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, former Chairman, Coal India 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, Greetings for the festive season, which is here again. As per the Hindu tradition, the season starts with the demolition of the lord of darkness (Asura) and ends with the celebration of light (Diwali). No wonder, there will be a spike in the power consumption graph of the country over the next two months before the chilling winter sets in. This is bad news. In fact, these days anything that remotely relates to ‘power’ (no pun intended) calls for caution. Justifiably so. The lights you and I put on so casually are putting many people in a difficult spot. Investors who invested fortunes (so that we could splash into some more light) are badly stranded. Banks that lent money to these investors are scared of massive defaults. Analysts fear the impact could plunge the economy further into darkness. All this, because you and I are not paying enough. And we can’t, if the government doesn’t want us to. The onus is on the government. But ideally the government is happy when its people are happy. And the people are happy when they have to pay peanuts (still better, if nothing) for public goods. We are not the only ones to face the blame. There is Coal India Ltd (CIL), of course. A company that has failed to live up to its supply contracts cannot escape the finger-pointing, can it? But then, it cannot bring coal out of thin air, either. It cannot carry coal too, in the absence of rail links, on the back of its miners. That however doesn’t shift the blame to the environment ministry. After all, you and I need oxygen to live, don’t we? But we need air conditioner too, yes or no, at cheap power?
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This is what I find most intriguing. In the largest democracy of the world, apparently nobody is at fault. Put otherwise, everybody is well within his or her rights…and yet our system doesn’t work. What is it that made the Japanese shine? What is it that made the Chinese overstep its huge limitations? And what is it that didn’t allow India to take its rightful place in the comity of nations, not even to manage its own people and affairs? There are two things that come to my mind. First, we are an ‘energystarved’ nation and that is reflected in our national character. Second, we have never bothered to look onto the other side of rights – responsibilities! With a little pragmatism and application of mind, the economy can still do wonders. It all depends on what we the people want. Inefficiency, (and hence) subsidy and de-growth, followed by unemployment and poverty? Or reforms, growth and an efficient system that rolls on…! The choice is ours. Happy reading,
Copyright: All rights reserved. No part of Steel Insights can be reproduced or copied in any form or by any means without the prior permission of mjunction services limited. Please inform us if any copyright has been inadvertently infringed. Disclaimer: This document is for information purpose only. Certain information herein has been acquired from various external sources believed to be reliable. While we have taken reasonable care to compile this report, we in no way assume any responsibility for any error or discrepancy in regards to information contained herein. Readers are requested to make appropriate judgment without any prejudice or compulsion.
(Rakesh Dubey) Coal Insights, October 2012
3
Contents
6 | Cover Story
18 ‘Discom bailout package a short-term solution’
Dusk at Dawn
28 Indian demand for low cv Indonesian coal picks up 30 Spot coking coal prices firm up marginally 34 CIL focuses on infrastructure to step up production 38 Indian refiners reduce pet coke prices in October 40 SIMA to focus on cost cutting options 42 India’s September power generation falls m-o-m
As discoms go bust, India’s ambitious power sector expansion faces uncertain future
22 | INTERVIEW
‘Meeting energy demand with limited resource is a big challenge’ Power sector input prices need to be stable, says I.A. Khan
32 | FEATURE
44 Coal need dwells on demand-supply issues
Blame it on generous grant of linkages: Rao
49 Captive block allocation deadline needs to be broken 56 DVC to produce over 2 mt from captive blocks in FY13 57 CIL expected to report 25% y-o-y growth in PAT in Q2 58 US coal production to be 1,027 MMst in 2012: EIA 59 India’s Jan-Aug imports from Soth Africa up y-o-y 60 Traffic handling by major ports down 3.28% in Apr-Sept 61 Railway’s commodity freight revenue down in Sept m-o-m 62 E-auction data 64 Port data
4 Coal Insights, October 2012
Supply side issues have not been considered while granting coal linkages
46 | TECHNOLOGY
Technology options for washing non-linked washery coals of Jharia CIMFR has been entrusted by govt to explore better utilisation of coal in costeffective manner
54 | Expert speak
Chinese package may boost Indian coking coal prices Price movements only after Dec, says Ganesan Natarajan
Cover Story
India’s power crisis deepens
DUSK AT DAWN Arindam Bandyopadhyay
I
n 1960, Dutch artist M C Escher made his famous lithography ‘Ascending and descending’. The picture, a marvel in illusory arts, was developed on the concept of ‘Impossible stairs’ (also called ‘Penrose stairs’) created by Lionel and Roger Penrose in 1959. Both the pictures show a twodimensional depiction of a staircase. The fun lies in that the stairs continuously ascend (anti-clockwise) or descend (clockwise), make four 90 degree turns on the way, and yet reach nowhere. In other words, the steps after every round come back to where they started from.
6 Coal Insights, August 2012
This apparent inconsistency, it is believed, is possible only in two-dimension. But in the three-dimensional world of the Indian power sector, this puzzle has come down to confuse the planners in recent times. So much so that after almost a decade of dramatic growth in electricity generation and years of brainstorming on how to sustain this growth, some policymakers are wondering if the Indian economy really needs this much power! Put differently, if the hectic growth in generation would actually take the economy backwards, going forward…!
