organisations which are ready to bring the land to a shape where it can be re-used, providing the original land losers with options for earning their livelihood from it. But CIL and its subsidiaries are bogged down with various other issues relating to its staff and other things. Thus, in my opinion, the job of reclamation should be handed over to an agency or institute recognised by a state or the central government. There are quite a few specialised organisations doing good work in this area. You may find a few even at the government level. If they tie up everything, they will only need funds from CIL to complete the job to the satisfaction of all stakeholders.

On MoEF restrictions on boreholes for drilling in forests I do not know why this is not improving despite the fact that the Ministry of Coal and PMO have taken up the issue with the Ministry of Environment and Forest (MoEF). Now, if MoEF really sticks to its existing rules, I fear that CMPDI will never be able to do drilling in forest areas. I would like to stress that during the drilling process no damage to forests is done, only the trees are trimmed and that too because when two boreholes are to be placed, these have to be surveyed and for the surveyor a straight line of sight is required.

14 Coal Insights, May 2013

Coal exploration projects

CMPDI has completed over 1,000 coal exploration projects in India in all types of terrain and geological set-up. This has resulted in proving more than 95 billion tons of coal reserves. CMPDI has expanded its activities to manganese, iron ore and rock phosphate. Exploration has also been carried out in Tanzania. Annually, CMPDI carries out about 500,000 metres of drilling spread over seven states in India through 18 drilling camps and outsourcing. Services offered

♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦ ♦♦

Drilling (Coring & Non-coring) Topographical Survey In-seam Seismic survey High Resolution Shallow Seismic (HRSS) Reflection Seismic Refraction Geo-technical studies Geo-physical survey (borehole & surface) Geo-chemical testing Hydro geological studies Water budgeting and management Groundwater budgeting and management Water well drilling, development and construction Aquifer testing yy Water supply for rural & urban population yy Mine inflow study yy Reserve assessment yy Modeling yy Documentation

♦♦ Coal Quality assessment ♦♦ Interpretation of Stratigraphy & structure ♦♦ Coal/mineral resource evaluation ♦♦ Geological modeling

Cover Story Depending on CIL to take action in this area is not correct. There are many expert organisations which know how to convert wasteland into a useful one and, at the same time, provide a source of income to the locals in a manner acceptable to society. I have given the names of some of these agencies to the CMD of BCCL. In today’s world, we often don’t have the manpower to execute such activities. And then there is attrition. This is a crucial area in CMPDI too. We train employees, but they leave, especially those who come from the Indian Institute of technology (IITs). There was also a freeze on recruitments for long time, and hiring was resumed only a few years back. People take time to acquire skills too. This is a problem area which should also be given over to experts. There are institutes for skills training, funds are there too and such an approach can address the social issues pertaining to mining. Going back to the land issue, I think it should be looked into if you can give this land back to the land owners after mining of coal because, after mining, CIL has no interest in the land. But this should be done in a more professional way so that it can be a good source of livelihood – there can be a park or fishing pond etc., so that people have a good source of income. Or you can set up an institute where locals can be trained. Of course, the funds would be given by CIL. CMPDI has its hands full with mining research projects. Can you name some of the researches nearing completion? The first such research project, which was done by Dr H K Mishra, is related to noncoking coal. Dr Mishra was also associated with some institute in the US. This research highlighted that non-coking coal reserves in some parts of CCL and BCCL have certain coking coal properties such as vitrinite and such coal can be used as coking coal after washing. First, they found that coal has some amount of vitrinite, but if you wash that coal with certain ash of say 15 or 20 percent, they found that at least 25 percent of that washed coal can be directly fed into blast furnaces and used as coking coal for coke-making.

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That is a very big achievement. It is called non-linked washery (NLW) coal. The second is CBM. This assignment was given to us by the Directorate General of Hydrocarbons (DGH). We initially made data of routes of potential CBM blocks, and then we assessed after laboratory tests, stating that a particular block has got CBM potential. Based on these reports, a total of 33 CBM blocks had been allotted to various companies by the ministry although only 2-3 blocks are right now under production or commercial operational. Something similar is being done for shale gas. The director of DGH, R N Choubey, will order the job to be done in non-coal areas. In the Cambay basin, where there is a sedimentary basin…Ranchi too has a sedimentary basin, but it has been declared a coal-bearing area. However, the Cambay basin is a non-coal bearing area. They have faith in us and have already given us around `10 crore to start work in the Cambay basin. So we are going to get projects in places that are far away from coal bearing areas. While completing the assignment for DGH on CBM, we have amassed a lot of data and found that there is coal even in those areas which were not identified by the Geological Survey of India (GSI) as coal bearing areas. So, in a way, the CBM exploration has helped to increase the mapping of coal-bearing areas in the country. It is interesting to note that earlier when GSI had done an initial survey, it did

not find coal in those areas. Ours may be preliminary data but we know there are areas where coal will also be available. Have you found coal in non-traditional areas besides the traditional areas in India where coal is present? There are two theories – one is the drift theory and the second is the in-situ theory. The drift theory is followed in India and in-situ in other parts of the world. Through the entire length and breadth of India, coal is found along rivers because trees would come flowing with the water and due to earthquake etc. these were deposited and gradually transformed into coal. This explains why most of the coal reserves in India are found along rivers like Narmada, Godavari, Mahanadi, Son etc. Apart from that, tertiary coal is found in north east India, Meghalaya and Nagaland, and anthracite coal in a few places in Jammu and Kashmir, but this is not commercially viable or commercially mined. We have lignite deposits in Gujarat, Rajasthan, Tamil Nadu etc. Coal India/CMPDI was conferred the Geospatial World Excellence Award- 2012 at Amsterdam. Could you tell us about the benefits accrued from applications of geomatics in Indian coal mines? This award is related to our remote-sensing work which helped us to capture the growth in vegetation in coal mining areas. To date, CIL has planted about 76 million trees, especially in Chattisgarh and Jharkhand.

On whether India lacks in UG technology I totally disagree with this argument. As far as finding the suitable technology for a particular mine, CMPDI is the best technical institute in the world. We have introduced several technologies. The Longwall technology was introduced by us way back in 1978 with British Mining Coal (BMC), then with Poland, Russia (Rajhara etc), IMCL, CDF (France), and also with Germany.

Cover Story But this growth in vegetation was not captured. What we did was take satellite pictures to verify how the vegetation is growing annually. Everything is available on the website and is in public domain. Apart from that, we are doing overburden (OB) measurements too, using satellites. In fact, we have developed specialisation in this. Then, we are using geomatics to determine the types of afforestation, vegetation and land. This has also helped the Ministry of Coal or the government in formulating various mine-related policies. There are certain satellites earmarked for this purpose. Actually, we get raw data from the National Remote Sensing Agency (NRSA). It is authorised to undertake such activity and we get data from it after we provide the latitudes and longitudes of a place. After getting the data from NRSA, we use our special software to process the same. But isn’t it difficult for a lay man to interpret those satellite images? I agree that it’s difficult to read the data. You have to take help from us because the different colours shown have different interpretations. But once you understand the meaning of those colours then it is not difficult. Initially, the ministries of coal and forest and environment too had difficulty in understanding the data. We explained the meaning of the colours. For instance, red means there is plantation; different shades of red depict different things such as the number of villages, number of houses etc.

What is the status of CMPDI’s initiative to digitise the maps of coal bearing areas of India? For this purpose, we have a memorandum of understanding (MoU) with Survey of India. The existing maps were prepared long back and since then there has been substantial changes. So we tied up with Survey of India to develop new digitised maps of coal-bearing areas. We require the current depiction of coal bearing areas. So it will be a new toposheet as of today which will be available after digitisation and that would be uploaded by CMPDI. Once it is in soft form, it will be uploaded on a day-to-day basis. This project is near completion. May be, it will be completed this year or next. What is the status of the integrated coal resource management information system? Under this project, all the coal-bearing areas or colliery projects will be in digitised form. It is like you sit before a computer and select a certain area; even a small area of the Gevra project can be seen if the latitude and longitude are indicated. It will give 180-layered information for that area, including the number of seams, seam thickness, surface features, geological features, etc. As part of the project, we have developed 3D models which will be given directly to the mine planners for mine management. The assignment was given by the Ministry of Coal for `30 crore and that has been completed. But the digitised maps will be rolled out next financial year.

On clearance of detailed drilling in forest areas We have around 60 blocks for which detailed exploration is required and you can imagine how much time it will take to get clearances and then again do the drilling. Case-to-case means you have to take up one project, give a presentation, and then they will see… all these will require about 2 years for one clearance. So, getting clearances for 42 blocks, I think, will take around a century.

18 Coal Insights, May 2013

We will superimpose the previous maps on the new digitised ones which will help us to know how much coal has been extracted and how much is left. Why is there a huge difference in total reserves and indicated reserves as estimated by GSI? That has to be explained in detail. Way back in 1975, the proven coal reserves were very less, about 20 billion tons. Now this figure stands at around 118 billion tons. There are different types of drilling – regional drilling, detailed drilling, etc. One is funded by Ministry of Coal and the other by the Ministry of Mines. In the case of regional drilling, the distance of the boreholes may be 2-3 kilometres. It will only indicate that some coal is there in a particular area. After that it is only the CMPDI which will do the detailed drilling and prove that. Proved reserves are those where the grid boreholes would be at a distance of 400 x 400 metres, which means one bore hole has got an influence of 200 metres this way and 200 metres that way. So if you have that kind of borehole density, it roughly comes to around 8-9 boreholes per square kilometre. If you put a borehole one kilometre apart, you will only know that coal is there. But to know whether the coal is thinning down or if it has been washed away due to some geological factors you need detailed drilling. The coal was formed a few billion years back, but after that some earthquake might have occurred and as such some part of that seam might have been washed away. Your question is why it is less. The answer is that it will take some time to increase the volume of proven reserves. Whatever indicated reserves are there, you will not be able to prove it immediately, because most of the deposits or reserves are lying on the dip side of the existing mines. There is a process for finding/binding. You can’t do mining in a haphazard way. We are taking up this work gradually. But as far as CIL is concerned, immediate requirement is not there because they have enough of proven coal reserves as far as blocks available with them are concerned.

Cover Story But those blocks which have been allocated through the screening committee or competitive bidding route or through government dispensation will require detailed exploration or drilling and they are doing it. There is an allegation that MoEF does not allow to even increase the density of boreholes in forest areas? This is one of the major difficulties that we are facing. We require 15-20 boreholes per square kilometre for detailed drilling, but they restrict it to 2 boreholes. I do not know why this is not improving despite the fact that the Ministry of Coal and PMO have taken up the issue with the Ministry of Environment and Forest (MoEF). Now, if MoEF really sticks to its existing rules, I fear that CMPDI will never be able to do drilling in forest areas. Because of its rigid attitude, we have already lost around 150,000 lakh metres of drilling during the last two years as we were not allowed to do drilling in many areas. This is despite the fact that we are not damaging any forest. We are doing drilling without damaging any forest and this has been proved by reports that came up after Jairam Ramesh, the then minister with MoEF, had agreed to allow us to do drilling on a trial basis in three forest years â&#x20AC;&#x201C; Singrauli, Talcher and Chhattisgarh. A team comprising members from CMPDI and the Divisional Forest Officer (DFO), representing the state government, was formed and it was found that there was no cutting of trees during the exploration or drilling process. After the hearing, the coal secretary took up the issue, but nothing happened as MoEF said it will take up the matter and give clearances on a case-to-case basis. I would like to stress that during the drilling process no damage to forests is done, only the trees are trimmed and that too because when two boreholes are to be placed, these have to be surveyed and for the surveyor a straight line of sight is required. We are drilling since 1973; The Mineral Exploration Corporation Ltd (MECL) is also doing so. We are a government

20 Coal Insights, May 2013

On award of UG blocks to private parties The projects that have been awarded are Kapuria (2 mtpa), Moraidih (2 mtpa), Block II (0.45 mtpa), Munidih XV top (2.5 mtpa), VII top (0.7 mtpa). Let us see what they can do. I hope they will do well. Lohapatty is going to be awarded soon and it will have a capacity of 0.35 mtpa. The projects have gone to Joy Global, Mino Innovative Private Ltd, Amar VV and Indu projects....in the near future, the thrust on opencast will continue, but after the 13th Plan (2021-22), the focus will be on underground mines. organisation and we certify that no damage to trees has been done and they know it because the forest department officials sign on the documents stating that there was no cutting of trees, but still MoEF is adamant on not giving clearances. Now, the problem with case-to-case clearances is that we have around 60 blocks for which detailed exploration is required and you can imagine how much time it will take to get clearances and then again do the drilling. Case-to-case means you have to take up one project, give a presentation, and then they will seeâ&#x20AC;Ś all these will require about 2 years for one clearance. So, getting clearances for 42 blocks, I think, will take around a century. Earlier, there were only 20-23 blocks for which applications were pending for exploration, but now this has increased to 42 which require permission to drill in the forest area with the required number of boreholes i.e. 15-20 boreholes per square kilometre for increasing the confidence level regarding the project. The initial exploration had been done with 1-2 boreholes per square kilometre to find indicative reserves. This new rule came in 5-7 years back. Incidentally, a long time back there was a rule that only 10 boreholes can be done in an area of 100 square kilometres, which was revised to 2 boreholes per square kilometre. In fact, permission for 2 boreholes per square kilometre had been given for initial exploration, but that is not sufficient for

projectisation, for which we require 15-20 boreholes, but we do not have permissions. Thus, the number of applications has gone up. In addition, for 900,000 metre of drilling we have identified 32-36 more blocks and, as such, the numbers will increase further in the coming days. In addition, another problem we are facing is that MoEF sometimes does not allow us to enter even those areas where we have permission for undertaking 1-2 boreholes per square kilometre. Despite the best efforts, India seems to be lacking in many critical areas of mining. For example, UG technology, for which, we still have to look at overseas support? I totally disagree with this argument. As far as finding the technology suitable for a particular mine is concerned, CMPDI is the best technical institute in the world. We have introduced several technologies. The Long Wall Technology was introduced by us way back in 1978 with British Mining Coal (BMC), then with Poland, Russia (Rajhara etc), IMCL, CDF (France), and also with Germany. With the help of Russian technology, we had introduced shell mining in the North Eastern Coalfields. With the help of CDF, we had introduced sub-level cable while Chinese technology helped us to introduce long wall in SECL. These were new technologies. CIL

Cover Story

Geomatics services CMPDI has established a full-fledged Geomatics division to form a core multidisciplinary group dedicated to Remote Sensing, GIS, GPS, Digital photogrammetry, LiDAR, Terrestrial and Mine Survey for integrated natural resources survey and management. Geomatics division has a professional group of multidisciplinary team having rich experience in the field of airborne and satellite data processing, GIS, Surveying, Photogrammetry, Geology, civil engineering, Computer Science and Digital Image Processing. CMPDI is extensively using the geospatial technology in all the three stages of mining, i.e. pre-mining, syn-mining and post mining ranging from topographical survey, mineral exploration, land use planning, watershed management, excavation measurement to slope stability, ground subsidence measurement, coal mine fire mapping, environmental management, land reclamation and mine closure monitoring. Besides mineral sector, CMPDI is using this technology for locating potential pit head and coastal thermal power Station (TPS) sites, reservoir siltation, sodic land mapping and coastal zone management, amongst others. Considering the best application of geospatial technology in the mining sector, Coal India/CMPDI has been conferred Geospatial World Excellence Award 2012 at Amsterdam, The Netherlands for Application of Geospatial Technology in Mining. had spent a lot of money on these, and the foreign companies had visited the sites, selected the equipment, but still it was found that in some cases those technologies did not work in India. Having said that, we have to accept we

22 Coal Insights, May 2013

cannot expect to increase our production the way China is doing because of difficult geology. I had a lot of argument with the then chairman of CIL, Partha Bhattacharyya, over this. Finally, a team of CMPDI was asked to visit China and a 12-member team of underground miners did visit China. I was also in that team. We came to the conclusion that their deposit is extremely beautiful and that is why they are in a position to do mass scale underground mining. Following this realisation, I gave an idea to the CIL chairman that since CMPDI is unable to bring in mass scale underground production in India and it is facing criticism from all quarters why not invite foreign companies to go for mass scale underground mining in India. So we prepared a tender document in such a way that foreign companies will bring in the technology, plan the mines and do the mining in the way they want, but the entire project would be funded by CIL and the mining of coal would be done over a period of 9-12 years on a per ton cost basis, which means CIL will pay to the foreign companies at the rate of per ton of mined coal. This tender document was given to all the subsidiaries, which floated global NITs and already 2-3 projects have been awarded under this. The projects that have been awarded are Kapuria (2 mtpa), Moraidih (2 mtpa), Block II (0.45 mtpa), Munidih XV top (2.5 mtpa), VII top (0.7 mtpa). Let us see what they can do. I hope they will do well. Lohapatty is going to be awarded soon and it will have a capacity of 0.35 mtpa. The projects have gone to Joy Global, Mino Innovative Private Ltd, Amar VV and Indu projects. So it is not true that we have not done well in introducing new technologies. Over the years (since 1978), CMPDI, with the help of global experts, has introduced various technologies and all the overseas companies have so far failed in successfully implementing these technologies. This has happened despite the fact that it is their technology, their suggestions, and they have selected the mines, equipment and manpower. We have spent a lot of money in

introducing new technologies, but if some of these were not successful, it was not our fault. We just wanted to introduce these and see what happens. People say CIL is not willing to introduce new technologies, but this is not true. New projects are being awarded for introduction of new technologies, which shows we are seriously in pursuit of new technologies. In your view what is the future of underground mining in India especially in view of the cost and scalability factors? Underground mining will definitely come up in a big way in the future. Underground mining activities have been stopped in the UK, Germany, France etc because of the cost aspects. In future, underground mining will come from the main basin in Singrauli and Mand Raigarh area and there is no doubt about it. But the technology and likely capacity will be difficult to predict unless we get the detailed data. All the future blocks are to be mined mainly through underground means. However, in the near future, the thrust on opencast will continue, but after the 13th Plan (2021-22), the focus will be on underground mines. The ministry of coal has asked CMPDI to step up exploration activities. How was your performance in 2012-13 and likely to be in 2013-14? There was a growth of 13 percent in exploration activities in 2012-13 compared to 2011-12. The total drilling was 498,000 meters in 2011-12 and 563,000 metres in 2012-13. The target for 2013-14 is 900,000 metres. We could have done more, but there was delay in getting permission from MoEF for drilling in forest areas and also law and order-related issues in some areas. We give these work orders through outsourcing, and the drilling activity had to be stopped in mainly four blocks, Saraipahar, Brahmini, Gonda and Mahuamilan. The problem is still there in these areas. In the process, we lost 150,000 metre of drilling.