The Penrose stairs
In India, development in whichever field has been a messy affair. There are ample instances where simple logic fails profound policies of growth. Let us start with a few clichés for the power sector. The case of cross-subsidy
The universal access to electricity, like the campaign of universal education, could never be held as a bad objective; at least not on paper (or a two-dimension world). Now consider this. In a country like India where the government must cross-subsidise the
Cover Story rural households and even the urban settlers, the more the number of households covered, the more is the burden imposed on the industry. This increased burden makes the industry uncompetitive and reduces margins and investible surplus. With other factors remaining constant, this in turn puts a lid on industrial growth. Now if the growth in households’ access to electricity exceeds the growth in industry, the cross-subsidy further eats up the bottomline of the existing units, now reducing their electricity demand. If the industry’s demand for power is reduced, the government is in a fix as to who would bear the additional burden for each additional unit being supplied to each additional household…! And thus the date for achieving universal access to power gets postponed…from 2007 to 2012 to 2017 to….? Low power tariff
Next comes the case of keeping power tariff low through governmental diktat. This again is a novel approach, aimed at delivering greater public welfare at less effort. Everybody loves low power bills; well, except for the power distribution companies (discoms). Discoms are entities that buy power from the generation utilities and sell it to the end consumers. The low power tariffs, if below the cost of buying power, lead to losses for the discoms, which at some stage are to be borne by the state governments. This affects the state government’s borrowing power and leads to financial constraints. The end result is reduced public welfare expenditure by the states that wanted to keep their people happy. The silent boilers
Yet another conundrum, just as common as the previous two cases, is the expansion of generation capacity despite not having adequate fuel supply at reasonable price. What happens when a plant must buy costly imported fuel to produce power that must be sold at a low price? After a certain point, it backs off. Foregoing generation saves the plant on each incremental unit foregone. For the consumers, this leads to power cut. What happens to states that have produced surplus power? It finds no buyers despite peak demand deficit in other states. All in all, the power utilities stop
8 Coal Insights, October 2012
“When the government provided the special package to save discoms in 2001-02, it was thought that the problem is solved. But then, it has come back to hit the segment ten years later, and on a much larger scale.” producing at their rated capacity. A significant part of the generation capacity, set up at heavy investments, remain nonproducing. This is tantamount to having huge idle assets, locked-up finances, strain on investor’s purse and illusory growth for the economy. The current crisis
The current crisis in the Indian power sector has its genesis in all the three apparent contradictions stated above. Among them, the low tariff structure has had the most debilitating impact. Since it is the discoms that sell the power to end consumers, it is this segment that bore the brunt of the gross mismanagement of this crucial sector. There are various estimates for the accumulated losses incurred by the discoms to date. According to latest reports, this amount has shot up to around `200,000 crore as of March 2012. Five states – Tamil Nadu, Rajasthan, Uttar Pradesh, Madhya Pradesh and Punjab – accounted for around 70 percent of this amount. These losses, as seen from official records, have piled up over the years. And although the estimates vary from time to time, the figures nevertheless showed a steep uptrend. The financial losses of discoms without subsidy stood at `20,623 crore. The accumulated losses increased to `39,444 crore in 2004-05, `50,503 crore in 2007-08 and `74,977 crore in 2008-09. This increase has moved up manifold in the last couple of years, exceeding the figures estimated by various government agencies and others. As per the preliminar y findings of the V K Shunglu Committee (appointed by the Planning Commission in July 2010), the total financial losses of power
utilities in FY 2009-10 was around `40,000 crore and in FY 2010-11, around `70,000 crore. Earlier, the government in 2001-02 provided a special financial package to save the state discoms from collapse when some state electricity boards defaulted on payment to state utilities such as NTPC and NHPC. The issue was also addressed by the Electricity Act 2003 which identified low tariff as one of the key reasons for the poor health of discoms. It further said that the discoms should run on commercial principles so that the sector gradually becomes selfsustainable. However, the states failed to take a lesson and continued with the populist measures. Known evils
The prime causes for the accumulation of this humongous loss are lower tariffs, higher fuel (coal) costs, limited success in reducing transmission & distribution (T&D) losses and delayed payment of state subsidies. A major cause was the subsidy given to agriculture and household sectors. Increasing revenue-cost gap
Due to the lower tariff and increasing cost of supply, the gap in revenue has increased from 65 paise/kWh per unit in 2001-02 to 78 paise/kWh per unit in 2008-09. Barring the period FY02-FY04, it has
Cover Story increased every year since the beginning of the last decade. Meanwhile, “annual revenue requirement has actually increased substantially due to wage revision, accounting for unfunded pension liability, increase in interest and finance charges, etc. on the other hand, tariff increase has either not taken place or the increase has not kept pace with the rise in CoS, increasing the financial losses,” said a report by G. Sinha, senior fellow, TERI. This gap between average cost and realisation continues to date. According to an official of Uttar Pradesh Power Corporation Ltd (UPPCL), the current average cost of procurement is `5.83 per unit while its average supply price is `3.67 per unit. The
story is no different in other lossmaking discoms in the country.
average tariff rose by 6.5 percent while CoS increased by 16.5 percent in 2010-11.