Cover Story We protested when the target for 201314 was assigned to us. After hear our side, the ministry said, “We agree with the points raised by you, but you need to have a target of 900,000 metres for 2013-14.” If all the targets for 2013-14 have to be achieved, 300,000-350,000 metres have to come through departmental means and 550,000-600,000 through outsourcing. We have to rely on outsourcing because of the huge work pressure. So the Twelfth Plan (2012-17) target submitted by us is like this: out of the 1,500,000 metres target, 400,000 metres would be through departmental means and the balance through outsourcing. Hopefully, there will be a substantial and miraculous increase in the drilling performance in departmental category in 2013-14. I am confident of this because I am bringing in some new technology based mainly on feedback received by me during interactions at various meets. Now we will try to implement the feedback. We have already started doing this for the last

The critical areas 1. Forest clearances for detailed drilling projects: CPDIL is doing drilling since 1975 and, it is on record that there has been no damage to forests because of drilling or exploration operations. The rules for new blocks restrict the number of boreholes one can put in forest areas. If the rule is not changed, in future, the entire coal sector will face a severe problem because of stoppage in exploration. 2. Future stagnation in coal production: Because no exploration activity will be on, opening up of new blocks will come to a halt. 3. Lack of outsourcing entities: There are some limitations in the areas where CMPDI is going to award the projects for outsourcing of drilling as the availability of outsourcing companies is also an issue. Because overseas players are not interested in drilling here, that chapter is closed. This leaves only 6-7 Indian parties and the volume of the job is real huge.

24 Coal Insights, May 2013

On why China excels in UG and India cannot We have to accept we cannot expect to increase our production the way China is doing because of difficult geology. I had a lot of argument with the then chairman of CIL, Partha Bhattacharyya, over this. Finally, a team of CMPDI was asked to visit China and a 12-member team of underground miners did visit China. We came to the conclusion that their deposit is extremely beautiful and that is why they are in a position to do mass scale underground mining. two months. There will be a change in the process of exploration and overall volumes will be much higher. How much increase will take place, I can’t say, but yes there will be sea change in the drilling performance, hopefully. Overall, I can say that we have already taken action, within two months of my taking over as CMD in February 2013. Within this period I have chalked out 3-4 measures the impact of which would be visible soon. This is apart from new technologies that I am going to introduce. My team is confident and so am I. But these are all subject to getting forest clearances and law and order issues too. Today, all the blocks where we need to start drilling are in forests and tribal areas with influence of Maoists – Chattisgarh, Odisha and Jharkhand. What prompts you to go for outsourcing exploration activity? Is CMPDI facing staff shortage for exploration work? Yes, staff shortage is there. The expansion scheme which we have submitted – 125,000 metres – requires additional drilling and manpower. Our total additional strength required for the additional drilling up to 1500,000 metres, including 400,000 metres through departmental means, is 675, including executives and non-executives. Our current staff strength would be 30,000-32,000. Now we have an adequate number of executives, but not non-

executives. In the coming two-three years many of the experienced drill operators will retire. So this is a serious problem and there is an immediate need to fill up the vacancies. We have started the recruiting process. For non-executives, the chairman-cummanaging director is authorised to recruit from the subsidiaries, but the process is such that you have to write to all the various subsidiaries regarding the type of manpower you are looking for. These subsidiaries will then study and confirm whether they can provide such manpower or not. Based on that, we have to take permission from CIL and then go for open advertisements. Another thing I would like to add is that the total drilling that we have to conduct under the Twelfth Plan is 1500,000 metres. We have planned to do departmentally about 600,000 metres and the rest has to be done through outsourcing. If we go at the rate of 1500,000 metres every year, and if it is not commensurate with the addition of promotional or regional explorations then our target of 1500,000 metres is not sustainable. This is so because we follow regional drilling. There is not much addition through regional drilling because that happens at a very slow rate. Right now, 6,900,000 metres have been accumulated. Suppose we keep on exploring 1500,000 metres per annum, then probably in the next 7-8 years, we will finish the entire drilling exercise. Then, what will happen to these drilling capacities? Thus, we have

Cover Story deliberately decided to go slow on the drilling exercise. By ‘slow’ I mean, we are adding 400,000 metres per annum through departmental means and the rest is being outsourced; so, if required, we will cut down on outsourcing. What is the status of the development of CIL’s coal blocks in Mozambique? Right now, drilling activity is going on. Our geologists and people from geophysical and cement are stationed there. Drilling is being done by Triveni Engineers. They were already doing drilling in an adjacent block. One part of drilling has been completed. They are giving orders for fresh part during this month (May) itself. Once the exploration is completed, then only further planning can be made. Right now we are doing drilling and then the project report will be prepared. What is the initial indication about the quality of coal in blocks in Mozambique? Only initial drillings have commenced; the quality of coal is not yet known, even

On green hurdle to exploration We could have done more, but there was delay in getting permission from MoEF for drilling in forest areas and also law and order-related issues in some areas. We give these work orders through outsourcing, and the drilling activity had to be stopped in mainly four blocks, Saraipahar, Brahmini, Gonda and Mahuamilan. The problem is still there in these areas. In the process, we lost 150,000 metre of drilling. though data has started coming. Samples have come, but there is lack of laboratory facility in Mozambique for testing the coal quality. So, we tried to bring those samples to India, though the cost of bringing a small sample is around `3,500,000. The problem being faced currently in Mozambique is that of limited evacuation facilities from mines to the ports. CMPDI is involved in setting up washeries for BCCL and other subsidiaries of CIL. This process has been very slow. Why is there so much delay, especially at a time when everybody says washed coal is the need of the hour? The problem lies in getting land for the washeries. Of the total number of washeries planned, a few have already been awarded wherever land is available. A few others are in the process of being awarded. The tender processing has already been done for projects like Kusmunda. The problem lies in cases where land is not available for washeries. Even in cases where these have been awarded, work has not started. Beyond this, I do not want to comment. So far as the 19 new

26 Coal Insights, May 2013

washeries of CIL are concerned, CMPDI is preparing tender documents and as soon as land is available we will process the same. Unless we get the details on land from the subsidiaries, we cannot plan. Because, we need to know the surface quality and do soil testing for detailed civil construction design. Once land is available, we will publish the request for proposal (RFP) document. Another problem with washeries is that in the current model of build-operatemaintain (BOM), the technology is not frozen. Different parties offer different technologies and because of this the tendering process is delayed. Additional time is being consumed in evaluating the various technologies. Whatever technology is on offer, CMPDI is checking on them. For example, if 13 parties bid in a project, they may come up with 13 different technologies…and this requires a lot of time. In view of this, we are changing the washery allotment process from BOM to BOO (build-own-operate). The only difference between BOM and BOO is that in the former, the capital investment will be made by CIL while in the latter, the capital investment will come from the bidder where we have frozen the technology. So now CIL will switch over to the BOO model. Lastly, what is the exact status of the ‘Go’ and ‘No Go’ areas concept? The terms “Go” and “No-Go” areas have been changed to ‘violate’ and ‘inviolate’ areas, respectively. The rest of it remains the same.

coal market fundamentals

Imported steam coal prices move in narrow range in April Coal Insights Bureau

mported steam coal prices firmed up in May with prices of South African, Australian and Indonesian coal rising marginally on increase in buying interest. South African coal (6,000 kcal/kg NAR) prices rose marginally to $83.1 per ton fob on May 23 compared to $80.25 per ton fob on April 30. Australian coal (6,300 kcal/kg GAR) prices rose marginally to $88.5 per ton fob on May 23 from $85.8 per ton fob on April 30. Indonesian coal (5,900 kcal GAR) prices rose to $73.25 per ton on May 23 compared to $71.75 per ton fob on April 30. Prices of Indonesian coal (5,000 kcal/GAR) fell slightly to $60.6 per ton fob on May 23 compared to $60.25 per ton fob on April 30. Currently China continued to remain relatively passive in importing thermal coal, industry sources said. However, there is robust Indian demand

for low-rank coal. Traders said that for the last six months Indonesian coal miners had been luckier than their counterparts in Australia and South Africa because Kalimantan prices, especially of sub-bituminous coals, held steady while Richards Bay and Newcastle bituminous coal prices fell. “This current price support for Indonesian coal is coming from the Indian thermal coal buyers who are now aggressively buying low-rank coals,” traders said. Traders are convinced that the Indians are currently desperate to get anything from the market. The demand for power plants in India is the main driver for low rank coal. Sources said low-rank coal is material with a calorific value of 4,700 kcal/kg gross as received or below. Traders said Indonesian low rank coals are scarce because traders have taken a long position expecting that the Indians will eventually buy everything. Traders are watching developments of

Steam coal FOB ($/ton) Dates

SOUTH AFRICA (6000 NAR)

AUSTRALIA (6300 GAR)

INDONESIA 5900 GAR

INDONESIA 5000 GAR

INDONESIA 4200 GAR

INDONESIA 3800 Kcal GAR

2 May

80.6

87.5

71.7

60.4

42.5

36.5

03 May

81.6

88.5

71.7

60.5

42.5

36.5

06 May

81.5

71.7

60.5

42.5

36.5

07 May

81.75

88.3

71.75

60.6

42.6

36.6

08 May

81.9

88.4

71.75

60.6

42.7

36.7

09 May

81.8

88.25

60.6

42.75

36.8

10 May

81.25

88.25

60.6

42.9

36.9

13 May

80.5

87.25

60.6

36.9

14 May

80.75

88.5

60.6

36.9

15 May

80.75

88.8

60.6

36.9

16 May

80.5

88.9

60.6

36.9

17 May

81.25

87.9

60.6

20 May

81.8

88.6

60.6

21 May

82.5

72.6

60.6

22 May

82.75

88.75

60.6

23 May

83.1

88.5

73.25

60.6

28 Coal Insights, May 2013

whether China would implement a proposal to outlaw imports of some grades of lower calorific value thermal coal. Market sources have said Indonesia is, so far, the largest producer and export of lower calorific value thermal coal to the Chinese market, supplying about 50 million tons of sub-bituminous grades most of which are classified by China as lignite. Market participants are also keeping a watch on how Indonesia would react to the proposed import ban and whether the Indonesian authorities would re-introduce a shelved proposal to ban the export of lowrank coals. Although there is massive Indian demand for low-rank Indonesian coal which has supported Kalimantan prices, market participants are keeping a watch on whether this support will unravel once India enters the monsoon season in June and more Indonesian coal becomes available as the rains subside in Kalimantan and Sumatra. For the past five months, Indonesian coal producers stood firm on their prices because supply is scarce. The demand for low-rank coal is there. There were problems associated with South Kalimantan illegal coal miners which prevented between 800,000-1 million tons of coal from being sold monthly. And the rains in Indonesia presented a logistics problems. But from June onwards the weather in Indonesia will improve. The frequency of rainfall will be less. The issue of illegal miners is being resolved. There will be more coal available. How will Indonesian coal prices hold up? That is a question that people will look for, sources said. Traders are keeping a watch on how long China’s appetite for imported coal will remain staid and India will aggressively buy Indonesian coal, sources said. Buyers expect a weakening in international coal prices primarily on slower economic growth in China. Indications from Chinese buyers for the second quarter were not positive and some were even bearish for the third quarter of this fiscal year. Chinese traders were willing to pay about $82-82.50 per ton for cargoes of 5,500 kcal/kg NAR imported coal on a delivered basis, while endusers were ready to pay as much as $83.50 per ton CFR.

coal market fundamentals thin, as a result of uncertainty with no spot transaction heard. With current faltering steel prices, raw materials procurement such as coking coal would understandably have to wait, sources said.

Seaborne coking coal prices ease in May Coal Insights Bureau

he seaborne metallurgical coal market saw continued drop in May as resilient demand continued to be trumped by even better supply. According to information available with Coal Insights, the premium variety was quoted at $139.5 per ton fob Australia on May 23, down from $147.5 per ton on April 30. Peak downs prices fell to around $141 per ton on May 23, down from $149 per ton on April 30. The semi-soft variety was quoted at $98.75 per ton on May 23 compared to $103 per ton on April 30. Although there was adequate demand with spot met coal traded volumes rising since April but on the other hand all major Australian and Canadian miners were actively offering spot, highlighting strong supply. Four brands of Australian premium mid-

Quarterly contracts

vols were being offered at $155 per ton CFR China, traders and steel mills reported, though no new transactions were heard done with buying interest closer to $140 per ton CFR. Australian 18-21% VM with 70-74% coke strength after reaction (CSR) was also reported offered at $145 per ton FOB Australia. Resilient buy-side indications were heard for non-premium HCC, which traders said was re-stocking of material. Mills were negotiating for lower May prices with domestic miners, sources said, so buyers were sitting out of the import market. Trade sources said although talks were on, deals were very thin. For second-tier HCC, liquidity outside China increased on relatively better buying appetite. Continued uncertainty in the near-term steel market created some fears in China, with buyers withholding any purchasing decisions. Liquidity appeared

Coking coal FOB Australia ($/ton)

Dates

02.05.13

Peaks Down (CSR 74%, VM-20.7%, Ash-9.7%, S-0.6%, P-0.03%, TM-9.5%)

Prem Low Vol (CSR-71%, VM21.5%, Ash-9.3%, S-0.50%, P-0.045%, TM-9.7%)

HCC 64 Mid Vol (CSR-64%, VM25.5%, Ash-9.0%, S-0.6%, P-0.050%, TM-9.5%)

Semi Soft Coking Coal

Met Coke

149

147.75

132

103

272.00

03.5.13

146.5

145.25

130

103

272.00

06.05.13

146.5

145.25

103

272.00

07.05.13

146

144.75

128.5

103

270.00

08.05.13

145.5

144.25

128.5

103

270.00

09.05.13

145

144

128.75

102

273.00

10.5.13

145

144

128.75

101

275.00

13.5.13

144.5

143.5

128.75

101

275.00

14.5.13

144.5

143.5

128.5

102

275.00

15.5.13

143

142

128

102

272.00

16.5.13

142

141

127.75

102

270.00

17.5.13

141.5

140.5

127

101

270.00

20.5.13

141

140

127

100

270.00

21.5.13

141

140

127

99.75

270.00

22.5.13

141

140

127

99.75

270.00

23.5.13

141

139.5

127

98.75

268.00

Earlier, BHP Billiton-Mitsubishi Alliance (BMA) and Japanâ&#x20AC;&#x2122;s Nippon Steel & Sumitomo Metal Corporation have agreed on coking coal prices for April-June at $172 per ton fob Australia, up $7 per ton from Q1 levels. However, sources now point out that BMA may face a drop in contract prices in the third quarter amid rising supply and weaker Asian demand. Asian buyers will probably pay $165 a ton for hard coking coal in the three-month period starting July 1, according to the median estimate of analysts. That would be a record low for contracts set in the first quarter and compare with $172 a ton in the second quarter. Rising supply from Mongolia and South Africa has added to an increase from Australia, which is rebounding from January floods that shut rail lines and curbed exports. A slowing Chinese economy is also causing weakness in the price. According to some sources, forecasts for the third quarter ranged from $155 to $180 a ton. Contract prices averaged $210 a ton last year. The re-balancing of the seaborne metallurgical coal market will be more gradual than previously anticipated, Goldman Sachs Group Inc. said in a report. The bank cut its 2013 forecast 8% to $164 a ton and its thirdquarter contract estimate 11% to $165 a ton. Metallurgical-coal suppliers traditionally held annual talks with steelmakers to fix benchmark contracts for the 12 months from April 1, the start of the Japanese financial year. They changed to quarterly negotiations in 2010. Met coke

Imported metallurgical coke prices dropped to $268 per ton in May from $272 per ton in April on low buying appetite. Poorer steel market fundamentals have resulted in the bearish trend in the prices. In India, coke prices remained around ` 17,000 per ton (basic) on low demand conditions prevailing in the market. The prices are likely to be around the same levels in rest of May, sources said.â&#x20AC;&#x201A;

Coal Insights, May 2013

Feature

India’s coal imports jump 20% in FY13, may cross 170 mt in FY14 Coal Insights Bureau

n line with market expectations, coal imports into India bounced back in 201213 after showing a flat trend in 2011-12. The import volume, though varying from one estimate to another, shows around 20 percent increase in 2012-13. Industry sources expect the buoyancy to continue in the current fiscal (2013-14). As estimated by Coal Insights, India’s coal imports crossed the mark of 150 million tons* (mt) last year and reached 153.01 mt in 201213. This shows about 25 mt increase over 128 mt estimated (revised) for the previous year. However, despite the surge in imports, much of India’s domestic coal demand remained unmet during the year under review. Official data shows that total demand for coal was around 772.84 mt while despatches by domestic producers were only 568.75 mt, thereby leaving a gap of more than 200 mt. While

30 Coal Insights, May 2013

some of this gap was met from the existing stock, it can be reasonably construed that a significant part of the demand remained unmet. Over and above this, the ambitious targets set by the government to increase power generation from coal-fired plants this year would add to the existing supply gap. Against this, domestic production is expected to clock around 4-5 percent growth. Discounting for these factors and given the benign international price levels, it is estimated that coal imports by India may grow by at least 1215 percent, thus exceeding 170 mt in 2013-14. Steam coal demand drives import

Of the total imports in 2012-13, steam coal imports accounted for 112 mt, while coking coal imports stood at 32.9 mt and others (anthracite coal, met coke, pet coke, PCI coal) made up the remaining 7 mt. The surge in imports was largely driven by a prolific growth in steam coal imports, which rose by around 26 percent over a year ago. In absolute terms, steam coal imports were

up by around 22 mt. Coking coal imports, however, remained flat due to the slowdown in the steel sector. Import of met coke nearly doubled during the year, but anthracite coal imports witnessed a drop against the last year’s level. A break-up by sources shows that bulk of India’s steam coal imports of around 84 mt came from Indonesia while 21 mt was imported from South Africa during the year. Other sources like Russia, US and Australia accounted for another 7 mt. Almost the entire volume of coking coal import came from Australia. Outlook for FY14

The thermal power sector, the biggest driver of coal imports, has been given an import target of 82 mt for the current fiscal, which depicts a sizeable jump over the previous year’s target of 63.67 mt. Besides, the Central Electricity Authority (CEA) has set a target of 11.23 percent increase in coal-fired generation, against a 6.84 percent rise in thermal power generation and a 6.9 percent growth in total generation during the year. In view of the increased targets, the power sector’s coal requirements are expected to rise from around 450 mt in 2012-13 to around 500 mt this year. Against this, domestic despatches are likely to increase by around 35-40 mt, leaving an additional import requirement of around 15-20 mt only from the power sector. In the coking c o a l

FEATURE segment, although market conditions have remained subdued, the ongoing expansions in steel plants are expected to increase the import of coking coal to around 35-36 mt. This would imply an incremental import of three mt over the quantity imported last year. The expansions in cement plants are also likely to see a marginal increase in coal imports by the sector. As already mentioned, domestic coal production and despatches are unlikely to fulfil the incremental demand from the power sector, leave aside the other consuming industries. In 2013-14, CIL aims an increase in production by 40 mt. It is widely believed that the entire incremental production in India would come from CIL, given the growth constraints facing SCCL and the ongoing problems in the captive segment. The above estimates for incremental demand and despatch show that import of coal, including steam and coking coal, should go up by at least another 20 mt in 2013-14 over last yearâ&#x20AC;&#x2122;s level.

Factors in play

Demand-supply gap in domestic

The benign spot coal market (in mt) coal prices in the 900 772.8 international market 800 696 would continue to 700 656.3 568.7 557.6 lure domestic buyers 600 535.3 532.7 539.9 523.5 in 2013. 500 Coal prices have 400 dropped dramatically 300 204.1 over the last one year, 160.7 200 132.8 for both coking and 100 non-coking coal and 0 across the markets. Demand Production Despatch Gap Since May 2012, 2010-11 2011-12 2012-13 South African coal prices (6000 NAR) have dropped $16/ coke imported into the country. Along with ton fob, while that of Australian steam coal low prices of the material, freight rates from (6300 GAR) has shed $5.1/ton fob and Indonesia and South Africa to the Indian Indonesian coal (5900 GAR) prices have coasts have remained benign in recent past. plunged $14.65/ton fob. The drop in coking However, the advantage of low prices and coal prices have been all the more severe. freight rates could be nullified if the Indian Since May 2012, prices of hard coking coal, Rupee weakens against the US Dollar, going premium low-vol and semi soft have declined forward. Rupee has been hovering around by $61, $63 and $22.5, respectively; `54 per USD in recent months. Given the so have been the price weak trend in crude oil prices, the USD of met may gain in value vis-Ă -vis other currencies. The relative movement would depend significantly on the crude oil price market.

Coal Insights, May 2013

FEATURE

(Apr-Mar) (2010-11)

(Apr-Mar) (2011-12)

FY. 12-13

FY. 11-12

AprMar’13 (Prov.)

AprMar’12

Growth Abs.

%age

I. Power Generation (In Billion Units) Total

811.143

876.887

911.652

876.887

34.77

4.0%

Hydel

114.257

130.509

113.626

130.509

-16.88

-12.9%

Thermal

665.008

708.806

760.366

708.806

51.56

7.3%

Coal based

535.340

584.787

659.042

584.787

74.26

12.7%

Oil

2.994

2.461

2.278

2.461

-0.18

-7.4%

Gas T.

100.257

93.464

66.742

93.464

-26.72

-28.6%

26.417

28.093

32.304

28.093

4.21

15.0%

26.266

32.287

32.871

32.287

0.58

1.8%

5.611

5.285

4.789

5.285

-0.50

-9.4%

74.97

73.47

69.95

73.47

75.25

73.65

69.73

73.65

73.82

70.87

75.61

70.87

Nuclear

65.40

76.90

78.50

76.90

III. Specific Coal Consumption* (Kg/KWH)

0.714

0.705

0.684

0.705

CIL

304.145

312.203

343.790

312.203

31.59

10.1%

SCCL

32.738

36.882

38.152

36.882

1.27

3.4%

Total

336.883

349.085

381.942

349.085

32.86

9.4%

INDIGENOUS

350.034

370.762

394.039

370.762

23.28

6.3%

IMPORT

30.302

45.228

62.547

45.228

17.32

38.3%

TOTAL

380.336

415.990

456.586

415.990

40.60

9.8%

377.875

410.290

452.709

410.290

42.42

10.3%

(As on 1.04.10)

(As on 01.04.11)

(As on 01.4.12)

(As on 1.04.11)

14.553

16.009

15.645

16.009

-0.364

-2.3%

(As on 1.4.11)

(As on 1.4.12)

(As on 1.04.13)

(As on 1.04.12)

16.009

15.645

19.471

15.645

3.826

24.5%

1.456

-0.364

3.826

-0.364

Multi Fuel Lignite Nuclear Import (Bhutan) II. PLF % Cummulative Thermal Coal based Multi Fuel Lignite

IV. Coal Despatches(In MT)

V. Coal Receipt *(In MT)

Coal Consumn.* (In Mt.) VI. Coal Stock (In MT)

VII. Decr./Incr.

Note(*) - (1) Receipt, consumption and coal stock includes coal from all sources. (2) Imported coal stock at port is 0.903 MT as on 01.04.2013 (3) Specific coal consumption calculated as per Apr-Dec Gen. & Consmn. Figs provided by CEA.

32 Coal Insights, May 2013

Indian power utilities’ April coal imports up 9.6% m-o-m The import of steam coal by Indian power utilities, including imported coal-based plants, in April 2013 rose by 9.61 percent to 6.5 million tons (mt) from 5.93 mt in March 2013, according to provisional data of Central Electricity Authority (CEA). The imports in April 2013 were, however, 4.41 percent lower than the target of 6.8 mt for the month, but higher by 65.39 percent compared with 3.93 mt imported in April 2012. Of the total imports in April 2013, imported coal based power plants had brought in 3.95 mt against their target of 2.67 mt for the month. These plants had imported 3.4 mt against their target of 2 mt during the month of March and only around 1.98 mt in April 2012 against the target of 2 mt for the month. The import by domestic coal based power plants in April 2013 stood at 2.56 mt, much lower than the target of 4.17 mt for the month. These plants had imported 1.95 mt coal in April 2012 against the then target of 3.83 mt. The total import of coal by power utilities during 2012-13 stood at 62.56 mt, which is 87.47 percent of the target of 63.67 mt for the period. CEA has set a target of 82 mt for coal import by power utilities, including 32 mt by imported coal-based plants and 50 mt by domestic coal-based plants for 2012-13. Meanwhile, the stock of imported coal of power utilities at ports fell by 17.24 percent in April 2013 compared with March 2013 levels. The stock of imported coal of power utilities fell by 0.106 mt and stood at 0.509 mt as on May 1, compared with a stock of 0.615 mt as on April 1. A year ago i.e. on May 1, 2012, the stock of imported coal of power plants stood at 0.679 mt, CEA data revealed.

FEATURE Steam coal prices in internationa market ($/ton) fob

100

250

Coking coal price movement in international market ($/ton) fob Australia

200

150

100

0 2.5.12 15.5.12 25.5.12 13.6.12 27.6.12 10.7.12 23.7.12 2.8.12 21.8.12 4.9.12 14.9.12 26.9.12 10.10.12 29.10.12 8.11.12 20.11.12 30.11.12 12.12.12. 24.12.12 07.1.2013 17.01.13 29.01.13 08.02.13 20.02.13 04.03.13 14.03.13

SA (6000 NAR)

Aus (6300 GAR)

China factor

The biggest influence on international coal prices and hence India’s imports would come from China’s reported decision on doing away with low CV thermal coal. While there was a lot of confusion over the news, the market generally believed the country could be seriously mulling such an action to curb the very high level of emission from its coal-fired plants. Commenting on the development, a

ID 5900 GAR

2.5.12 15.5.12 25.5.12 13.6.12 27.6.12 10.7.12 23.7.12 2.8.12 21.8.12 4.9.12 14.9.12 26.9.12 10.10.12 29.10.12 8.11.12 20.11.12 30.11.12 12.12.12. 24.12.12 08.1.2013 18.01.13 30.01.13 11.02.13 21.02.13 05.03.13 15.03.13

120

Peaks Down

market source said the issue was still not very clear. “If changes are made a significant market impact will be felt favouring higher CV products. However, nobody has clear sight of how this will or will not develop.” Indian traders expected the price of Indonesia coal, especially the low graded material, to come down from its current levels once China implemented its proposed action. On contrary, the prices of standard South African and Australian steam coal,

Prem Low Vol

Semi soft

particularly 5,500 Kcal are likely to firm up. The Chinese decision would imply that import of Indonesian low CV coal by Indian power plants could go up significantly. In fact, the market believes that the Indian generators could remain the sole buyers of such low grade coal. Some sources feel that the Indian government may also toe the Chinese line and impose restrictions on imports of inferior quality coal into Indian ports in future.

*The figure is arrived at on the basis of monitoring of vessels in 30 major and minor ports, but does not take into account the stock lying with 12 major ports.

Coal Insights, May 2013

Feature

Light at the end of the tunnel?

Coal industry moots ‘green tax’ to fund UG mechanisation Arindam Bandyopadhyay

n an interesting development, the coal industry in India is mulling plans to propose a “green tax” on coal production to create a fund dedicated to the mass mechanisation of underground mines in the country. While the nitty-gritty of the proposal are yet to be worked out, informed sources said the tax may come in the form of the green energy cess already in vogue to promote the use of clean technologies.

While the basic concept has come from one of the large miners, the coal industry at large, including traders and consumers, seems to agree on the proposal. According to the plan, the concept will be discussed amongst the various stakeholders before being placed before the government. “We aim to discuss the proposal with other stakeholders and then submit it before the coal ministry for its consideration,” said a senior official at the coal mining company. He said the new tax may come in the

form of the “green” tax and, if implemented, will serve the cause of the environment significantly. “It is common knowledge that underground mining has significantly less impact on the environment compared to opencast mining. The land area required is also much less and so are the hassles related to rehabilitation and resettlement (R&R),” the official said. Despite these advantages, the primary obstacle to the growth of underground mining is the higher cost of production. The cost, as suggested by experts from time to time, could be brought down only by largescale mechanisation, which requires heavy investments. “The tax we propose may be used to create a fund that would be dedicated to subsidising such a mechanisation drive,” he added. Earlier, in 2010, the government had imposed a clean energy cess on coal at the rate of Rs 50 per ton to fund research and innovative projects in clean technologies. The cess is also levied on imported coal.

Miners inside an underground mine in Jharkhand

34 Coal Insights, May 2013

Feature A chicken and egg story

The success of underground mining in many countries, especially China, and the failure of the same in India has been the subject of a prolonged debate between the champions of surface and underground mining in the country. While the top managements of the two largest coal producers, Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL), cite high costs of underground mining operations as an impediment, heavy mining equipment manufacturers argue that large-scale mechanisation would bring down the costs to levels close to surface mining. However, the initial cost of massmechanisation poses a significant hurdle. The detractors maintain that given the characteristics of Indiaâ&#x20AC;&#x2122;s coal seams, there is no guarantee that such investments would pay off to the desired extent. However, due to increasing land prices and clearance issues, the cost of surface mining is bound to increase in the coming years. Also, depleting reserves in surface mining would make old opencast mines uneconomic. In fact, the Coal Cost Guide Indexes for Canada shows that the cost difference between surface and underground mining (capital and operating cost) has

All India UG production (mt) and share (%)

70 60 50 40 30 20 10 0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 All India UG production

All India UG share (%) revival of underground mining in India in recent years, when it comes to taking the plunge, none of the two major coal producers seems to be too keen. This is so because the cost of underground mining is often 3 to 5 times the cost of opencast mining. Even the foreign players have, so far, not shown much interest when offered to take up such projects in the country.

decreased very significantly over the last 10 years. If India starts mechanisation of underground mines right away, the countryâ&#x20AC;&#x2122;s mining sector may witness a similar picture a few years hence, say supporters of underground mining. Not a priority area

Although much has been said about the

Production of raw coal from OC and UG mines in last 10 years Opencast Year

CIL

SCCL

All India

Underground All India OC Share (%)

All India OC Growth (%)

CIL

SCCL

All India

Raw Coal All India UG Share (%)

All India UG Growth (%)

Production

Growth (%)

2002-03

242.272

20.428

278.113

81.49

5.76

48.416

12.808

63.159

18.51

-2.56

341.272

4.11

2003-04

258.819

20.54

298.493

82.63

7.33

47.445

13.314

62.753

17.37

-0.64

361.246

5.85

2004-05

276.534

22.329

320.266

83.7

7.29

48.041

12.974

62.349

16.3

-0.64

382.615

5.92

2005-06

297.572

23.427

346.074

85.02

8.06

45.817

12.711

60.965

14.98

-2.22

407.039

6.38

2006-07

317.591

25.831

373.134

86.61

7.82

43.322

11.876

57.698

13.39

-5.36

430.832

5.85

2007-08

335.918

27.959

398.182

87.11

6.71

43.541

12.645

58.9

12.89

2.08

457.082

6.09

2008-09

359.771

32.459

433.785

88.03

8.94

43.959

12.087

58.972

11.97

0.12

492.757

7.8

2009-10

387.997

38.456

473.519

9.16

43.262

11.969

58.523

-0.76

532.042

7.97

2010-11

391.303

39.726

477.839

89.7

0.91

40.018

11.607

54.855

10.3

-6.27

532.694

0.12

2011-12

397.443

41.734

488.108

90.4

2.15

38.39

10.477

51.832

9.6

-5.51

539.94

1.36

2012-13

414.41

41.872

506.572

90.9

3.78

37.78

11.318

51.098

9.1

-1.41

557.67

3.28

Note: 2012-13 figures are provisional estimates

Coal Insights, May 2013

Feature It is not only the cost factor, but also the need to step up raw coal production that compelled the miners to stay focused on surface mining. On an average, the time required for bringing a surface mine to production stage (subject to statutory approvals) takes much less time compared to underground mining. As a result, the share of underground mining has continued to dwindle annually. Except for the marginal growth in 200708 and 2008-09, production of coal from underground mines registered a year-onyear drop each year during the last decade. According to data provided by the coal ministry, the fall has been sharp during the four consecutive years, starting 2009-10, and the trend is likely to continue over the next few years. Production from UG mines dropped 6.27 percent in 2010-11, 5.51 percent in 2011-12 and 1.41 percent in 2012-13, the data revealed. According to the data, production from UG mines in 2010-11 fell 54.855 million tons (mt) from 58.253 mt in 2009-10. It declined further to 51.832 mt in 2011-12 and 51.098 mt in 2012-13. Also, productivity in terms of output per manshift (OMS) showed a similar trend. While productivity increased marginally in opencast (OC) mines of CIL in recent years, it has declined for underground mines. The only exception to this trend was perhaps the 2012-13 performance of SCCL

Due to increasing land prices and clearance issues, the cost of surface mining is bound to increase in the coming years. Also, depleting reserves in surface mining would make old

opencast mines uneconomic. In fact, the Coal Cost Guide Indexes for Canada shows that the cost difference between surface and underground mining (capital and operating cost) has decreased very significantly over the last 10 years. which reported a marginal increase in underground production to 11.318 mt from

All India UG production growth (%)

3 2 1 0 -1

FY03

FY04

FY05

-2 -3 -4 -5 -6 -7

36 Coal Insights, May 2013

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

10.477 mt a year ago. Apart from a drop in production, the number of underground mines in the country is also expected to witness a steady decline over the years, due to the closure and conversion of underground mines into opencast ones. As of 2012, CIL had 467 active mines, of which 273 were UG mines, 164 OC mines and the remaining 30 of mixed character. SCCL has 50 mines, including 35 UG and 15 OC. The number of CIL mines has more or less remained unchanged in the last few years, but there are talks of closing down some UG mines due to the high cost of operations. As for SCCL, the number of UG mines has dropped from 56 in 2000-01 to 35 in 201213. The number of OC mines, over the same period, has increased from 11 to 15. Meanwhile, a number of UG mines of CIL are being converted into OC up to a reasonable depth. In fact, CMPDIL, the Ranchi-based R&D subsidiary of CIL, had been looking for a research partner for safe divisions between UG and OC workings for conducting simultaneous mining activities. Untapped reserves

While there are strong views regarding the viability of underground mining in India, what nobody seems to argue on is the substantial reserves of coal lying below 300 metres of depth which cannot be retrieved through surface mining. In the absence of UG mining, India’s estimated coal reserves will come down dramatically, industry sources added. Besides, there are substantial coal reserves blocked in developed pillars and these cannot be mined through conventional methods. CMPDI sought external expertise to mine such reserves too. Private sector companies are more aggressive in their outlook on UG mining. With modern technology and proper project designs, they maintain, UG mining can be nearly as economic and productive as surface mining. “India is not exploiting the advanced UG technologies which are available now. There are large contract miners who can lend their expertise in this regard. But the attitude needs to change,” an official of a private sector miner said. The green tax proposal, if accepted, could signal that change in attitude.

Feature route theft of good quality coal from wagons/ trucks,” Patil noted.

Quality row to continue

Govt rules out coal sampling at unloading point Coal Insights Bureau

hile quality issues continue to strain relations within India’s coal community, the ministry of coal has made a candid admission of the presence of impurities in coal supplies but ruled out any proposal for coal sampling at the unloading point, which has been a standing demand for many consumers, including power utilities. “There is no proposal for sampling at the unloading end,” Pratik P Patil, minister of state for coal, has said. He has, however, informed that a proposal for third-party sampling at the loading end for determination of the gross calorific value (GCV) is under active consideration of Coal India Ltd (CIL). Asked to comment on the recent complaints on grades slippages, the minister said such complaints have come in from time to time and “cannot be ruled out”.