Inadequate tariff revision
Coal shortage
The major cause of the increasing gap between realisation and CoS is the lack of adequate tariff revision by the discoms. Tariff revision in Tamil Nadu, Haryana, Rajasthan, Delhi – the major moss-making state utilities – have had not taken place annually, due to which these state discoms suffered huge accumulated losses. For Tamil Nadu, there had been no tariff revision from 2003 to 2010. However, with increased pressure on finances, the discoms are now going for tariff revisions in recent years. Even then, the
The second most important factor behind the sickness of discoms is perhaps the shortage of domestic coal and the high cost of imported dry fuel. Although the discoms are not directly involved in buying coal, any upward movement of the fuel raises their cost of supply. This is so because the generating companies can pass on the impact of the fuel price hike to the discoms, but the latter cannot do the same due to state government interventions. Besides, the shortage of the fuel has affected the power sector as a whole by limiting generation at coal based thermal power units. According to a power industry source, the coal based capacity of 117 GW produced only 85 GW worth of power last year. This results in low plant load factor (PLF). “A power producer must achieve at least 85 percent PLF for fixed cost recovery. Otherwise, he defaults in his payments to lenders,” the source said. According to some estimate, domestic coal shortage is going to be around 185-200 million tons (mt) by the end of the Twelfth Plan (2012-17). This estimate is somehow agreed upon by even Coal India Ltd (CIL). While the domestic demand would reach around 1 billion tons, production can be augmented only up to the level of 750800 mt, thereby leaving a gap of around 200 mt, said S. Narsing Rao, chairman of CIL. “The demand can vary a little bit, but I don’t expect domestic production to go beyond 800 mt by any means,” he said, adding that “the shortfall faced in the last few years will be there at least in the medium term.”
Losses of state distribution companies at current tariffs (` cr)* State
2010-11
2011-12
2012-13
2013-14
2014-15
Haryana
5,190
6,242
6,701
7,086
7,910
Uttar Pradesh
8,573
11,412
13,134
14,879
17965
Punjab
7,211
8,675
9,652
10,674
12,310
816
1,147
1,321
1,473
1,626
Rajasthan
6,320
6,835
7,080
7,607
8,822
Jammu & Kashmir
1,815
1,890
1,852
1,908
2,049
Uttarakhand
Himachal Pradesh
499
475
452
431
401
Gujarat
4,156
3,366
3,113
2,897
3,163
Maharashtra
3,505
5,488
6,234
6,854
9,153
Chhattisgarh
562
329
379
475
591
Madhya Pradesh
4,518
4,566
3,783
4,635
5,539
Karnataka
5,701
7,432
8,978
10,318
12,215
617
846
1,059
1,254
1,617
Tamil Nadu
5,419
6,833
8,220
9,967
12,454
Andhra Pradesh
5,406
5,351
7,179
7,919
8,963
Jharkhand
1,099
1,264
1,346
1,848
1,657
Bihar
2,905
3,477
3,670
3,995
4,590
Odisha
1,338
1,747
2,174
2,699
3,484
West Bengal
1,538
1,775
1,993
2,300
2,690
Sikkim**
(82)
(76)
(76)
(92)
(110)
Assam
566
395
205
192
188
30
25
24
25
28
Meghalaya
375
338
331
357
410
Tripura
214
203
205
205
348
Mizoram
116
95
94
93
92
Nagaland
146
133
135
136
137
Kerala
Arunachal Pradesh
Manipur Total
370
336
351
367
384
68,643
80,319
88,170
98,664
116,089
*As of June 2011 **Sikkim is the only state to earn net profits for its discom Source: Finance Commission, Ministry of Finance
10 Coal Insights, October 2012
Delayed payment of subsidy
The state discoms, due to the low power tariff, get subsidies from the state governments from time to time to keep afloat. The subsidy amounts, however, are pretty low as compared to the revenue foregone. Still worse, the payments are often not paid in full and/or delayed inordinately. This leaves the discoms with little option but to borrow from lending institutions and banks at market rates. This further strains their financial position. Along with this, the high subsidy given
Cover Story Subsidy released by states (` cr) Year
Subsidy books
Subsidy released
% subsidy released
2006-07
13,590
12,836
94.45
2007-08
19,518
16,472
84.39
2008-09
29,665
18,388
61.99 Source: TERI
to the agriculture sector also affects the finances of the discoms. As pointed out by Sinha, the trend in consumer category wise consumption and revenue realisation reveals interesting facts. “It is to be noted that for 2008-09, while domestic and agriculture category consumption was around 45 percent of total consumption, revenue realisation was only around 27 percent of total revenue realisation. Commercial, industrial and others contributed to 55 percent of sales and revenue of 73 percent. With implementation of RGGVY, there will be steep rise in BPL consumption, low end rural domestic consumption as well as agri consumption whose average tariff is much below the cost of supply….As such, increased electrification will require increased requirement of subsidy from government as well as cross subsidy from subsidising consumers.” Payment default
The precarious financial condition of the discoms compelled them to go for borrowings. This was primarily required to meet the gap between realisation and expenses, including CoS. In fact, the financial structure of the utilities on an all India basis reveals a highly leveraged position. As of FY 2008-09, around 77 percent of capital employed by the segment was being financed by loans
from Fls/banks/bonds and state government loans. During the period, the total net worth was estimated at only 9.5 percent of capital employed. Commenting on the observation, Sinha said, “It is quite possible that the net worth has been wiped off by FY 2010-11 due to continued and increasing financial losses.” The loans were taken to cover the accumulated losses of discoms. However, due to continued stress, the discoms had to take fresh loans to repay the old loans. And this led to a vicious cycle. Things became worse when financial institutions decided not to lend further to the loss-making discoms about nine months ago. This `200,000-crore default by the discoms, said a senior bureaucrat associated with power sector reforms, could trigger another ‘subprime crisis’. Sensing the urgency, the government and the Planning Commission have set up various committees to recommend measures to deal with the crisis. Government bailout