“CIL has been receiving complaints, mainly from power plants, on oversized coal and coal mixed with some stones/boulders etc, which altogether cannot be ruled out due to geo-mining factors/conditions present in coal seams. On receipt of such complaints, remedial actions are taken by CIL/coal companies,” the minister said. As per the New Coal Distribution Policy (NCDP), he said, supply of the commodity to consumers is covered under the fuel supply agreement (FSA). As per the provisions of the FSA, consumers are to make payment of coal bills as per the price list in accordance with the quality of coal so determined jointly by the seller and purchaser at the loading end. “Besides, as per the provisions of the FSA, power plants are also compensated for stones of (+) 250 mm size... the reasons for variance in quality may also be due to en-

In TPA we trust

About a month after the spat with utility major NTPC hit the headlines, CIL is looking for third-party sampling agencies to curb customer grievances regarding the grades supplied at the loading point. The company has already floated a tender to appoint third-party sampling agencies, a senior official said. “We expect to put third-party sampling into place in 2013-14. Our internal plan is to put that in place by October, 2013, but it may get extended,” he added. Asked about NTPC’s claims that CIL supplies stones and boulders in the name of coal, the official said, “For that there is a compensation clause in the FSA. We are not asking them to pay whatever we are supplying. We have agreed on joint assessment of the quality of coal or stones on a monthly or quarterly basis. The assessment of stones is done by CIL officials jointly with officials at the plants. It is a regular process and takes every month or every quarter and, based on the outcome, the payment is adjusted,” the official added. The joint sampling system, according to the minister, has been a part of the NCDP and

Coal Insights, May 2013

Feature FSA. However, industry sources claim that, in various cases, the joint sampling method at the loading point was found to exist only on paper. There were many instances, before the NTPC outburst, where consumers faced 3-5 grade slippages. “If you calculate the price of coal for these grades, even for a small offtake, the differential amount becomes substantial,” said an official of the Indian Coal Consumers’ Association (ICMA). However, now with the issue hogging the limelight and CIL showing a pro-active stance in resolving the issue, things are likely to take a turn for the better, he said. A boost for haulers

While CIL has floated a tender for engaging a third-party sampling agency, the quality issue is likely to boost the coal testing, handling and inspection business in the country, industry sources said. “These days, there is an increasing role for intermediaries who can stand guarantee for the consumers on quality and quantity issues. This vertical is dominated by a few players but there are opportunities for new entrants,” said a source. The established testing labs, however, have not been done away with. The focus of their business is mainly on imported coal. Although there was a ripple in the market after CIL shifted to the gross calorific value (GCV)-based pricing method from the useful heat value (UHV) based one, it did not sustain. “There were various complaints about the lack of bomb calorimeters, grade slippages, stones and quantity mismatches initially, but these came mostly from small consumers and were often not given due consideration by the miners. These small consumers couldn’t afford to engage someone to test their coal on a regular basis. However, in the present case, the complaint has come from the biggest of them all and, hence, these intermediaries and allied businesses may get a boost,” the source said. Bell the cat

Despite the increased focus and pro-active stance taken by the consumers, suppliers and the government, industry veterans feel the basic issue will remain unaddressed. “The point to note is that neither the suppliers nor the government is talking of

38 Coal Insights, May 2013

And now, CIL-NTPC row over dues Even before the tiff between Coal India Ltd (CIL) and NTPC Ltd, related to coal quality issues, subsided, the two public sector behemoths engaged in a row over outstanding payments and curtailment of coal supply. Alleging that NTPC’s Farakka and Kahalgaon plants had accumulated excessive outstanding against supply of coal from Eastern Coalfields Ltd (ECL), CIL curtailed supply to these plants. NTPC’s outstanding had crossed `2,800 crore early this month. As of May 10, the overall outstanding of the power sector stood at around `8,000 core, which was above the normal level of `5,000-6,000 crore. “The normal level is about `5,0006,000 crore but, at present, the outstanding has crossed the normal limit,” a CIL official said. The official, however, indicated that

sampling at the unloading point. This part of the problem is being overlooked. Nobody can deny the fact that the real problem lies in the transit process. This is a law and order problem and often involves social issues. That’s why nobody wants to touch upon this factor,” said an expert. It is not possible to bring the coal to the road and then ensure a pilferage-proof delivery mechanism. “Coal is not a parcel that

in some cases, the power generators may not be at fault. It has been found quite often that generators do not get timely payment from state discoms and, as such, they cannot pay to CIL on time, he said. While the curtailment of supply could be a “routine affair”, the matter, in tandem with the quality row, has complicated matters. Commenting on the issue, CIL sources said the supply situation could be expected to improve only after the dues were brought down. He, however, said some supplies are indeed going to NTPC’s two plants fed by ECL – Farakka and Kahalgaon, because the coal supplier could not just keep the stock growing and creating a backlog. “We cannot just produce and allow the stocks to pile up because, if there is a backlog, how will we clear it? Thus, we have to supply some coal to NTPC on a regular basis,” the official said. Asked about the claims of NTPC that CIL supplies stones and boulders in the name of coal, the official said, “For that there is a compensation clause in the FSA. We are not asking them to pay whatever we are supplying. We have agreed on joint assessments of the quality of coal or stone on a monthly or quarterly basis. The assessment of stones is done by CIL officials jointly with officials at the plants. It is a regular process and takes every month or every quarter and based on the outcome, the payment is adjusted.”

can be despatched through secure channels. Given the huge socio-economic disparity between the various societal classes, you cannot possibly do much about such law and order issues. Be it illegal mining or transit losses, the government hasn’t been able to adopt any effective measures so far. The only way things can be improved is through higher economic growth and development,” the expert added.

Feature

CIL unions to go all out to stall disinvestment

“May be the government is not so keen to go for it. The ministry knows it will be a delicate issue to handle, especially at a time when the government is facing the wrath of the media, judiciary and people alike,” union sources said. “The economy is in a bad shape and the government is already under pressure from various scams. We have a feeling that overseas investors are taking advantage of this situation to put pressure on the government to open up such crucial sectors such as coal,” they said. The logic behind the argument, the sources said, is simple. “If one minor stakeholder in CIL (TCI), holding merely one percent stake, can dictate terms and demand the company chairman to step down, you can think of what the scenario could emerge after the second round of stake sale.” The motif behind the stake sale, they said, was to push forward the agenda of opening up the coal sector. “This effect of this will be devastating. The impact will be immediate and across the sectors. People need to understand the urgency of the situation.” Show of solidarity

Coal Insights Bureau

ven as the proposed disinvestment of Coal India Ltd (CIL) hangs fire, the trade unions are determined to stall the move as and when it comes, a union leader told Coal Insights. “Under no means we are going to allow this (disinvestment). We have held talks between the various union bodies and four units have agreed to join forces to stall the move,” he said. The trade unions, he said, have decided to hold a convention in Ranchi in late June to chalk out an action plan and decide on the agitation and strike programmes. “The timing of the strike will be decided at the convention. But we have already started campaign among fellow workers against the move.” It is learnt that four out of the five unions are likely to take part in the convention in Ranchi.

Asked if the strike planned would be token on indefinite, the union leader said, “This time, it should not be a token strike, but a full-fledged industrial action that will compel the government to give up.” The unions, meanwhile, have already intimated the government on their dissent and expressed ire at the government’s betrayal of its earlier stance. “After the Initial Public Offering (IPO), the government had signed an agreement with us (2011) that there would be no followon offer after the sale of 10 percent stake in CIL. Now if they go on with it, that should be construed as a clear violation of the agreement,” he alleged. Government acting under pressure?

However, there is a growing feeling among the unions’ top leadership that the UPA government is acting under pressure allegedly from overseas interest groups.

Referring to the agitation before the float of the IPO in 2010, the union leader said, “The action this time will be far more intense. During the IPO, gradually four unions, barring ours, had backed out. But this time around, at least four unions have pledged to move in tandem.” In view of the fact that a ‘solo’ agitation by the union had created a huge response during the IPO, he said a combined effort was sure to serve the purpose this time. Asked if there was any talk with the CIL management in this regard, union sources said the proposal has come from the government and therefore the agitation would be aimed at putting pressure on the same. They also summarily rejected the idea of an improvement in the coal production scenario through greater private participation. “You look at the poor state of captive blocks. Whatever private production is being done, the infrastructure for that is provided by CIL. How could you expect them to contribute to production on their own? Their sole purpose is to extract high profit and not to serve the economy per se.”

Coal Insights, May 2013

Feature

India excels in mining education, but needs more industry interface Coal Insights Bureau

midst a growing debate over the need to overhaul the mining education system in the country, senior industry officials said the Indian academia produces top quality graduates for the mining sector, but needs increased industry interface to help them cope with the onfield challenges and changing skills requirements. “In mining and allied activities, the quality of education imparted at Indian institutes is at par with the best in the world. The increased employability of Indian mining engineers abroad is a testimony to this fact,” said a senior official of a central research institute associated with mining and quarrying.

40 Coal Insights, May 2013

Also, the number of institutes is on the higher side if compared with other mineral rich countries. India has around 11 leading colleges offering mining engineering courses, about the same as in China but higher than in South Africa and Indonesia. However, what the academia lacks is close interaction with the industry. As a result, in many cases, the graduates are required to undergo intense on-thejob training. This problem is more acute in specialised areas such as exploration, drilling, geomatics etc. The increased demand for such resources has brought the problem to the fore. According to a top official of the Central Mine Planning and Design Institute (CMPDI), the increasingly higher target set

by the coal ministry is making it difficult to find adequate manpower, be it within the organisation or the industry at large. “We have to train people in such specialised activities and, when they leave, it is very difficult to find replacements,” he said. CMPDI awards drilling contracts to private agencies, but the situation is such that a few years down the line, the exploration sector as a whole may not have adequate number of people specialised in this job, the official said. The underground mining sector too is grappling with a similar scenario, where Indian mining engineers have world-class knowledge on the subject but lack the experience of working in a mechanised environment. However, an official of a private sector technology company said that mining professionals in the country often lack knowledge of sophisticated “green” technologies being developed elsewhere. “Even today, if you talk about clean coal technology, many people here would think in terms of washed coal!” he said. Such advancements are possible only through increased interaction between academia and industry, especially technology companies, the official maintained.

Feature

Sandvik Asia sponsors Chair Professor at ISM

andvik Asia, the Indian subsidiary of Sandvik AB, Sweden, on May 17 announced the sponsorship of a Chair Professor at the Indian School of Mines (ISM). The role of the Chair Professor broadly involves industryinstitute interaction and research and development (R&D) activities apart from regular teaching and academic assignments. The Chair Professor will also undertake “Sandvik projects”, including undergraduate and post-graduate assignments after consultation with ISM. This initiative of technology-meetingacademia commenced with the signing of a memorandum of understanding (MoU) between ISM and Sandvik. The tenure of appointment initially is for two years, but may be extended further based on evaluation up to a maximum of five years or 70 years of age, whichever is earlier. Speaking on this occasion, Mr. Ajay Sambrani, MD, Sandvik Asia Private

Limited, said: “Sandvik has been in India for over five decades and has always remained committed to its contribution to the country’s development through technology, products and people. Today we are delighted to be associated with India’s premier institute in mining, ISM, by sponsoring a Chair Professor. I am confident that this joint initiative will enhance industryacademic interaction and expand the sphere of learning for next-generation miners.” Prof. D.C. Panigrahi, director, ISM, said: “ISM is a premier institute in mining in the country, having given the sector many stalwarts for the past eight decades. We appreciate Sandvik’s initiative in sponsoring a Chair Professor at our institute. New technology directed at continuous improvement is pivotal to the growth and development of the mining industry. ISM and Sandvik together can contribute towards meeting this challenge.” Sandvik president and CEO Olof

Faxander was present on the occasion which took place at ISM Dhanbad. P.K.Lahiri, chairman, general council and executive board, ISM, and top coal industry officials also took part in the event. Indian School of Mines (ISM), Dhanbad is a deemed university. Established in 1926, ISM has taken rapid strides in its core competence areas, namely, mining, oil and gas, mining machinery, fuel and mineral engineering and mining environment. The institute has embarked on a massive expansion plan as per the directive of the ministry of human resource development, Government of India and is poised to grow further in student and faculty strength, state-of-the-art research facilities, modern infrastructure, international relations and human resource capacity building. The Indian School of Mines, with 17 faculty departments, 5,000 students, 250 faculty members and 550 research scholars, is a vibrant campus throughout the year.

Coal Insights, May 2013

Feature

India talks green but sticks to coal

Additional generation from coal to exceed overall generation increase in FY14

Coal Insights Bureau

midst frenzied talks of a more balanced energy portfolio, India’s power generation is becoming progressively reliant on coal as a fuel. The government keeps on harping on renewables and “green” energy, but when it comes to setting yearly generation targets, it cannot but increasingly bank on the dry fuel. An analysis of the power generation targets set by the Central Electricity Authority (CEA) reveals that the additional generation from coal this year (201314) would exceed the overall incremental generation targeted for all resources combined (including coal). This is so because there would be negative growth in generation from some of the fuel types, especially natural gas, during the year. According to the data, the total

42 Coal Insights, May 2013

Overall growth target

According to CEA data, the total power generation target in the country is set to increase by 6.9 percent to 975,000 million units (MU) in 2013-14, compared to the actual generation of 912,056.70 MU in 2012-13. The targeted generation would be 4.84 percent higher than the yearly target of 930,000 MU set for last year, the data showed. Of the total increase, thermal power generation is targeted to increase by 6.84 percent to 812,737 MU in 2013-14, compared to the actual generation of 760,675.80 MU reported for 2012-13. Hydro power generation is targeted to increase by 7.51 percent to 122,263 MU in 2013-14, compared to actual generation of 113,720.29 MU in 2012-13. Nuclear power generation is targeted to increase by 7.10 percent to 35,200 MU in 2013-14, compared to the actual generation of 32,866.11 MU in 2012-13. The yearly target in 2013-14, however, has remained unchanged from the target set for the previous year. Power import from Bhutan is targeted to increase only marginally, from 4,794.50 MU in 2012-13 to 4,800 MU in 2013-14. With respect to the target set for last year, this year’s target is lower by 12.41 percent.

incremental generation in 2013-14 would be Coal-fired generation 62,944 million units (MU) while that from coal would cross 74,000 MU. The addition to Coal-fired thermal power generation is coal-based generation would also exceed the targeted to increase by 11.23 percent to incremental generation in thermal category, 733,271 MU in 2013-14, compared to actual targeted at 52,061 MU. Against this, nuclear and Additional generation target for various hydro generation would fuel types in 2013-14 (in MU) add only 2,333 and 8,543 80,000 74,040 MU. 70,000 62,944 In terms of growth, 60,000 coal would account for a 52,061 50,000 double-digit increase in generation, much higher 40,000 than the growth targeted 30,000 for the thermal power 20,000 segment and total power 8,543 10,000 generation in the country. 2,333.89 Additional generation 0 coal total thermal hydro nuclear target for various fuel types Source: CEA in 2013-14 (in MU)

Feature Break-up of annual generation target 2013-14 and growth rate (in MU) Category

Target 2013-14

Target 2012-13

Actual generation 2012-13

Growth (%) w.r.t. target

Growth (%) w.r.t. generation

Thermal

812,737

767,275

760,675.80

5.93

6.84

Nuclear

35,200

32,866.11

0.00

7.10

122,263

122,045

113,720.29

0.18

7.51

4,800

5,480

4,794.50

-12.41

0.11

975,000

930,000

912,056.70

4.84

6.90

Hydro Bhutan (import) All India Source: CEA

Thermal annual generation target 2013-14 and growth rate (in MU) Fuel Coal

Target 2013-14

Target 2012-13

Actual generation 2012-13

Growth (%) w.r.t. target

Growth (%) w.r.t. generation

733,271

653,239

659,231.43

12.25

11.23

Lignite

33,000

29,878

32,323.70

10.45

2.09

Naptha

909

1,221

1,930.04

-25.55

-52.90

43,570

80,288

64,905.90

-45.73

-32.87

1,987

2,649

2,284.73

-24.99

-13.03

812,737

767,275

760,675.80

5.93

6.84

Natural gas Diesel Grand total Source: CEA

generation of 659,231.43 MU in 2012-13, according to data released by CEA. However, compared to the generation target of 653,239 MU in 2012-13, this year’s generation target depicts an increase of 12.25 percent, the data shows. Total thermal power generation is targeted to increase by 6.84 percent to 812,737 MU, compared to actual generation of 760,675.80 MU in 2012-13. Other than coal, all the other fuel types in the thermal power segment show either marginal or negative growth in this year’s targets versus the targets set for last year and also actual generation in 2012-13. While the target set for lignite is around two percent higher than the actual generation last year, the same for naptha, natural gas and diesel depict significant negative growth against both the actual generation and the target set last year. Among these, the major decline would be in natural gas-fired generation. The generation target set for this segment in 2013-14 (43,570 MU) is almost half the target (80,288 MU) set last year.

Coal Insights, May 2013

FEATURE

India’s power generation falls 2.9% in April m-o-m Coal Insights Bureau

ndia’s power generation in April 2013 stood at 77,579.07 million units (MU), down 2.94 percent from 79,928.89 MU generated in March 2013, according to provisional data released by the Central Electricity Authority (CEA). The generation in April was significantly lower than the target of 76,913.50 MU, the data revealed. The power generation in April 2012 was 75,261.21 MU against the target of 71,838 MU, which means year-on-year generation was up. Of the total generation in April 2013, 66,997.85 MU (64,124.56 MU in April 2012) were from the thermal sector, 2,245.42 MU (2821.30 MU in April 2012) from the nuclear sector, 8,169.07 MU (8100.80 MU in April 2012) from the hydro sector and Bhutan imports were 166.73 MU (214.55 MU in April 2012). India’s power generation during 201213 stood at 911,652.31 MU, down 1.97 percent compared with the target of 930,000 MU for the period and up 3.96 percent compared to 876,888.48 MU generated during 2011-12.

Months

2013-14 282

2011-12 735

May

1070#

550

Capacity addition

June

2376

2224

A total of 282 MW of power generation capacity was added in India during April 2013, sharply down from 7,028 MW added in March 2013, according to provisional data made available by Central Electricity Authority (CEA). With this, the total installed generation of the country stood at 223,625.60 MW, provisional data prepared by the Central Electricity Authority (CEA) revealed. The total power generation capacity added during the entire period of 201213 stood at 20,622.80 MW, as per CEA’s revised data whereas in 2011-12, total capacity addition stood slightly lower at 20,501.70 MW, data indicated. Capacity addition in February 2013 was at 2,863.8 MW whereas in January it stood at 877 MW. However, CEA data revealed that in January 2013, another 745.8 MW of generation capacity was also added in the thermal sector but since the information was received late, it has been included in the February figure. During April, capacity addition in the thermal sector stood at 150 MW while the target for the sector stood at nil. However, for the hydro sector 132 MW was added against

July

950

1660

August

550

1200

September

870

786.5

1400

345

November

803

2807

December

1158

877

895

2863.8

972

7028

5482*

20562.8

18814.5*

April

2012-13 1760

Categorywise Energy Generation in April 2013 (in %) 11%

Capacity addition during 13-14, 2012-13 and 2011-12 (in MW)

October

January February March Total

282

*As reported by CEA, the capacity for 2011-12 was increased by them to 20,501.70 MW instead of 18,814.50 MW. # CEA had earlier reported that capacity addition in May (2012-13) was at 1,070 MW, but it appears that the figures have been revised to 1,130 MW. ## As per the consolidated data provided by CEA, total capacity added during April-March, 2013 stood at 20,622.80 MW although addition of the individual month’s capacity addition figures show the total April-March capacity addition to be at 20,562.8 MW.