With the massive default by discoms threatening to impact the banking and financial sector, the Union Cabinet in September 2012 approved the proposal to restructure debt worth nearly `200,000 crore of discoms. As part of the scheme approved for the financial turnaround of discoms, state governments are to take over 50 percent of their short-term liabilities. A power ministry release announcing the scheme for “Financial Restructuring of State Distribution Companies (discoms)” said, “50 percent of the outstanding short term liabilities up to March 31, 2012, to be taken over by State
Average cost of supply and average realisation Year
Average cost (paise/kWh)
Average realisation (paise/kWh)
Gap between average CoS and average realisation (%)
2001-02
246
181
26.42
2002-03
238
195
18.07
2003-04
239
203
15.06
2004-05
254
209
17.72
2005-06
260
221
15.00
2006-07
276
227
17.75
2007-08
293
239
18.43
2008-09
340
261.8
23.00
Source: TERI
12 Coal Insights, October 2012
Conditions for financial restructuring While approving the restructuring/ reschedulement of loan for discoms, the government announced that the package will be accompanied by concrete and measurable action by the discoms/ states. These conditions are meant to improve the operational performance of the distribution utilities. ♦♦ The state governments taking part in the restructuring exercise will have to convert all their loans into equity. Also, all outstanding energy bills of the state departments as on March 31, 2012 are to be paid by November 30, 2012. ♦♦ The participating states need to pass the State Electricity Distribution Responsibility Bill in their respective states before the package is made effective and government grants start flowing in. The real bailout will come only after five years of consistent performance by discoms when the Centre will pay 25 percent of restructured debt. ♦♦ The restructuring package for the State Electricity Boards (SEBs) must be supported by tariff hikes, a timely and adequate financial support by the state governments, and better regulatory process and disclosures to yield results. ♦♦ The private sector is to be involved in state distribution sector through franchisee arrangements or any other mode. This will have to be prepared within a year by the discoms. Governments. This shall be first converted into bonds to be issued by discoms to participating lenders, duly backed by state governments’ guarantee.” State governments are to take over liability from discoms in the next two to five years by way of special securities, repayment and interest payments. The balance 50 percent short term loans are to be restructured by rescheduling loans and
Cover Story
approached the state regulatory body for a hike, but are yet to reach the stage of full recovery of costs. Whether they will be able to pull through the crisis for once and all will largely depend on how much leeway they are given by the Coal consumption by power utilities (in mt) respective state governments. 36
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The root of the current crisis, other than in low tariffs, lies in the ad hoc growth in private sector investment in the power sector, some industry sources maintain.
35
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Do we really need so much power?
Ju
Even though the ailing discoms and the states involved heaved a sigh of relief at the government bailout package, power industry sources were not so optimistic. “When the government provided the special package to save discoms in 2001-02, it was thought that the problem is solved. But then, it has come back to hit the segment ten years later, and on a much larger scale,” observed a top official of a state power department. “Till last year, we were talking of three to four debt-stressed state discoms. A few more have joined the big league of late. Unless strict conditions are imposed to avail the bail-out package, the measures will fail to ensure their sustainability this time as well,” he added. The problem is that the state governments often take recourse to populist measures without giving a serious thought of the aftereffects. “For instance, in Tamil Nadu, it was doing fine till the government announced of free power to agriculture and allied sectors.” Commenting on the issue, Dr Ashok Khurana, director general of Association of Power Producers (APP), said, “The financial restructuring must be accompanied by financial and commercial discipline. Otherwise, you are only postponing the problem…and may be there will be yet another committee on discoms 10 years on.” The problem is whether the state governments would go by the bailout conditions in letter and spirit. In Tamil Nadu, even after 26 percent tariff hike, there is under-recovery. And the discom must go for another 50 percent hike to recover costs. The same is the case with many other discoms, which have increased tariff or have
At a time when price pooling is being looked at as a possible solution to the severe coal crisis facing the power sector, the West Bengal power ministry has expressed its strong objection to the mechanism saying this will go against the interest of the state. “We have strong opposition to the price pooling mechanism. This will do no good to the people of West Bengal. We will object the idea to the extent possible,” Malay K. De, principal secretary, department of power, government of West Bengal, has said. The price-pooling mechanism would essentially cross-subsidise power plants that came up without due consideration to the fuel cost factors and hence faced viability problem, he said while addressing a panel discussion organised by Assocham and Financial Journalists Club (FJC), Kolkata. The state of West Bengal had surplus power but couldn’t sell it because of the lack of buying capacity of other state utilities.
g
A vicious cycle?