Achievement Vs Target in Capacity Addition (in MW) 160 140

120 100 80 60 40 20

86% Thermal Hydro Source: Central Electricity Authority (CEA)

44 Coal Insights, May 2013

Nuclear Bhutan Import

Thermal

Hydro Target

Nuclear

Achievement

Source: Central Electricity Authority (CEA)

FEATURE a target of 33 MW. In the case of the nuclear sector, target and achievement both stood at nil. However, during March, capacity addition in the thermal sector stood at 6,986 MW while the target for the sector stood at 735 MW. For the hydro sector 42 MW was added against a target of 172 MW. In the case of the nuclear sector, the target and achievement stood at 1,000 MW and nil respectively. During April 2013, in the thermal sector, 150 MW was added at the Thamminapatnam TPP Unit 2 in Andhra Pradesh. On the other hand, in the hydro sector, 33 MW was added at Teesta Low Dam-III HEP Unit 4 in West Bengal by NHPC, 49.5 MW at Chuzachen HEP Unit 2 in Sikkim by Gati Infrastructure and another 49.5 MW at Chuzachen HEP Unit 1 in Sikkim also by Gati Infrastructure. Critical coal stock

According to data available with Coal Insights, 18 plants out of a total 99 in the country faced a “critical coal stock position” of less than seven days as on April 30. The data further shows that out of the 18 plants facing a “critical coal stock” position, 11 faced a “super critical” coal stock position of less than four days. On April 15, of the 19 plants (of the 99 plants) facing critical coal stock position of less than seven days, 13 were facing “super critical” coal stock position of less than four days. Plants in Bihar, Tamil Nadu and Odisha were the worst sufferers. Plant load factor

The plant load factor (PLF), a measure of

Indian power utilities’ coal receipts up 4% in April m-o-m : CEA

Power supply position

India’s power utilities received a total of 42.26 million tons (mt) of coal in April 2013, up 4.06 percent compared with 40.61 mt received in March. The import in April 2013 was, however, 12.9 percent higher than 37.43 mt imported in April 2012, the data revealed. Of the total coal received by power utilities in April, 36.39 mt was domestic coal and 5.86 mt was imported coal. In March, 34.67 mt was domestic coal and 5.93 mt was imported coal. In April 2012, the power utilities had received 33.29 mt of indigenous coal and only 4.13 mt of imported coal, the data revealed. On the other hand, India’s power utilities received a total of 456.59 mt of coal of during entire 2012-13, up 9.76 percent as compared to 415.99 mt received during 2011-12, according to the data. In 2012-13, out of the total quantity, 394.04 mt was indigenous coal and 62.55 mt was imported coal whereas in 2011-12, 370.76 mt of indigenous coal and 45.23 mt of imported coal was received. The total coal consumption by utilities during April 2013 was estimated at 35.16 mt as compared with the consumption of 36.98 mt in April 2012.

In April 2013, the country’s peak power demand was estimated at 82,736 MU, but actual availability was only 75,772 MU, reflecting a shortfall of 6,964 MU or 8.4 percent. During the previous month

of March 2013, the country’s peak power demand was estimated at 85,642 MU, but actual availability was only 78,304 MU, reflecting a shortfall of 7,338 MU or 8.6 percent. Despite acute power shortage, the deficit stood at nil in Chandigarh, Daman & Diu, Dadra & Nagar Haveli, Goa and Lakshwadeep while peak power deficit was noticed in Andhra Pradesh which stood at 1,554 MU.

the output of a power plant compared to the maximum output it could produce for the country, during April 2013 stood at 70.04 percent against the planned 71.33 percent. The PLF was 72.21 percent for March 2013 and 71.12 percent for February 2013, respectively. The PLF of power plants of the central sector-run companies such as NTPC and DVC in April 2013 stood at 75.42 percent whereas the figure achieved in March 2013 was at 83.10 percent. In April 2013, the plants in the state sector recorded a PLF of 67.56 percent against the planned 70.54 percent. The worst performers were Mauda TPS, Muzaffarpur TPS, SVPPL, VESPL and Kodarma TPP, all of which recorded nil PLF against a target of 50 percent, 25.88 percent, 8.82 percent, 39.68 percent and 8.33 percent, respectively.

All India PLF Factor (April 2013) in % 80 75 70 65 60

Central

State Sector Program

Pvt. Utl. Sector Achievement

Source: Central Electricity Authority (CEA)

All India

Coal Insights, May 2013

Opinion

PPP in coal: The next big thing! Naresh Nautiyal

n the wake of the recent announcement by the Ministry of Coal (MoC) for allocation under rule 4(3) of the “Auction by Competitive Bidding of Coal Mines Rules 2012” to allot 17 Coal blocks (14 for power and 3 for mining) to public sector companies , a lot of excitement has been generated in the coal sector. It is generally believed that this move will ensure a fair and transparent system of allocation of coal blocks besides giving a much needed boost to the sector. Coal as of now in India is an extremely valuable resource and the most important source of energy. As of now, it accounts for more than 50 percent of the energy requirements of the country. Scaling-up challenges in general for other forms of energy, and more particularly high capex for solar, environmental issues for hydro, round the year non-availability for bio-mass, policy bottlenecks for gas, etc. make us highly vulnerable and dependent on coal as an energy source. While this is as much a known fact to us as is to the Government of India, precious little is being done to open up the sector for global players and private participation which would bring in risk capital and global best practices, thereby facilitating fast-track development of coal assets. Coal as a sector is the most neglected in terms of policy reforms, and one of the handful of sectors that are still highly regulated. Indian coal sector still at early stage after 250 years

The Indian coal sector would be completing around 250 years of mining history since coal was first dug out in the Raniganj Coalfield

46 Coal Insights, May 2013

in 1774. Coal, therefore, as an industry is probably as old as the telecom (which is more than 200 years old), automobile (which is more than 70 years old) and the banking sector (which is in practice in India for more than 225 years). However, while telecom, automobile and banking have attained maturity in the life-cycle, coal is still at a start-up phase. The USA, Australia and South Africa are matured economies in terms of the coal sector, while China, Indonesia, Russia, Mongolia and Africa (other than South Africa) are in the mid growth phase. India in comparison to these countries is still at the early stage in the industry life-cycle. Indian coal sector growth

As on April 1, 2012, India’s coal resources stood at 293 billion tons (source: MoC). Of these, only 118 billion tons are under Proved category which can be mined. The rest are under indicated and inferred category implying that substantial exploration is

required to convert these resources into Proved category before they could become commercially exploitable. It is anticipated, according to the Working Group of Coal and Lignite for the Twelfth Five Year Plan (2012-17) that the country’s production in 2016-17, the terminal year of Plan period, will be 715 million tons (mt) and the demand 980.50 mt (CAGR = 5.1 percent), leaving a gap of 265 mt. The situation is pretty grim and importing coal appears to be the only solution as of now to meet our production shortfalls, thereby causing a heavy burden on the exchequer, and more alarmingly increasing the current account deficit. During the period 2011-12, India imported coal worth around `70,000 crore which is more than Coal India Limited’s (CIL) top line in value terms (`62,415.43 crore) for the same period. As if this was not enough, it would be almost double the CIL top line by the end of the Twelfth Five Year Plan (201617). India has to gear up to bridge this ever widening gap between demand and supply by increasing production indigenously. One of the ways ahead could be the PPP route. Private participation & PPP: The way ahead

Private participation and public private partnership (PPP), which are not necessarily

Opinion the same thing, could be one of the ways to ramp up coal production in the country by 10 percent year-on-year (yoy) and take India towards self-sufficiency. The Government of India describes PPP as a partnership between a public sector entity (sponsoring authority) and a private sector entity (a legal entity in which 51 percent or more equity is with the private partners) formed for the creation and/or management of infrastructure for public purpose for a specified period of time (concession period) on commercial terms and in which the private partner has been selected through a transparent and open system. PPP experiences in Indian coal sector

A number of leading state government mining companies such as Madhya Pradesh State Mining Corporation (MPSMC), Maharashtra State Mining Corporation (MSMC) and Maharatna public sector units (PSU) like Steel Authority of India Limited (SAIL) have successfully adopted the PPP model for fast-tracking development

of coal blocks allotted to them through the government dispensation route. The innovative structuring of the PPP models for these companies and selection of Joint Venture partners through a fair and transparent bidding process was done by aXYKno Capital Services Ltd, a leading consulting powerhouse in the natural resources and energy sector in India. These bids have been run in a fair and transparent manner and this resulted in fast-track development of these blocks. The projects structured are within the existing regulatory framework and have created valuepropositions for the government as well as the private entrepreneur and this has ensured fast-tracking of coal production. But, we feel more could be done if the sector is opened up further for risk capital. Approach for structuring PPP transactions

(a) Pre-feasibility /detailed feasibility study of the coal block is the starting point. (b) A structure/model based on the study is constructed to suit the ‘sponsor’ and the ‘developer’.

(c) Detailed mine valuation running multiple scenarios and option analysis of the project is run to demonstrate adequate risk-reward and for structuring a robust bid. (d) Selection of a strategic partner is accomplished through a fair and transparent bidding process. Case study

Presented below are two caselets successfully adopted by MPSMC and SAIL: CASELET 1- Madhya Pradesh State Mining Corporation (MPSMC)

Coal Blocks: Bicharpur, MarkiBarka, Mandla South, Morga III, Morga IV, Semaria -Piparia. (1) MPSMC is an enterprise owned and controlled by Government of Madhya Pradesh and engaged in the exploitation of different minerals. (2) The model was developed within the PPP framework for the six coal blocks allocated to MPSMC by MoC through the government dispensation route.

Coal Insights, May 2013

Opinion also set up a washery and the clean and secondary product would be handed over to SAIL. (4) SAIL would set up a JV for power from the secondary product with the MDO. 80 percent of the power would be sold through a PPA to SAIL while the balance power would be sold on merchant basis as per regulatory norms with SAIL having first right of refusal. (5) The bidding process has been successfully concluded, with global and Indian players evincing strong interest.

Joint Venture Model

It can be seen from the above case studies that the PPP route has helped in fasttrack development of coal blocks through selection of financially sound and technically competent Joint Venture partners/MDO. These models have brought huge financial gains to the companies. On commencement of mining from these coal blocks, around 25 million tons of coal is expected to be produced annually. PPP vis-a-vis MDO

(3) The bidding parameter fixed here was a percentage over the royalty of grade D coal. (4) The bidding was a huge success with more than 232 bids sold and 152 bids submitted with global and Indian players joining in. (5) The successful bidder was the one who quoted the highest amount over the royalty of coal specified. (6) The successful bidder (H-1) will form a Joint Venture company (JV) with MPSMC holding 49 percent stake while MPSMC will hold 51 percent share, thus retaining its majority stake in the JV. The qualified bidder (JV partner) forms a special purpose vehicle (SPV) for mining and supply of coal to the JV. The JV partner has the first right of refusal of coal provided he sets up an end use plant in the state of Madhya Pradesh. MPSMC will earn facilitation fees based on royalty on per ton of extractable reserves. This would result in MPSMC earning profit before tax of around `850 crore annually for the mine life besides fast-tracking the development of the coal blocks.

48 Coal Insights, May 2013

CASELET 2: Steel Authority of India Limited (SAIL)

Coal Block: Tasra Model: MDO

SAIL is a Maharatna PSU and the leading steel maker in the country. (1) SAIL had earlier made three attempts for selection of mine developer and operator (MDO) for mining its Tasra coking coal block located in the Jharia coalfield. However, the company could not succeed as the block had inherent problems of Resettlement and Rehabilitation (R&R) and land acquisition. (2) The challenge was to develop a successful model for the development of the block which would not fail for the fourth time. It was felt that unless an incentive was given to the developer no financially sound party would participate. It was therefore decided that to make the model successful, incentive in the form of power generation from rejects would be offered to the MDO with majority stake in the Power JV with SAIL. (3) The scope of work of the MDO was to develop and mine coal on mining fees per ton of coal extracted. The MDO would

There is a common misconception that mining from coal blocks through PPP model and MDO route is similar. On the contrary, there is a vast difference between the two. While PPP is based on the principles of ownership and equal participation, the MDO would undertake mining of coal on a fixed cost per ton mining fees covering all activities of mine development till loading of coal in wagons, and is more a mode of private participation. At times, the scope of work of the MDO is enhanced to cover issues like preparation of mining plan, obtaining mining lease, obtaining forest and environment clearance, land acquisition, R&R etc. In other words, the MDO works like a contractor on a fixed mining fees and is penalised for shortfall in production. Thus there is very little incentive for the MDO since there is no ownership involved. On the other hand, PPPs should not be mistaken for privatisation but a contract that enables the government to retain majority control on the equity ownership (generally 51 percent share) in the Joint Venture company formed between the private and public sector. The PPP route thus creates a larger sense of commitment for the private partner since it owns a stake in the company. This results

Opinion

Model: MDO

in fast-track development of the coal block ensuring timely completion of all milestone activities leading to commercial production of coal. The PPP route is particularly effective for those government companies which are cash starved and do not have the financial strength to develop the coal blocks allocated to them through the government dispensation route. The PPP model if implemented judiciously can result in windfall gains for the state government mining and power companies since the private player is willing to offer upfront equity besides financial investments required for the development of the coal block. This can be seen from our caselet on MPSMC where Joint Venture partners have offered facilitation fees /upfront sweat equity besides financial investments to develop the coal blocks as Joint Venture partners. If the MDO route is to be implemented successfully, there must be some incentive for the MDO. As illustrated in the caselet on SAIL, the incentive offered was in the form of power development. Thus a large number of financially and technically strong bidders participated in the bidding process for the coal blocks allotted to these companies as they would work as MDO for mining of coal and also form a JV company for setting up

power plant and electricity generation on merchant basis as per the regulatory norms. Bottlenecks for implementation of PPP

The MoC vide its notification dated December 27, 2012 has amended the “Auction by Competitive Bidding of Coal Mines Rules, 2012”. In the Terms and Conditions of allocation of area containing coal for the purpose of mining and also for specified end use, it is clearly stipulated that the “Mining Lease shall be in the name of the allocate company and shall remain with a Government company and the formation of Joint Venture by such company with any private company shall not be permitted for development of areas containing coal allocated under these rules.” This in our opinion is a negative step by the government and detrimental to the development of the coal sector in India. On the contrary, Joint Venture participation should be encouraged so that the private sector can infuse its finances and technical strength to help the PSUs in speedy development of coal blocks. Conclusions

(a) PPP model and more private participation

is one of the key potential solutions to ramp up coal production in the country. This would facilitate large private sector investments in coal mining sector. However, it has to be implemented in its true spirit and must involve ownership. Then only can we expect to see the desired results from such a partnership. (b) The Government of India has in the 2013 Budget announced that it will allow private firms to mine coal along with Coal India Limited under PPP initiatives. However, if the ownership of identified mines including coal lies solely with CIL and the private operator is only paid a fees, then this violates the spirit of PPP where two entities work as partners with joint ownership. If not, then this is indeed a very positive initiative taken by the government and shows its seriousness to increase production of coal in the country. The implementation of PPP on a large scale will give a much needed fillip to the Indian coal sector.

The author is a Director at a’XYKno Capital Services Ltd. Note: The views expressed here are those of the author and not of Coal Insights. The publication does not take any responsibility for the article in part or in full.

Coal Insights, May 2013

CORPORATE

Shree Cement set to increase capacity to 20 mt by 2015

Coal Insights Bureau

hree Cement, a leading cement manufacturer based in Rajasthan, is set to increase its production capacity to 20 million tons per annum (mtpa) from the current level of 13 mtpa by 2015. Out of the total incremental capacity, four mtpa will be added at the company’s existing plant at Beawar in Rajasthan, a senior company official told Coal Insights. At the Beawar unit, he said, two mtpa capacity will be commissioned by July, 2013 while the remaining two mtpa will come up by March, 2014. Besides, a one mtpa grinding unit is coming up at Aurangabad in Bihar, which is likely to be commissioned by 2014. Construction of this plant is already in the process, the official said. Another greenfield project, with a capacity of two mtpa, in Raipur, is likely to be in place by March, 2015 construction of which is currently going on in full swing, he added. All the expansion projects are aimed at meeting the future demand growth in the Indian market. Asked to comment on the current scenario, the official said the market is currently witnessing weak demand conditions, but inputs costs have shot up. Although coal prices in the international markets have remained largely subdued,

50 Coal Insights, May 2013

diesel costs and railway freight charges have gone up significantly, thereby increasing the overall cost of production for industry players. Contracts for pet coke

Meanwhile, in a major departure from the existing trend, the company recently signed contracts with Reliance Industries Ltd (RIL) and Essar Oil Ltd (Essar) to procure petroleum coke (fuel grade) at a fixed price over the next six months, a source familiar with the development said. “While the duration of the contract with RIL is three months, starting May, and ending July, the duration of the contract with Essar is six months, starting April and ending in September,” the source said. “Each petroleum refiner will supply 350,000 tons of pet coke to Shree Cement during the agreed period,” the source said, adding, “This is the first time that a fixed price contract has been signed by the refineries with any consumer.” RIL had started despatches of pet coke from May 4 and it has, till date, despatched 15 rakes, while Essar has already despatched nine rakes in May, he said. The source, however, could not throw light on the price at which the contracts have been signed. According to information available, Shree Cement requires around 1.75 million tons (mt) of pet coke or 2.00 mt of high

Low demand for imported coal from Indian cement makers Demand from the cement sector in India for imported coal, particularly of South African material, is weak at present as no major industrial activity is taking place in the country, an official of a cement company told Coal Insights. “Sentiment is weak despite the recent announcement of a healthy index of industrial output (IIP) for March. Not a single industry in India is operating at 100 percent capacity utilisation and cement is not an exception. As such, there is low demand for imported coal from this industry,” the official said. “The cement industry, in most parts of the country, is operating at 70-90 percent capacity utilisation while those in south India are operating at 60 percent capacity because of excess capacity and low demand in that region,” he added. Asked whether the companies are looking at stocking imported coal for their monsoon consumption as a large number of ports face problem in coal handling during this period, the official said, “A number of cement companies are not looking to stock up the material in a big way as there is already sufficient stock lying at various Indian ports and they can buy as per requirements,” he added. calorific value (6900 Kcal NAR) steam coal annually. No to US steam coal

In a related development, Shree Cement has decided not to procure high calorific value and high sulphur steam coal from the US, at least, during the next 2-3 months. “The company initially planned to procure 0.5 mt of US steam coal and 0.5 mt of pet coke for delivery between May and January, 2014 but it has recently signed a contract to procure 0.7 mt of domestic pet coke and, as such, it will not buy steam coal,” the source said.

CORPORATE

SECL revised booking norms A may hit CPPs

CIL standalone net up 90% on dividend income Coal Insights Bureau

iding on dividend income paid by its subsidiaries, Coal India Ltd (CIL) reported a 90% jump in standalone net profit to `2,320.6 crore for the quarter ended March 31. The world’s largest coal producer had reported standalone net profit of ` 1,223.5 crore in the year-ago period. Its fourth quarter standalone net sales declined 21 percent to `121.9 crore, vis-avis `154.6 crore in the same period last year. CIL’s other income, largely dividends paid by the subsidiaries and interests earned on bank deposits during the quarter,

rose 71 percent to `2,679.6 crore, against ` 1,565.6 crore in the same period last year For 2012-13, the coal miner reported a rise of 21.4 percent in its standalone net profit at `9,794 crore, largely due to dividends paid by its subsidiaries. It had reported a net profit of `8,065 crore in 2011-12. However, the company’s expenditure at ` 726.6 crore overshot its net sales (at `352.3 crore) in a big way, largely due to rise in other expenses. Other income, which includes dividend payouts of subsidiaries, rose by a little over 21 percent to `11,088 crore in 2011-12.

Coal Insights Bureau

revision in the booking norms of South Eastern Coalfields is likely to especially impact captive power producers (CPPs). According to a circular issued by SECL, bookings may be allowed to the extent of 100 percent of entitlement in case of steel, fertiliser, defence, central public sector units and state agencies. Bookings may be allowed to the extent of ninety-five percent of entitled quantities in the case of existing power utilities as on March 31, 2009. In the case of all other sectors, (existing as well as new) uniformly, bookings may be restricted to eighty percent of their respective entitlements (indigenous components in case of fuel supply agreements through the LOA route). This eighty percent would be in terms of the overall entitlement quantities and not field-wise. For example, if a consumer is entitled to draw part quantities from the Korba-Rewa as well from the Korba-Raigarh fields, then an internal adjustment of fieldwise bookings may be done depending upon availability. Thus, within the overall ceiling of eighty percent and subject to original linkage restrictions, if any, the quantum of supplies pertaining to Korba-Rewa component may be up to hundred percent. Thus, the booking quantum of CPPs, which fall in the third category, stands reduced to eight percent from the previous hundred percent. In the case of rail-bourne consumers, for the purpose of formation of rakes, the existing procedures laid down in the FSAs for carrying over the fractional quantities of the concerned month to the next month till the formation of rakes and further fraction carrying over to the next quarter till the end of the year will be applicable as per the existing FSA norms. However, fractional quantities for carrying forward shall be reckoned only with reference to the reduced levels of percentage bookings applicable in respective categories and not with reference to the hundred percent entitled monthly quantities. Further, if any booking has already been allowed for the months of April-May, 2013 in excess of the respective ceilings as above, then the same shall be adjusted in May-June, 2013, the release further said.

Coal Insights, May 2013

CORPORATE

CIL disinvestment may go ahead despite unresolved issues Coal Insights Bureau

espite concerns over the payment dues from power utilities including NTPC and resistance from employees within the company, the department of disinvestment may go firm with its plans to disinvest another 10% in state owned CIL in the next few months. Divestment of a 10 percent government’s equity in CIL alone would help in meeting more than half of the `40,000 crore disinvestment target set by the government for the current financial year. Reacting on reports of the ongoing row between CIL and NTPC casting a shadow over CIL’s divestment plans, official sources said these are routine issues, which are already being dealt but that does not mean

that the government’s disinvestment plans be changed. Both CIL and the coal ministry have flagged reservations about a stake sale in the company till issues like `9,000 crore dues owed by electricity utilities are resolved. An Inter-ministerial Group, earlier this month, already approved a 10 percent equity sale in the coal PSU which is expected to fetch close to `20,000 crore to the government. The government, at present holds a 90 percent stake in CIL. Coal Ministry reservations

Coal ministry has reservations about stake sale till issues, like `9,000- crore dues owed by electricity utilities, are resolved. Coal Ministry in a letter to the

Department of Disinvestment (DoD) has said that going ahead with the stake sale process in Coal India (CIL) is not advisable till power utilities including NTPC clear its dues and labour issues are resolved, official sources said. The letter was sent to the DoD which had sought Coal Ministry's views on further 10 percent divestment of government's share in the world's largest coal miner. Power utilities, including NTPC and DVC, owe a huge amount of about `9,000 crore to CIL and the Coal Ministry has already asked Power Ministry to ensure steps for payment of dues, including about `3,000 crore by NTPC, to CIL. Both Coal India and NTPC had locked horns over the issue as the power producer had refused to honour about `1,000 crore bills of CIL subsidiary Eastern Coalfields (ECL) saying that the quality of fuel supplied was inferior. Coal Secretary S K Srivastava in a letter to Power Secretary P Uma Shankar has said the disputes should be settled within the ambit of fuel supply agreement (FSA). Sources said the Ministry has said further divestment was not advisable at this juncture as employee unions are against it.

Siemens supplies drive system for cement mill Coal Insights Bureau

iemens’ Drive Technologies division has developed a new drive system for a cement mill as part of a joint project with Gebr. Pfeiffer SE, a company with a long tradition in the manufacture of processing systems for the cement, lime, gypsum and ceramics industries. Siemens will supply six drive modules. With an overall power rating of 11,500 kW and producing 450 metric tons of cement per hour, the vertical mill is the most powerful of its kind in the world today. The mill will be operated by Brazilian cement producer Holcim, which will commission the plant as part of a project to expand the capacity of its Barroso works in the Brazilian state of Minas Gerais. The multi-drive solution meets the demands of the cement industry for more availability, reliability and performance

52 Coal Insights, May 2013

power. The modular and redundant drive system consists of six identical 1,920 kW drive modules that drive the grinding table of the cement mill. Siemens is also supplying all components of the drive train -- gear unit, coupling and oil supply system, as well as electric motors and frequency converters. An advantage of this concept is that the drive units are mounted on carriages, thus, enabling them to be replaced quickly whenever maintenance is required and ensuring the fastest possible resumption of mill operation, according to a statement issued by the company. The radial arrangement of the drive units around the grinding table bearings protects the drives against grinding forces. The frequency converter allows variable speed adjustment and thus flexible adaptation of the milling process to suit the requirements of different input materials. This makes it

possible to optimise for example, throughput or energy efficiency. With this system configuration, even higher-output drive modules can be installed for an overall power rating of up to 16,500 kW. Up till now, the mechanical engineering limit attainable by conventional plants was only 8,000 kW. “The multi-drive solution developed by Siemens is another example of how we can offer significant benefits to our customers by combining innovative mechanical drive components with suitable electronic drive systems to create an integrated drive system. Thanks to the modular design of the drive train, a system can deliver previously unattainable performance ratings and offer significantly more energy efficiency and availability,” said Dr Bernhard Hoffmann, head of drive applications at Siemens’ mechanical drives business unit.

Government

Coal Controller gives facelift to Coal Directory

India’s coal import bill nearly doubles in 2011-12 India’s coal import bill ballooned to `78,837.58 crore in FY12 to 102.85 million tons against 68.92 mt, valued at `41,549.58 crore recorded in the previous fiscal, according to the Coal Directory published by the office of Coal Controller. This shows an increase of a whopping 49 percent in volumes and 90 percent in value terms year-on-year. Import of coal in 2011-12 Type of coal

Madhumita Mookerji

he Coal Controller, which publishes the Coal Directory every year, has reorganised its introductory sections this year, as a means to providing the reader with a better sequence of the compiled data. For instance, right after the “contents”, the reader is taken to the “Historical Perspective” segment which in earlier editions used to be tucked away in the inside pages, in Section I, after the “Introduction” and “Categorisation of Coal & Coke” segments. Speaking to Coal Insights, A K Verma, deputy director general in the Coal Controller’s Organisation, said: “We made a few changes to the Coal Directory this year to make it even more relevant for the reader.” During 2011-12, additional data on fixed assets, plants and machineries, work-force, etc, have been collected under the initiative of Verma and we may expect another publication, say, Coal Directory 2011-12 Part-II, on these aspects very soon. In the Coal Directory 2011-12, for the first time, concepts, definitions and procedures have been properly explained. Moreover, unlike in earlier publications, this year an attempt to present basic facts, chapter-wise has also been made. It is learnt that the statistical unit is not properly equipped in terms of manpower and other infrastructure support and, as such, various recommendations of the

National Statistical Commission are yet to be implemented. For example, a comprehensive report on coal washeries is still awaited. Input-output analyses, which were attempted long back, have not been included in the recent past. The Ministry of Coal, which is preoccupied with other priorities, needs to pay more attention to the development of its statistical system for better monitoring and planning, feel industry sources. The publication is based on audited data received from various Indian coal companies, export-import data received from the Directorate General of Commercial Intelligence and Statistics (DGCI&S), world coal data received from the International Energy Agency (IEA) and World Energy Council (WEC). The directory also includes data on coal reserves received from the Geological Survey of India (GSI), information on production of electricity, including generation received from coal- based thermal power plants from the Central Electricity Authority, etc. For collection of data from Indian coal companies, a special form, called the Annual Survey of Coal & Lignite, is used. The Coal Directory’s Historical Perspective provides an overview of the commodity’s ascendance in the Indian context. Few, perhaps, know that commercial use of coal started around 2,000 years ago, or

Quantity (mt)

Value (in `crore)

Coking

31.80

42,469.23

Non-coking

71.05

36,368.35

Total

102.85

78,837.55

that coal mining in India received a thrust with the setting up, in 1853, of the rail link between Howrah and Ranigunge. Or, even that the Nizam of Hyderabad had bought the majority of shares in Singareni Collieries Company Limited (SCCL) in 1945 to bring the company under the aegis of the State of Hyderabad. The Coal Directory explores the sector at length, takes in a backgrounder on the nationalisation of coal mines, gives a lowdown on captive coal mining, distribution and marketing and clearly outlines concepts, definitions and practices undertaken in the coal trade. The Coal Controller’s Organisation has been carrying out this mammoth task of collecting and disseminating data related to coal and lignite to meet the information requirements of the ministry of coal, related ministries, government organisations, research bodies etc for several years now. Spread over 11 sections and basically a statistical product, the Coal Directory provides relevant data on a wide range of issues related to coal statistics such as production, off-take, reserves, export and import, mine statistics, captive coal Blocks, world coal statistics, etc.

Coal Insights, May 2013

International

US coal consumption expected to rise 7.3% in 2013 Chandrika Mitra

S coal consumption, which fell in 2012, is estimated to increase by 7.3 percent to 955.4 million short tons (MMst) in 2013, as consumption in the electric power sector increases due to higher electricity demand and higher natural gas prices, according to the latest report by US Energy Information Administration (EIA). Coal consumption in the electric power sector in 2013 and 2014 is expected to be 890.9 MMst and 906.8 MMst, respectively. Coal consumption may further rise by a modest 2.2 percent to 976.2 MMst in 2014, which is much higher than that estimated last month. As estimated by EIA, coal production in the US is expected to increase by 1 percent in 2013 to 1,026.9 MMst as compared to 2012 as inventory draws, combined with an increase in coal imports, meet most of the growth in consumption. However, coal production is forecast to grow in 2014 by 3.5 percent to 1,063.2 MMst, as compared to 2012 and 2013 as inventories stabilize in the face of increasing consumption. Production might further diminish by the projected decline in exports from 126 MMst in 2012 to 105 MMst in 2013 and 106 MMst in 2014 with continuing economic weakness in Europe which the largest regional importer of US coal. Other factors such as falling international coal

54 Coal Insights, May 2013

prices, and increasing production in other coal-exporting countries are the primary reasons for the expected decline in US coal exports. Coal trade

EIA expects coal exports to decline to 105.1 MMst in 2013 in its May report from 106.7 MMst in recorded in its previous report. The current report also estimates 2014 coal exports in 2014 at 106.3 MMst which is lower than 109.8 of coal exports MMst recorded in its April report. US coal exports, which had been steadily growing since 2009 on an annual basis, were down 1.3 MMst compared with the same period in 2012. US coal imports may stand at 10.1 MMst in 2013 from 11 MMst reported last month and to 10.8 MMst in 2014, as per the agency’s latest report. Coal prices

Delivered coal prices to the electric power i n d u s t r y increased steadily over a 12-year period through 2012, when the delivered coal price averaged $2.40 per MMBtu. EIA forecasts average delivered coal prices of $2.40

per MMBtu in 2013 and $2.44 per MMBtu in 2014. Electricity

EIA projects US residential and commercial electricity sales during 2013 and 2014 are about 0.5 percent higher than in last month’s report as projected US cooling degree days for 2013 and 2014 are 3.9 percent and 3.6 percent higher, respectively, compared with last month’s forecast. For the entire year, US residential electricity sales increase by 1.1 percent to 3.80 billion kilowatthours per day during 2013 and by 0.5 percent to 3.82 billion kilowatthours per day in 2014. US retail electricity sales to the commercial sector increase to 3.67 billion kilowatthours per day in 2013 and to 3.71 billion kilowatthours per day in 2014. Industrial electricity sales

increase to 2.72 billion kilowatthours per day and 1.2 percent to 2.75 billion kilowatthours per day in 2013 and 2014, respectively. EIA expects total US electricity generation will grow by 1.4 percent in 2013 and by 1.0 percent in 2014. The increasing cost of natural gas relative to coal contributes to higher levels of electricity generation from coal and due to this generators are running their existing coal capacity at higher rates so far this year compared with the same months in 2012. This trend is expected to continue, leading to an 8.7 percent increase in US electricity generation from coal during 2013. The share of total generation fueled by coal is forecast to increase from 37.4 percent in 2012 to 40.1 percent in 2013. After an increase of 1.4 percent during 2012, EIA expects US retail residential electricity prices will grow by 2.6 percent in 2013 and by 2.3 percent in 2014.

International

China mulls ban on low CV coal, market unfazed so far

Coal import by China from RBCT (in tons) Months January

2013 310,651

316,365

February

1,394,225

964,421

March

1,592,609

1,251,086

792,517

814,535

April May

1,350,027

June

1,730,684

July

2,108,058

August

895,239

September

656,361

October

783,087

November

963,665

December

Coal Insights Bureau

n a bid to curb the growing carbon emission menace, the Chinese authorities have reportedly proposed to ban import of low calorific value (CV) coal into the country. While there was little confirmation from the Chinese authorities, the market was abuzz with speculations over the likely impact of such a drastic move. According to information available from market sources, China may soon impose ban on import of thermal coal below the calorific value of 4,500 kcal/kg (NAR) and also coal with high sulphur and ash content. While this sudden proposal took the coal community by surprise, it was generally surmised that if implemented, the move will lead to a shake-up in the international market. However, in the absence of an official confirmation, the prices of coal remained flat without showing any indication of a major movement. Market sources said that chances of implementation of the decision could be high because the Chinese cities were chocked with high pollution levels. According to a study by Discovery, seven of the world’s top 10 polluted cities are in China. Coal-fired power generation is held as the primary cause of the deteriorating air quality in Chinese cities.

About the impact of the Chinese move, market sources said it is expected to impact the international coal market in two ways. While the demand and hence price of low CV coal would be hit, that of higher grade coal may see an opposite impact. Asked about his view on Chinese development, an official of a leading coal miner of South Africa and Australia told Coal Insights, “We are right now unclear on this. If changes are made a significant market impact will be felt favouring higher CV products. However, nobody has clear sight of how this will or will not develop.” An Indian trader said, it is expected that if the decision ultimately materialises, the prices of Indonesian coal, which had been ruling firm over the past 5-6 months on various grounds, will soften sharply. On the other hand the prices of standard South African and Australian steam coal, particularly 5500 Kcal are likely to firm up which in turn will impact prices of standard material, he added. However, in absence of demand from China, if the proposed ban indeed comes, Indian power generators stand to immensely benefit because they would be the sole buyers left to procure such low grade coal from Indonesia, they said.

2012

1,086,800

Total (Jan-April)

4,090,002

3,346,407

Total

4,090,002

12,920,328

It was initially reported on May 14 in a section of media that China is contemplating a ban on import of low CV coal to lower its emission levels and also to support their domestic miners facing a difficult situation following a decline in domestic coal prices. Imports from SA fall 50.24% in April

Meanwhile, China’s total coal import from Richards Bay Coal Terminal (RBCT) of South Africa fell 50.24 percent in April 2013 as compared to the quantity imported in March, according to data available with Coal Insights. Total coal import by China from RBCT during April 2013 stood at 792,517 tons whereas 1,592,609 tons were imported during March 2013. The imports in April 2013 were also down 2.7 percent as compared to 814,535 tons imported in April 2012. With this, China’s coal import from South Africa stood at 4,090,002 tons in the first four months (January-April) of 2013, up 22.22 percent compared with 3,346,407 tons imported in the corresponding period of 2012. China’s coal imports from South Africa stood at 12.92 mt in 2012, down from 13.20 mt in 2011. The imports were down 3.66 percent at 13.69 mt in 2012-13 (AprilMarch) from 14.21 mt in 2011-12.