While this may sound bizarre, the fact remains that many private investors took the plunge without proper due diligence and adequate consideration of the ground realities. The government, in its urge to tap investments to maintain high economic growth, promised fuel availability in the form of coal linkages, without considering if the coal sector can actually match the growing demand. These investors should have kept at least two crucial factors –lack of fuel availability and low power tariff – in mind before locking their money, the sources said. There, however, was an even more fundamental consideration that should have been taken into account, said M.K. De, principal secretary, department of power, West Bengal government. “Do we really have a massive demand for additional power generation? My answer is no,” he said. “In fact, given the slow GDP growth seen in recent past, the energy demand growth may drop below the current estimates.” To buttress his point, De said, “Demand is a function of market affordability. If the market cannot afford a product, the demand cannot be said to exist.” West Bengal, for instance, has surplus power which cannot be sold because of the lack of purchasing capacity of power deficit states, he elaborated. “Many people had invested in this sector without due diligence. These assets are stranded now. We need not cry wolf over this,” he added. According to an estimate, about 60,000 MW fresh generation capacity has been stranded due to want of coal and other problems.
WB govt against price pooling
Au
providing moratorium on principal and at the best possible terms of interest. The scheme will remain open up to December 31, 2012, and will be available for all participating state-owned discoms. Earlier, to look into the issues of discoms and suggest a strategy for their financial turnaround, the Planning Commission had constituted an expert group under B.K. Chaturvedi, Member, Planning Commission, which had recommended that 50 percent of the short term debt to be taken over by the respective states and the balance 50 percent be restructured by the banks.
Coal Consumption by power utilities(In million tons)
14 Coal Insights, October 2012
Cover Story Drawing a comparison with the Chinese economy, which again is driving its growth based on expansion in coal-based power generation, De said, “In China, 50 percent of the GDP comes from manufacturing, while the share of manufacturing in Indian GDP is only 20 percent. Also, Chinese climate is colder. Since we are not having a manufacturing-led growth, our power requirement will never be as high. India will not see more than 7 percent compound annual growth rate of power demand. So we need to moderate these growth projections.” Moreover, India can reach the size of the Chinese economy at 2011 only in 2027, that also at a growth rate of 9.5 percent. “At the current rate of GDP growth, we may not even see 7 percent growth in power demand,” he added. A messy affair
“The power sector,” said an industry veteran, “is in total mess now. The discoms’ losses are going to affect state finances, limiting their borrowing power under the fiscal responsibility and budget management (FRBM) limit of 3 percent. This is going to impact the state’s functioning, leading to further cascading effects on the economy.” Commenting on the matter, Alok Ramachandran, institutional equity research (power), said, “It has to be seen how the states are going to absorb such humongous debt on their books post this recast as they have to not only service the debt but also replay them.” Meanwhile, the banks and financial institutions have burnt their fingers, and
“Do we really have a massive demand for additional power generation? My answer is no...Demand is a function of market affordability. If the market cannot afford a product, the demand cannot be said to exist.” may not be very forthcoming in extending loans at least in the near to medium term. On contrary, the Power Finance Corporation (PFC) cannot stop lending, no matter what, as its lending is not based on balance sheet performance, but on project basis. Overall, “there will be paradoxes galore,” said a source, “neither can you allow steep hike in tariff at one go; nor can you let the crisis go out of hand and impact the financial systems and states’ finances.” In the medium term, some states will have surplus power while others will have power cuts. At the same time there will be government initiatives to expand reach and achieve universal access to power. This in turn will imply higher cross-subsidy which will affect the industry, leading to lower investment growth and a decline in growth of energy demand. All in all, the Penrose stairs in the making…! Real growth for real people
Amidst this mayhem, there are industry voices that call for an overhaul of the system and the mindset too. “We may need to have something like the Federal Energy Regulatory Commission as in the US. There is need for an integrated
Financial structure of the utilities on all India basis for 2008-09 (Rs crore) Networth
energy regulator,” said a source. It is high time the governments, both at Centre and the states, learnt a lesson or two from past mayhems and put in place a simple and reliable system that will actually deliver. The states’ interferences need to be curbed in fixing tariffs. Once the current chaos with balance sheets of discoms is cleaned up, they need to be maintained through consistent policies and discipline. Some suggest greater participation of the private sector, not only in generation but also in distribution as franchisees. This is believed to bring improved technology in billing and collection and also to reduce T&D losses. As for power sector expansion, the sources said the government needs to take up projects keeping in view the ground realities. “The ultra mega power projects (UMPPs) have nearly flopped. Also, the tariff based bidding didn’t taste success. Only the costplus basis will work. The government needs to consider these aspects.” Above all, the country as a whole needs to restrain its blind race for power sector expansion. Instead, the real growth opportunities along with real obstacles are to be considered. Perhaps a quote of Mahatma Gandhi would not be out of context here – that the nature has enough for everybody’s need, but not for everybody’s greed. The planners would do well to keep this in mind. Otherwise, it will not take long to unwind a growth story that has been built so painstakingly, with such high ambitions.
State govt. loans Loan from FIs/banks/bonds
References
♦♦ Scheme for financial restructuring of state distribution companies (discoms), Ministry of Power, Government of India, October 2012
Other loans Grants towards capital assets Consumer contribution Total capital employed 0
Source: TERI
16 Coal Insights, October 2012
50,000
100,000
150,000
200,000
250,000
300,000
350,000
♦♦ Shunglu Committee Report, Planning Commission, December 2011 ♦♦ State owned electricity distribution companies: a report by ICRA
Cover Story
‘Discom bailout package a short-term solution’
I
Arindam Bandyopadhyay
f there is one segment which has been one of the worst hit due to the ongoing domestic coal crisis, it is undoubtedly the power sector, which is largely dependent on coal for its generation needs. Of course the shortage of gas has not helped them much. In a free-wheeling interview with Coal Insights, the director general of the Association of Power Producers (APP), Dr Ashok Khurana, says that the present crisis is the result of several long-standing issues. While there are efforts to resolve a few of them, there are others which need immediate attention and for which the government needs to take important policy decisions without delay. Dr Khurana holds forth on a variety of issues – from the financial restructuring of the distribution companies to alternative sources of energy. Excerpts: It is being said that the Indian power sector is in shambles. Just how severe is the crisis? The power sector is currently facing the worst crisis it has seen in many years. On the generation side, the growing shortage of fuel – both coal and gas – has severely tripped the generation
18 Coal Insights, October 2012
output of the sector. By my estimates, more than 30,000 MW generation capacity is currently stranded due to fuel unavailability and pricing issues. On the distribution front the utilities are in such bad financial shape that they resort to load shedding rather than procure power at even affordable rates from the market. In fact, from a power project developer and financer’s point of view, the present situation can only be termed as nightmarish since they have already sunk in massive amount of funds in to the projects which are turning into NPAs for no fault of their own. The severity of the crisis is evident from the fact that equity and debt are not available for any ongoing or new projects. The viability of the generation segment under the present regulatory structure is under serious threat.
What is the genesis of this crisis? Who is to be blamed for the current situation? A multitude of factors have converged to lead to the current crisis. Failure of policy to sync the coal sector and power sector regulations have led to developers facing uncertainties regarding assurance of fuel supplies which has manifested itself in possible default of contractual power purchase obligations. From the operational point of view, statutory clearance related and other issues have prevented CIL from increased coal production at the required rate. Gas output from the KGD6 basin has been steadily declining leading to shortage of gas for projects which were built up on the basis of much higher projected gas availability from KGD6. As the distribution and pricing of the two vital inputs for generation – coal and gas – is completely controlled by government, necessary steps need to be taken by the government to make generation viable if imports are resorted to in order to tide over domestic fuel constraints. An ever increasing revenue deficit of the distribution utilities have led to power project developers facing risk not only from the fuel input front but also the revenue and financing aspect. While the blame for the current situation cannot be assigned to any specific entity, the resolution of the current situation has to come from policy/regulatory recognition of the ground realities. It is a matter of great concern for the entire nation that despite record generation capacity in the 11th Plan, many of the newly commissioned projects are operating at suboptimal capacity. Please tell us about the restructuring initiatives taken by the government to rescue the bleeding discoms. In my view, it is a fairly comprehensive package which is being proposed for the distribution utilities. It addresses both
Cover Story the immediate challenges of accumulated losses for discoms, and also has a long-term prescriptive roadmap to improve the health of the sector. Immediately, the package proposes that 50% of the short term liabilities of the utilities would be taken over by the state government, and another 50% would be re-structured by lenders and serviced by the discoms with a moratorium of three years on principal. In addition to this, the package also proposes timely tariff revisions, cost-reflective tariffs, and implementation of open access by all discoms. All these measures will go a long way in ensuring that the health of discoms can be improved in the medium term. As their health improves, it would solve one of the major issues of the power sector – the bankability of the PPAs. It would also pave way for power developers to raise cheaper and international financing on the strength of PPAs with discoms. Do you think the financial restructuring of discoms will suffice? Or do you suggest more fundamental changes? While restructuring of discoms does solve a major issue in the power sector, the longterm challenge continues to be able to provide adequate coal and gas to our power capacity. In the 11th Plan period which ended in March 2012, the private sector has participated with unprecedented capacity addition of over 23,000 MW, or almost 40% of the total capacity added. However, we find that most of this capacity is now stranded for want of adequate coal and gas. Solving our coal issues is a larger systemic issue, and involves a series of regulatory measures, including expediting forest clearances for coal mines, introducing a surplus coal policy, expediting coal block auctions and finally, opening up of the coal sector.. For the gas based generation, adoption of differential time-of-day tariffs would help in incentivizing such plants. There is also a pressing need to make Open Access a cognizable reality.