Coal Insights, May 2013

EXPERT SPEAK

CIL should consider setting up its own freight corridor J.P. Panda

oal India Limited (CIL) should resolve its coal evacuation problem by building its own rail network, rather than depending on Indian Railways (IR). CIL has created a war chest of `30,000 crore for development of coal blocks and infrastructure outside India. It may explore plans of investing around `5,000 crore within the country in developing rail infrastructure in coal blocks spread over Ib Valley, Talcher (Mahanadi Coalfields), Singrauli (Northern Coalfields), Korba and Mand-Raigarh (South Eastern Coalfields) and the North Karanpura region of Central Coalfields. According to the CIL chairman, S. Narsing Rao, the coal behemoth is facing three major constraints to raise its coal output: yy Restrictions imposed by regulators related to forest clearance and environmental safeguards; yy Logistical constraints, including rail transport bottlenecks; and yy Land acquisition. In the March 2013 issue of Coal Insights, I had suggested methods to expedite environmental and forest clearances. Where logistical constraints are concerned, including rail transport bottlenecks, the CIL chairman said these are the biggest hindrances to improving production. Rao was recently quoted as saying that the Railways’ failure to provide connectivity to mines even after receiving `300 crore from Coal India is causing an annual production loss of 100 million tons of coal. He said, ”My plans are ready, clearances are there, projects are ready, but I have no rail connectivity to transport.” Production losses

56 Coal Insights, May 2013

resulting from the lack of railway connectivity is equivalent to about one-fourth of CIL’s total annual output. N. Kumar, Coal India’s director, technical, speaking at Coal Summit, 2012, said a significant proportion of the company’s production in the future will come from six coalfields, namely IB Valley & Talcher (Mahanadi Coalfields), Singrauli (Northern Coalfields), Korba and MandRaigarh (South Eastern Coalfields) and North Karanpura (Central Coalfields). However, evacuation facilities at these coalfields are not optimal and will, consequently, restrict the ability of CIL to supply to consumers to an extent. The projects linked to laying of new rail tracks for evacuation have not achieved their desired progress levels in the last few years and are thus likely to put constraints on production and despatch of coal from key coalfields like North Karanpura (CCL),

Ib Valley and Talcher (MCL) and MandRaigarh (SECL). CIL’s production data over the last four years reveals stagnation, with production levels hovering at around 430-435 million tons per annum (mtpa) in 2009-10, 2010-11 and 2011-12. Only in 2012-13, did output levels inch up marginally to 452 mt but these were still below targeted levels. So, what ails the biggest coal company in the world? Why has it practically stagnated for the last four years? Has it done enough to achieve its planned production volumes? If yes, why has it failed to achieve its targeted output levels? In my opinion, it could be that CIL’s past performance created a sense of complacency. The objective of Coal India, in its vision document 2025, is “to promote the development and utilisation of coal reserves in the country for meeting the present and likely future requirements of the nation, with due regard towards the need for conservation of non-renewable resources and safety of mine workers.” Instead of trying to meet the present and future coal requirements of the nation as per its vision document, the largest Maharatna PSU seems to be grappling for answers to its subdued growth trend. Surprisingly, CIL had been sitting on cash reserves of `65,000 crore up to last year and, this year, the same could be upwards of `75,000 crore. The need is to invest these cash reserves into future projects rather than just holding on to them. Indeed, the government has said it could look at infrastructure as an investment area. In response, CIL allotted `30,000 crore for development of mines overseas with the purpose of developing coal mining and infrastructure in other countries. What begs the question is, if CIL is prepared to invest `30,000 crore overseas, why should it not adopt a similar approach within India, a country which has nearly 290 billion tons of reserves, for infrastructure development? Why are we generating employment opportunities for foreigners in their countries instead of doing the same for Indian citizens? The CIL chairman recently said, because of poor infrastructure in the coalfields of Talcher, North Karanpura, Ib Valley and the Mand-Raigarh block, CIL is losing 100 mt of production annually.

EXPERT SPEAK If there does not seem to be any shortage of funds, why does CIL not build its own infrastructure for evacuating coal in the absence of such moves from Indian Railways? If CIL builds a railway system in Mozambique for coal evacuation, surely, it can do the same in India. Therefore, the logic that infrastructure is the biggest bottleneck, somehow, does not seem to hold water. The Railways are widely regarded as slow-moving. Yet, CIL has said since it has paid money to the Railways, it is the latter’s duty to provide connectivity to it. Most of the Railways’ coalfield projects are moving at a snail’s pace. On the other hand, take the case of Dhamra Port. It constructed its own railway network to the port, which is located 65 km from the nearest station, in just two years. Surely, CIL can work along similar lines. Recently, the Railways released some models for development of rail infrastructure through private and public sector participation. The summary of all the railway models circulated by the Railway Board on December 10, 2012 is as follows: Non-government railway model

♦♦ It envisages financial participation of the project proponent in the development and creation of rail infrastructure for providing first- and last-mile connectivity under an agreement with the ministry of railways (MoR) either on its own or through a joint venture with an infrastructure financing and development institution; ♦♦ Funds will be fully mobilised by the project proponent without any railway participation; ♦♦ Land to be acquired by the project proponent; ♦♦ The railway land used for connectivity shall be made available by railways on lease/licence; ♦♦ Indian Railways (IR) will provide rolling stock and locomotives on a chargeable basis; ♦♦ Freight, as applicable, shall be collected by IR which will pay user fees for the usage of infrastructure; and

♦♦ The non-governmental agency shall pay for essential operations while commercial staff will operate the lines. Joint venture (JV) model

♦♦ This is generally applicable to bankable new line and guage conversion projects in mines, ports etc; ♦♦ Project development will be done by IR or its PSU through consulting firms; ♦♦ Land acquisition will be done either by Indian Railways at the joint venture’s cost or by the JV itself as mutually decided upon; ♦♦ Railway land used will be charged a token rent of `1 per annum; ♦♦ IR or the railway PSU will hold a minimum 26 percent share; ♦♦ Revenues shall be collected by Indian Railways; ♦♦ Project construction and maintenance shall be done by the JV/IR; and ♦♦ Operation will be IR’s responsibility. Build-own-transfer (BOT) model

♦♦ Applicable to sanctioned railway projects and rail corridors; ♦♦ Concessionaire to be selected through the competitive bidding route; ♦♦ The concessionaire shall design build and maintain the project/corridor; ♦♦ Handover to IR at the end of the concession period, which is a minimum of 25 years; ♦♦ Land acquisition will be done by the Railways; ♦♦ Revenue shall be shared as per agreement; ♦♦ Maintenance will be done by concessionaire; and ♦♦ Train operations to be the responsibility of Indian Railways. Capacity augmentation model (doubling of line etc) - funding by customer

♦♦ Doubling/trebling lines where customers benefit and are, therefore, interested in funding, with an eye on expeditious project completion;

Capacity augmentation (annuity model)

model

♦♦ Applied in cases of doubling and trebling of lines, and when no specific user is interested; ♦♦ The concessionaire would be paid through annuity for a limited predetermined period and on a committed basis; State government model

♦♦ Applicable in cases where a state government is interested in developing a rail project in its own state -- it can participate especially through the joint venture route, ie, the second of the six models formulated by IR. Coal India should take advantage of these models. To my mind, CIL can opt for one or more of these prototypes and build its own infrastructure. Conclusion

Coal Indian can set up infrastructure within India at lesser funding against the `30,000 crore it has earmarked for injecting overseas. The rail infrastructure of North Karanpura, Ib Valley, Talcher and MandRaigarh coalfields will hardly require `5,000 crore and increase production of CIL to 700 mtpa from the present level of 450 mtpa. It will also create employment opportunities within India and the country will not have to import coal worth `60,000 crore (200 mt at `3,000 per ton) every year. The author is managing director of Priya Mining Consultancy and Services Ltd, which provides consultancy on both underground and opencast coal mines, including EMP-EIA, forest clearance etc. The company has also produced CDs on a wide variety of subjects including all DGMS circulars from 1957 till December 2010, a history of disasters in coal mines for the last 100 years and safety and productivity improvement in both opencast and underground mining. He is presently senior advisor at the Rampia Coal Mine project of Rampia Coal Mines and Energy Pvt Ltd. The author can be contacted at jppanda2003@yahoo.com

♦♦ Operation and maintenance by IR; and ♦♦ Railways shall pay a freight rebate of seven percent plus interest on the capital till full recovery of costs.

Note: The views expressed here are those of the author and not of Coal Insights. The publication does not take any responsibility for the article in part or in full.

Coal Insights, May 2013

logistics

Golden Quadrilateral project nearing completion Sanjukta Ganguly

he Golden Quadrilateral (GQ), the governmentâ&#x20AC;&#x2122;s dream national highway project which will connect the four metros -- Delhi, Mumbai, Chennai and Kolkata - is almost in the final stages of completion, fourteen years after its launch and despite facing a number of roadblocks that led to its delay in completion. Road transport minister C P Joshi had announced at Auto Expo 2012, that the 5,846 km, four-lane highway was complete but, in reality, the ambitious project is around 99.99 percent complete, with at least a road length of 118 metres and some bridges yet to be build. Delay due to land acquisition, forest clearance

According to information available with Coal Insights, the initial scheduled completion date for GQ was December 2003. But, the project got delayed due to unavoidable problems in acquiring land, arranging funds and awarding contracts. There was no cost overrun, though. The project cost stood at Rs 32,492 crore, slightly less than the Rs 34,300 crore estimated in 2005. According to media reports, Gammon India, which was awarded deals in four of the seven stretches marked â&#x20AC;&#x153;under implementationâ&#x20AC;?, said that in all the projects, the main four-lanes have been completed and are open to traffic, while admitting that some service roads are still under construction. According to ministry sources, projects have been delayed mainly due to problems associated with land acquisition, shifting of utilities, deferred environment and forest clearances and approvals for road over-bridges, poor performance of some contractors due to cash flow constraints and law and order issues in some states. In fact, the golden quadrilateral project which provided abundant opportunities

58 Coal Insights, May 2013

for public-private partnerships (PPPs) in building infrastructure in the country, has also been projected by the government as an example of Indian highways attaining global standards while giving a boost to the local economies around it. Media reports also indicate that, by the time Manmohan Singh completed ten

months in office as the Prime Minister, around 80 percent of the stretches were done. But things slowed down in recent years and, for around seven years, the final five percent has been barely inching ahead. Highway users complain that several stretches of the four-lane stretch are suddenly turning into two-or three-lane diversions due to ongoing work, leading to accidents in many cases. According to information available with Coal Insights, about 30 metres of construction activity has remained incomplete on the Balasore-Bhadrak stretch in Odisha. While four-laning of the road is complete, Indian Railways is supposed to expand the level crossing from a two-lane to a four-lane one as this is leading to traffic congestion.

National Highways Development Project

logistics NHDP NS - EW Phase I & II

GQ Total Length (Km.) Already 4/6Laned (Km.)

5,846 5,846 100.00%

NHDP Phase III

NHDP NHDP Phase IV Phase V

NH-34

Others

Total by NHAI

12,109

14,799

6,500

700 47,096

380

388

5.5

1390

49,260

6,134

5,296

172

1,462

21 18,931

372

1066

20,468

20 12,328

Under Implementation (Km.)

636

5,128

3,956

2,588

372

1,685

10,671

2,420

Balance length for award

Port NHDP Connectivity SARDP -NE Total

7,142

Contracts Under Implementation (No.) (Km.)

NHDP Phase VII

5.5

305

12690

211

220

659 15,807

276

16,103

Source: NHAI

In the second stretch in Odisha, work on a rail under-bridge along an 88-metre stretch was stuck as NHAI did not get the requisite permission. However, the go-ahead was received in February and work too is in progress, sources said. The National Highways Authority of India (NHAI) was set up with a vision to meet the nation’s need for the provision and maintenance of a national highways network of global standards and to meet users’ expectations in the most time-bound and cost-effective manner, within the strategic policy framework set by the Government of India and thus promote economic well-being and quality of life of the peoples.

started facilitating better movement of traffic, allowing people more options in terms of locations for initiating industrial activity as well as scopes to reduce wastage of agricultural produce, vehicle operating costs and time. Thus, industry, at large, already seems to be reaping the benefits of GQ. “Better quality roads can carry more loads. So, instead of pygmy trucks (up to 10 tons of capacity), transporters can use multiaxle ones. This reduces overall costs as they can transport more goods at a marginally higher cost,” an industry insider told Coal Insights. “Also, the fleet goes through less wear and tear,” he added. NHDP in progress

Industry reaping benefits

The golden quadrilateral project has already

According to NHAI sources, in addition to GQ, the National Highways Development

Project is also being implemented in all phases except phase VI currently. The project’s present phases are under way with a mission to improve more than 49,260 km of arterial routes of the National Highway network to international standards. In fact, the NS (North-South) Corridor connects Srinagar to Kanyakumari and EW (East-West) Corridor connects Porbandar to Silchar. Once in place, these projects are expected to immensely benefit the business scenario of the country. Hence, amidst the gloomy economic situation prevailing in the country at present, near completion of these projects is definitely providing a ray of hope. Following are the details of National Highways Development Project - Phase V Status as on March 31, 2013:

Applications for the post of Advisory Industry Expert mjunction services limited, a joint venture of Tata Steel and Steel Authority of India limited invites applications for the post of advisory industry experts for its following categories (a) MRO (b) Ferro Alloys (c) Logistics (d) Steel (e) Refractory (f) Coal (g) Projects Procurement professionals with relevant experience of more than 20 years in above categories in large manufacturing organizations may send their CVs along with at least 2 detailed case studies evidencing their expertise in their respective domain within 15th July 2013. Candidates should have extensive hands-on purchasing experience in sourcing new suppliers both domestic & overseas, preparing best in class RFQs and estimating market prices with excellent communication & analytical skills. Adequate working knowledge of MS Word, Excel & Powerpoint is mandatory. Candidates should essentially possess adequate competence to generate cost-build up models, price analysis, cost analysis and to design innovative sourcing strategies with commitment of tangible savings to clients with respect to above mentioned procurement categories. Compensation package would be competitive and would have components of Fixed and Success Based Pay. Send your CVs to paromita.sen@mjunction.in, mjunction services limited, Godrej Waterside, 3rd flr, Block DP, Sec V, Salt Lake, Kolkata 700091

Coal Insights, May 2013

logistics Annexure: List of major completed projects on Golden Quadrilateral stretches as on March 31, 2013

Sl. No.

Stretch

NH No

Length (Km)

Funded By

Contractor & Nationality

Delhi to Mumbai on NH 8,76 and 79 1

Manor - Baseeim- Creek Section

Mangalwar - Udaipur (KU-VI)

Udaipur - Kesariaji (UG-I)

Bhilwara Bypass - Chittorgarh (KU-IV)

58 MORTH

Maharashtra PWD-

58.175 NHAI

Sadbhav Engg. Ltd.- Prakash (JV)-Indian

62 NHAI

KMC Construction Ltd.-Indian

66 NHAI

B. Seenaiah & Co. (Projects) Ltd.-Indian

Vadodara - Surat

152 MORTH

Gujarat PWD-

Surat (Chalthan) - Atul

79.6 ADB

SKEC - Dodsal-Korean - Indian JV

Mahapura (near Jaipur) - Kishangarh (6 Lane)

90.38 BOT

Gurgaon - Kotputli

126 ADB

Kotputli - Amer

86 ADB

Consortium of GVK International-BSCPL-Indian BSC - RBM - PATI (JV)-Indian - Malaysian JV MOSRTH-

Mumbai to Chennai on NH 4,7 and 46 32

Satara - Kagal

Mumbai Pune Expressway

133 BOT

Chitradurga - Sira

66.7 ADB

UEM - ESSAR (JV)-Malaysian - Indian JV

Hubli - Haveri

64.5 NHAI

Afcon Infrastructure Ltd. - Apil (JV)-Indian

Belgaum - Dharwad

62 NHAI

Sunway Construction Ltd. - Berhad & R N Shetty & Co.-Malaysian - Indian JV

Maharastra Border-Belgaum

77 Annuity

North Karnataka Expressway Pvt. Ltd. (Consortium of IL & FS Punj Lloyd - CTNL)-Indian

Kharagpur - Laxmanath (WB-IV)

80 MSRDC

MSRDC Ltd. Mumbai-Indian MSRDC-

Chennai to Kolkata on NH 5,6 and 60 60

65.86 NHAI

B. Seenaiah & Co. (Projects) Ltd.-Indian Hindustan Construction Company Ltd.-Indian

Kolaghat - Kharagpur (WB-II)

60.45 NHAI

Palasa - Srikakulam (AP-2)

74 NHAI

Ankapalli - Tuni

Chilkaluripet - Ongole (AP-13)

66 NHAI

IJM - Gayatri-Malaysian - Indian JV

Ongole - Kavali (AP-12)

72 NHAI

HO - HUP - Simplex (JV)-Malaysian - Indian JV

Eluru-Vijayawada Package V

72 ADB

Gowthami - Gundugolanu (AP-18)

81.08 NHAI

58.947 Annuity

SPCL - IVRCL-Indian GMR-Tuni-Ankapalli Express Ltd.-Indian - Malaysian JV

Madhucon Projects Ltd. - Binapuri (JV)-Indian - Malaysian JV LIMAK - SOMA (JV)-Turkish - Indian JV

Bhadrak - Chandikhole (OR-II)

75.5 NHAI

Nellore - Tada (AP-7)

110.517 BOT

Larsen & Toubro Ltd.-Indian

Fatehpur - Khaga (TNHP/II-C)

77 WB

Centrodorstroy Russia-Russian

Sikandara-Bhaunti (TNHP/II-A)

62 WB

IT Thai & Som Dutt Builders India (JV)-Thailand - Indian JV

Etawah - Rajpur (GTRIP/I-C)

72.825 WB

CIDBI Malaysia-Malaysian

Kolkata to Delhi on NH 2

101

Gorhar - Barwa Adda (TNHP/V-C)

78.75 WB

105

Palsit - Dankuni

65 Annuity

PATI - BEL (JV)-Malaysian - Indian JV Progressive Construction Ltd.- Sunway Berhad (JV)-Indian Malaysian JV Consortium of Gomuda (Malaysia) & WCT Engineering (Malaysia)-Malaysian

106

Panagarh - Palsit

64.457 Annuity

109

Delhi-Mathura

145 ADB

113

Barachatti - Gorhar (GTRIP/V-B)

80 WB

Larsen & Toubro Ltd. - Hindustan Construction Company Ltd. (JV)-Indian

114

Aurangabad - Barachatti (TNHP/V-A)

60 WB

Oriental Structural Engineers Pvt. Ltd.- Gammon India Ltd. (JV)Indian

116

Shikohabad-Etawah (GTRIP/I-B)

59.02 WB

117

Varanasi - Mohania (GTRIP/IV-A)

76 WB

Progressive Construction Ltd.- Sunway Berhad (JV)-Indian Malaysian JV

118

Handia - Varanasi (TNHP/III-C)

72 WB

Centrodorstroy Russia-Russian

60 Coal Insights, May 2013

Gamuda Malaysia - WCT Malaysia-Malaysian MOSRTH through Haryana & UP PWD (IRCON)-

Progressive Construction Ltd.-Indian

logistics

Traffic handling by major ports down 6.2% in April Coal Insights Bureau

he 12 major Indian ports have handled 43.50 million tons (mt) of traffic during April of 2012-13, about 6.21 percent lower than 46.38 mt recorded during the same period last year. According to data released by the Indian Ports Association (IPA), the country’s major ports handled a total of 3.03 mt of coking coal in April period, up 25.28 percent as compared with the same period last year. Movement of thermal coal through the major ports was up 26.13 percent to 5.67 mt during April, compared to 4.50 mt achieved in the same period last year. Movement of iron ore through the major ports showed a significant drop of 62.25

percent in April due to restrictions on mining and hike in export duty on iron ore. The major ports together handled 1.93 mt of Traffic handled at major ports iron ore in the April (During April, 2013* vis-a-vis April, 2012) period, compared to (*) Tentative (in '000 tons) 5.12 mt handled in April traffic the same period last % variation against Ports prev. year traffic year. 2013* 2012 Vishakhapatnam Kolkata Dock System 863 898 -3.90 port handled the Haldia Dock Complex 2072 2202 -5.90` highest volume of 989,000 tons of iron Total: Kolkata 2935 3100 -5.32 ore in April. This Paradip 5816 4075 42.72 volume, however, was about 5.55 percent Visakhapatnam 4683 4958 -5.55 lower than the iron Ennore 1947 1371 42.01 ore traffic moved Chennai 4266 4296 -0.72 through the port in the same period last V.O. Chidambaranar 1934 2430 -20.41 year. Cochin 1562 1406 11.10 Movement of New Mangalore 3282 2931 11.98 container traffic in terms of tonnage Mormugao 908 3986 -77.22 and TEUs fell in the Mumbai 3852 5533 -30.38 April. The major ports handled 9.20 JNPT 5191 5533 -6.18 mt of tonnage and Kandla 7125 6760 5.40 9.93 million TEUs Total 43501 46380 -6.21 in April compared to 9.93 mt of tonnage Source: IPA

and 6.39 million TEUs in the same period last year. Among the major ports, Paradip port had the distinction of handling the highest volume of thermal coal of around 2.16 mt in April. Visakhapatnam port handled the highest quantity of 8.28 mt of coking coal during the period. Movement of coking coal through Kolkata, Paradip, Visakhapatnam, Ennore and Mormugao ports increased during the period when compared to the corresponding period last year. Seven major ports showed negative growth in traffic handling during the April, while the remaining five showed positive growth on a year-on-year basis. In terms of growth, Paradip port topped the list with 42.72 percent increase in cargo throughput. Kandla port’s growth was lowest at about 5.40 percent during the period. In terms of traffic volume, Kandla port clinched the top rank with a cargo volume of 7.12 mt recorded for the period. The Mormugao port registered the highest decline of 77.22 percent in traffic handling during the period due to a fall in iron ore export.