for power generation has stemmed from the failure of the Standing Linkage Committee to exercise adequate caution and due diligence while awarding linkages, leading to issuance of Letter of Assurances for supply of coal beyond CIL’s ability to deliver. Another major cause for the current coal woes stems from various coal projects getting stuck for want of statutory clearances. Going ahead, the share of coal based capacity out of the total generation portfolio of the country is slated to rise from the current 57% to 63% by the end of the 12th Plan, and hence it is imperative to resolve the policy/regulatory and operational issues impacting coal availability at the earliest. What steps should be taken to mitigate the coal deficit facing the power sector? There are already some steps being taken in the right direction. A committee has been set up to help operationalise the MDO (Mine Developer and Operator) model to enable CIL to outsource coal mining to private developers. However, the government needs to seriously think about freeing up the coal sector and create competition for CIL in order to spur the domestic coal production. The government should focus on expediting clearances and land acquisition for coal blocks. Even after the Group of Ministers on Coal has recommended forest clearance for the Chhatrasal and Mahaan coal blocks, the Ministry of Environment and Forests has not cleared these blocks, which speaks of a sorry state of affairs. Such regulatory lethargy does not help the coal sector in any way, and only increases the import bill (which is likely to surpass 100 million tons this very year). In addition, the industry has also been waiting for a forward looking surplus coal policy, which would incentivise production of coal to fulfill deficits. Based on our numbers, I can say that India can wipe out its complete coal deficit if it frames a suitable surplus coal policy which can incentivise coal miners to augment coal production.
What is the role of coal in all this? Due to coal being the dominant fuel source for power generation in India, the current coal shortage has hit the power sector extremely hard. This deficit of domestic coal
20 Coal Insights, October 2012
What are your views on alternative energy sources and nuclear power? India is a complex power market, and we need to balance our fuel mix by having a
strong component of alternate energy and nuclear power. While we need to be careful with nuclear, in view of the social and environmental issues concerned with it, I am of the strong view that the government should take all possible steps to increase alternative energy, particularly solar, and all possible incentives should be provided to the sector. What role is the APP playing in shaping up the power sector in India? APP is the industry’s premier think tank, and our members constitute over 90% of the power capacity in the private sector. In the 12th Plan period, about 60% of the upcoming power capacity is likely to be in the private sector. Therefore, APP’s role is to highlight the issues facing the private sector, and ensure timely redressal to ensure that our capacity addition targets can be met. Importantly, APP also undertakes studies from time to time, in order to highlight strategic issues facing the sector, and proposes long-term policy alternatives to the government of India. These studies seek to fill the sectoral knowledge gaps and help in informed decision making by the authorities. APP has been repeatedly acknowledged as a responsible industry representative by the Government of India, and we play a constructive role in the country’s power sector by being an interface between the private sector and the government of India. How do you view the Indian power sector in 2030? By nature, I am an optimist, so I always look at the beautiful possibilities that can unfold in the power sector provided the Government takes timely policy steps. Our vision for 2030 is called 30 – 30 – 30. That is, I expect that by 2030, the country would have a mix of at least about 30% of renewable energy (along with an optimal hydro mix) in our power sector and add about 30,000 MW of power capacity each year with adequate coal and gas. By 2030, with proactive policy measures, I envisage that our power shortages would be fully met, and we would be able to fully harness our coal production and be a coal surplus country.
INTERVIEW
‘Meeting energy demand with limited resource is a big challenge’
I
Rakesh Dubey
ndia’s energy crisis is not a new phenomenon, and though the government has been trying in recent times to make the road smoother for developers, a lot more obviously needs to be done. Very recently, the government has taken a number of initiatives to boost production of domestic coal, since that continues to be the primary source of fuel and though imports are happening, most also agree that it is not a long-term solution. In this situation, the role of the Planning Commission becomes important in chalking a viable roadmap for the country in the energy segment. In a candid interview with Coal Insights, adviser (energy) of the Planning Commission, I.A. Khan, holds forth on a wide spectrum of issues regarding the energy crisis and steps that need to be taken to combat it. Excerpts: Please give us your view on the current challenging phase of the Indian energy sector. India is not endowed with enough energy resources. Whether it is coal, hydro carbon or uranium or gas, the availability is way below our needs. From the planning perspective thus our challenge is in trying to meet the energy demand with limited resources. As far as coal is concerned, the production is limited. In hydro power, we have the potential to generate 150,000 MW of electricity through this mode, but actual generation is not even 40,000 MW. Whatever we are designing now to further tap our hydro potential, are all in remote areas and often not acceptable to the local inhabitants. If you take the case of North
22 Coal Insights, October 2012
East, there are so many problems. It will take a long time to complete any new project there. Then this power has to be brought back to the mainland because it cannot be consumed there. In coal, for instance, everything depends on how much we are able to boost production over the next four to five years. Similar is the case with uranium. It is said that we have enough reserve to generate 10,000 MW of electricity through this route and that is why we are negotiating with the international community to supplement the growth in generation capacity that are going to come up in the next five years. In a nutshell, we have enormous requirement, but the availability of resources is limited and we have to build strategies on how to meet the demand and our energy requirement to sustain our economic growth.