Coal Insights, May 2013

logistics

Railways coal handling falls 11.9% in April m-o-m Compared to last year, transportation of coal in April 2013 was up 2.63 mt from 40.33 mt transported in April 2012. In fact, the Railways’ revenues from coal transportation surged 7.98 percent to ` 3,420.74 crore in April 2013 compared to ` 3,167.82 crore in the same month last year. Overall, the Railways’ revenue earnings from commodity-wise freight traffic rose year-on-year in April, to ` 7,477.3 crore, up 8.26 percent compared to ` 6,906.83 crore

Coal Insights Bureau

ndian Railways (IR) transported 42.96 million tons (mt) of coal in April 2013, down 11.95 percent from 48.79 mt in March 2013, according to information available with Coal Insights. Revenue earnings of Indian Railways from transportation of coal fell to ` 3,420.74 crore in April 2013 from ` 3,608.30 crore in March 2013.

Commodity-wise revenue Commodity

Quantity (in mt) April’12

Earning (in ` cr)

April ‘13

April ‘12

April ‘13

Coal i) for steel plants

4.2

3.94

251.53

242.86

ii) for washeries

0.09

0.15

1.07

2.02

26.29

27.34

2,174.31

2,324.27

9.75

11.53

740.91

851.59

40.33

42.96

3,167.82

3,420.74

1.2

1.39

113.02

124.68

i) from steel plants

2.08

2.09

350.93

373.17

ii) from other points

0.63

56.11

61.91

iii) Total

2.71

2.72

407.04

435.08

iii) for thermal power houses iv) for public use v) Total Raw material for steel plants except iron ore Pig iron and finished steel

Iron ore i) for export

0.36

0.3

86.63

79.26

ii) for steel plants

5.13

4.53

250

213.66

iii) for other domestic users

3.71

4.07

297.3

311.21

iv) Total

9.2

8.9

633.93

604.13

Cement

9.22

9.27

764.9

748.94

Foodgrains

3.26

4.62

459.48

729.94

Fertilizers

2.14

2.06

218.79

195.63

Mineral oil (POL)

3.14

3.33

366.58

426.18

Container service i) Domestic containers

0.72

0.8

68.99

88.76

ii) EXIM containers

2.57

2.45

224.41

244.67

iii) Total

3.29

3.25

293.4

333.43

Balance other goods

5.76

5.18

481.87

458.55

80.25

83.68

6,906.83

7,477.30

Total revenue earning traffic

62 Coal Insights, May 2013

earned in April 2012 but sharply down by 10.56 percent from ` 8,360.58 crore earned in March 2013 owing to lower transportation of coal and iron ore compared to March 2013. Revenues from transportation of iron ore for exports, steel plants and for other domestic users in April 2013 fell to ` 604.13 crore, down 18.2 percent from ` 738.58 crore in March, 2013. The quantity of iron ore transported also fell to 8.9 mt compared to 10.35 mt in the previous month. Revenues from transportation of cement in April 2013 stood at ` 748.94 crore (9.27 mt) compared to ` 876.12 crore (11.05 mt) in March 2013, while that from foodgrains transportation fell to ` 729.94 crore (4.62 mt) in April 2013 from ` 744.77 crore (5.24 mt) in March of this year. The Railways’ revenues from transportation of fertilisers in April 2013 fell sharply to ` 195.63 crore (2.06 mt) from ` 313.09 crore (3.1 mt) in March. Revenues from transportation of petroleum oil and lubricant (POL) in April 2013 stood at ` 426.18 crore (3.33 mt), while the same from pig iron and finished steel from steel plants and other points were ` 435.08 crore (2.72 mt). Revenues from container services were at ` 333.43 crore (3.25 mt) and from transportation of other goods at ` 458.55 crore (5.18 mt).

logistics

KoPT targets 8 mt coal handling in FY14

expenses to maintain the draft level at Haldia and Kolkata in the face of high siltation. The central government is now looking to phase out the subsidy in tranches. Kahlon, however, said no formal decision on the matter had been communicated to the port authority in “writing”. Apart from these troubles, KoPT is also facing problems related to huge overheads and overstaffing at the moment which has forcibly brought down the revenues of the company. “At this juncture, the withdrawal of subsidy will only aggravate the problem,” he further added. Adani, Concast Hyundai in fray for Salukhali project

Sanjukta Ganguly

midst troubles plaguing Kolkata Port Trust (KoPT) in recent times, it has set itself a target of handling eight million tons (mt) of coal in the current financial year of 2013-14, Utpal Sinha, traffic manager, KoPT, told Coal Insights. According to data available from the Indian Ports Association (IPA), KoPT had handled 6.515 mt of coal, including domestic coal, in 2012-13. “Besides this target of coal handling, our target for iron ore handling has been set at 5 mt for FY’14,” he said. “We know these targets are hard to achieve considering various problems plaguing the port, at present. However, we will try our best to reach these targets,” Sinha said. The traffic manager added that the port had set a target of handling a total of 43 mt of cargo in 2012-13, but due to various problems, including dredging and berthing issues as well as a slowdown in iron ore exports and movement of petroleum products, it ended up with handling about 39 mt of cargo in FY’13. The setback in FY’13 has, however, not deterred the port from increasing its cargo handling target for 201314 to 46 mt.

64 Coal Insights, May 2013

He said the port is trying to boost other dry bulk cargo by easing terms like lowering demurrages and stock yard charges. Phasing out dredging subsidy to affect HDC

The Government of India’s (GoI) move to phase out dredging subsidy will severely impact the efficiency of the Haldia Dock Complex (HDC) of KoPT, port chairman R.P.S. Kahlon said. “The phasing out of the dredging subsidy might lead to a sharp fall in cargo handling at HDC to around 30 million tons per annum by 2020,” he added. HDC’s current handling capacity is at 38 mtpa. “For the Kolkata port, being a riverine one, dredging is of utmost importance. We have to maintain a long channel. The dredging subsidy for KoPT stood at Rs 450-500 crore per year till last year. Hence, withdrawal of such subsidy will result in the suspension of dredging which will further decrease the draft level. This will not be a positive sign for KoPT”, he said. At present, the average draft level at Haldia is close to 7.5 metres and that in Kolkata is 7.2 metres. The KoPT receives subsidy from the Centre for dredging

KoPT has, so far, received a total of five bids in response to its request for proposal (RFP) to develop Dock-II project at Salukhali under public-private-partnership (PPP), its chairman R. P. S Kahlon said. “The Adani Group and Concast Hyundai are among the five bidders and they are really serious about this,” he said. Meanwhile, in order to attract higher response and allow some more companies to submit their offers, the port has decided to extend the last date for submission of RFPs for the third time to May 17, Kahlon said. The project entails setting up of four berths at Salukhali at an investment of Rs 1,700 crore and is likely to increase the ports handling capacity by 23.4 million tons per annum. Ship breaking operations resumed

KoPT recently restarted ship-breaking operations at its Kolkata Dock. The segment, which used to fetch an average of nearly Rs 67 crore a year to the port authorities, was stalled for almost three years since 2010. According to a senior official of the marine department of KoPT, the ship-breaking facility at Kolkata Dock has been initiated again since end-April. Hence, in the current scenario, one of the busiest ports on the eastern coast of the country, KoPT is struggling hard to overcome adversities and gearing up to fructify its ambitious expansion plans. However, it is to be watched to what extent government policies will support these plans.

E-AUCTION Monthly data of offered quantity through coaljunction and mstc (road & rail)* MONTH

OFFERED BY ROAD 2,991,320 2,824,250 2,922,850 2,466,770 2,564,788 1,724,469 2,236,945 2,091,330 2,262,732 512,850 3,083,582 2,706,157 4,518,196 3,698,200 5,874,230 5,014,680 4,927,850 3,818,650 3,444,100 3,541,130 3,226,580 3,313,820 5,329,723 5,787,610 5,895,470 5,917,129 5,953,895

Jan'11 Feb'11 Mar'11 Apr'11 May'11 June'11 July'11 Aug'11 Sept'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 June'12 July'12 Aug'12 Sept'12 Oct'12 Nov'12 Dec'12 Jan'13 Feb'13 Mar'13

Qty. in Tons

OFFERED BY RAIL 328,366 738,520 326,950 367,390 273,884 135,535 275,070 92,040 315,350 79,060 225,852 220,400 252,812 431,150 1,675,226 867,492 327,030 239,548 195,467 164,433 225,268 236,830 241,440 278,784 816,988 878,082 557,398

Monthwise quantity offered & sold through coaljunction & mstc E-Auction* Jan'11 Feb'11 Mar'11 Apr'11 May'11 June'11 July'11 Aug'11 Sept'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 June'12 July'12 Aug'12 Sep'12 Oct'12 Nov'12 Dec'12 Jan'13 Feb'13 Mar'13

Quantity in Tons

4,000,000 3,000,000 2,000,000

6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000

1,000,000

OFFERED BY RAIL

251,780

-6.05%

-2.61%

116,820

116.67%

NEC ROAD

20,000

8,800

40,000

17,550

-50.00%

-49.86%

NEC RAIL

22,000

2,033,150

1,290,600

1,428,750

1,060,200

42.30%

21.73%

SECL RAIL ECL ROAD

151,445

151,338

319,029

309,137

-52.53%

-51.05%

ECL RAIL

202,488

128,502

673,662

537,372

-69.94%

-76.09%

WCL ROAD

588,550

459,220

768,450

510,410

-23.41%

-10.03%

225,000

180,493

617,000

373,111

-63.53%

-51.62%

CCL ROAD

706,000

548,180

693,550

535,890

1.80%

2.29%

CCL RAIL

79,800

38,000

79,800

38,000

0.00%

6,511,293

4,904,393

6,795,211

5,229,140

-4.18%

-6.21%

WCL RAIL SCCL ROAD SCCL RAIL

TOTAL

Mar'13

Feb'13

Jan'13

Nov'12

Dec'12

500,000 250,000 0

Companies Mar'13 QTY OFFERED Feb'13 QTY OFFERED

Note: Data for the period January 2011 - December 2011, February 2012 is for e-auction through coaljuntion only, while data for January 2012, and March 2012 - March 2013 includes data of MSTC

66 Coal Insights, May 2013

Oct'12

Sep'12

Aug'12

July'12

750,000

Mar'13 QTY SOLD Feb'13 QTY SOLD

CCL RAIL

261,000

253,110

CCL ROAD

245,200

253,110

SCCL RAIL

245,200

NCL RAIL

SCCL ROAD

NCL ROAD

1,000,000

WCL RAIL

WCL ROAD

8.84%

ECL RAIL

9.73%

ECL ROAD

1,198,470

SECL RAIL

1,377,000

1,250,000

SECL ROAD

-100.00%

NEC RAIL

0.70%

-100.00%

NCL RAIL

14.84%

7,800

NEC ROAD

272,600

7,800

NCL ROAD

1,304,450

412,350

MCL RAIL

1,511,000

MCL RAIL

1,500,000

SOLD QTY

MCL ROAD

274,500

BCCL RAIL

QTY SOLD

BCCL RAIL

QTY SOLD

Variation (In Percent) OFFERED QTY

BCCL ROAD

473,550

Feb’13 QTY OFFERED

SOLD QTY (in tons)

Companywise quantity offered & sold through coaljunction & mstc in Mar ’13 vs Feb ’13*

Quantity In Tons

Mar’13

June'12

OFFERED QTY (in tons)

Companywise quantity offered & sold through coaljunction & mstc in Mar ’13 vs Feb ’13 via rail & Qty. In Tons road* QTY OFFERED

May'12

Mar'12

Mar'13

Feb'13

Jan'13

Dec'12

Oct'12

Nov'12

Sept'12

Aug'12

July'12

June'12

Apr'12

May'12

Mar'12

OFFERED BY ROAD

Apr'12

SECL ROAD

Qty. in Tons

Variation (In Percent) -21.42% -21.26% -23.63% -23.11% -17.96% -29.94% -10.22% -19.17% -14.53% -34.80% -12.64% -10.06% -21.22% -13.38% -13.00% -11.87% -15.20% -11.15% -18.14% -21.08% -10.44% -10.50% -12.56% -32.91% -21.88% -22.95% -24.68%

7,000,000

5,000,000

MCL ROAD

SOLD QTY (in tons) 2,608,551 2,805,310 2,481,981 2,179,060 2,328,720 1,303,176 2,255,313 1,764,911 2,203,438 385,904 2,891,019 2,632,049 3,758,496 3,576,946 6,584,608 5,183,850 4,456,357 3,605,700 2,979,323 2,924,489 3,091,583 3,177,658 4,871,200 4,069,700 5,243,866 5,256,640 4,904,393

8,000,000

6,000,000

BCCL ROAD

OFFERED QTY (in tons) 3,319,686 3,562,770 3,249,800 2,834,160 2,838,672 1,860,004 2,512,015 2,183,370 2,578,082 591,910 3,309,434 2,926,557 4,771,008 4,129,350 7,568,706 5,882,172 5,254,880 4,058,198 3,639,567 3,705,563 3,451,848 3,550,650 5,571,163 6,066,394 6,712,458 6,822,711 6,511,293

Quantity offered & sold through coaljunction & mstc*

Monthly data of offered quantity through coaljunction & mstc (Road & Rail)*

Qty Offered In Tons

MONTH

port data Major coking coal supplier countries to India (through mentioned ports) Mar ’13

Major ports through which coking coal arrived in India Mar ’13 Port

Qty (in Tons)

VIZAG

527,760

KOLKATA

358,747

GANGAVARAM

324,740

PARADIP

286,379

NEW MANGALORE

Port

Qty (in Tons)

1.7%

Country of Origin

27,880

AUSTRALIA

MUNDRA

24,255

SOUTH AFRICA

89,168

MOZAMBIQUE

CHENNAI

159

UNITED STATES

87,423

UNITED KINGDOM

NEW ZEALAND

44,000

Grand Total

1,639,088

Major ports through which coking coal arrived in India – Mar ’13 5.4%

Qty (in Tons)

KANDLA

Grand Total

89,168

Country of Origin

1,399,959

12,000 6,380

1,639,088

21.9% VIZAG GANGAVARAM NEW MANGALORE MUNDRA

86%

KOLKATA PARADIP KANDLA

AUSTRALIA NEW ZEALAND

Major ports through which steam coal arrived in India Mar ’13 Port

Qty (in Tons)

MUNDRA

694,988

GANGAVARAM

585,870

PARADIP

526,688

KANDLA

433,908

NEW MANGALORE

421,239

Port MUMBAI ENNORE VIZAG KOLKATA COCHIN Grand Total

Qty (in Tons) 387,189 377,625 232,344 71,368 3,000 3,734,219

Major ports through which Steam Coal arrived in India March’13

Country of Origin INDONESIA SOUTH AFRICA OTHERS SAUDI ARABIA AUSTRALIA MOZAMBIQUE Grand Total

UNITED STATES

Qty (in Tons) 2,447,137 740,878 377,625 119,149 47,430 2,000 3,734,219

Major Steam Coal supplier countries to India (through mentioned ports) March’13

18.6%

10.1%

SOUTH AFRICA CANADA

Major steam coal supplier countries to India (through mentioned ports) Mar ’13

1.9%

6.2%

159

32.2%

19.8%

CANADA

Major coking coal supplier countries to India (through mentioned ports) – Mar ’13

1.5%

17.5%

Qty (in Tons)

10.1%

3.2%

1.3%

10.4%

15.7% 11.3%

11.6% MUNDRA PARADIP NEW MANGALORE ENNORE KOLKATA

19.9%

14.1% GANGAVARAM KANDLA MUMBAI VIZAG

65.6% INDONESIA OTHERS AUSTRALIA

SOUTH AFRICA SAUDI ARABIA

Note: Figures are based on consignment lifted from these ports for which price details/break-up is available with Coal Insights team

68 Coal Insights, May 2013

Tear along the dotted line

70 Coal Insights, May 2013 Tear along the dotted line