What is the growth expected for India’s energy demand in coming years? What will be the major fuel source that we can bank on? For the Twelfth Plan (2012-17), we have projected a growth of 7 percent in commercial energy. This projection, however, looks ambitious. It was based on a forecast of 8-9 percent growth of the economy, but the effective growth rate may come down to 8.2 percent. So to achieve a GDP growth of 8.2 percent, we plan to increase the availability
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INTERVIEW of energy by 7 percent. This includes the energy to be generated by coal as well as other resources. If you consider the effective growth in energy during the Twelfth Plan period, the majority of around 69,000 MW is likely to come from coal based generation. The capacity planned from gas based plants is only 2,500 MW. So it can be said that the majority of power generation during the next five years will still be coming from coal.
demand and supply will widen and we will see more problems. We have to increase the domestic coal production level and then only we can match the demand. We cannot depend on imports because imported coal will not be much in demand. The high price of imported coal affects the electricity sector because it cannot be passed on. Overall the distribution companies cannot afford high cost power and so the alternative is to provide cheap coal.
How can we meet the additional demand for coal?
Isn’t acquiring foreign mines a viable alternative?
It is estimated that total demand for coal will be around 1000 million tons (mt) by the end of the Plan period. Of this, the domestic availability is projected to be around 750 mt. Some of it will come from Coal India’s (CIL) new blocks and some from captive blocks. Let us see how much of this ultimately comes up. But we have planned to add 69,000 MW of coal-based generation capacity. It implies that every year we have to add around 13,000 to 14,000 MW of coal based capacity from now on. Now if you go by the numbers, considering that 4.5 to 5 mt of coal is required for 1,000 MW capacity, we will need around 100 mt of additional coal every year. However, while making this calculation in the Planning Commission, instead of considering a plant load factor (PLF) of 85 percent, we assumed that plants will operated at a PLF of 70-75 percent, which is what we can achieve in the coming years. This is so because as the base capacity increases, the PLF will automatically come down.
Even if such assets are acquired, that will be not an easy option. Take the example of Indonesia where they suddenly changed the price and some plants which were planned to
“If you go by the numbers, considering that 4.5 to 5 mt of coal is required for 1,000 MW capacity, we will need around 100 mt of additional coal every year.” Even though some plants may operate at 100 percent PLF, the overall PLF may not go above 75 percent. This is not so bad. If you go to any country, even to the US or China, I don’t think you will find a PLF of above 60-65 percent. Actually, you need to have
24 Coal Insights, October 2012
surplus capacity to meet the contingency. In our case, we have the capacity, but because of the lack of availability of coal, the overall capacity utilisation of power plants has come down. As for imported coal there is a cost factor. The discoms are not willing to take imported coal based generated electricity. So the main issue is how to increase the availability of domestic coal. The government is taking various initiatives. The developers can give you a better idea of the ground reality, but we feel the government is sincerely trying to address the issues so that the developers can move forward. What are the governmental initiatives you are referring to? Well, the GOM has taken a decision to do away with the “Go and No Go” concept. If you have already increased production by say 20-25 percent, then relaxation has been given in terms of CEPI index. These are initiatives the government has taken to bring down the hurdles for the developers, so that they face less problems in implementing their projects. But again coming back to coal, how much coal we will be able to get through the incremental capacity? Our estimate is that even to reach that 750 mt level, we have to increase incremental coal production by 4045 mt every year, but how much we will be able to do only time will tell. This year we have planned at least 7 percent incremental growth in production. If we are not able to increase coal production by 7 percent, the gap between
“The main issue is the prices of coal should be stable. The input price for power sector should be cheaper, and only then can the Indian power sector survive.” come up based on Indonesian coal are facing problem. Even then, I must say the problem is not much so far as Indonesia is concerned because their coal quality is more or less similar to ours; but I have seen many people who had acquired assets in Australia, South Africa and Mozambique. They may be at a greater risk. The point is that overall availability is not going to improve much even with outside coal. We need to keep in mind that overseas assets are not easy assets. The owners of these assets are supposed to build roads, ports and incur so many additional expenditures. After doing all these things, when that coal is going to be delivered in India, what would be the price of that coal? By the time it reaches India it may no longer be cheap. Besides, the volatility in international coal prices would be very high and their availability uncertain. It is therefore a far better option to concentrate on the production of domestic coal. What needs to be done to make the power sector viable? To make the power sector commercially viable, we need to maintain or restrict the
INTERVIEW input cost at a reasonable level. Only then can the power sector be supported and continued in the long run. The nodal point is that in any country growth is difficult to sustain if domestic raw material is not available for its power sector. In imported coal, the lateral growth will be constant because of uncertainty in international prices. Also, the mining cost in those countries is quite high. In the US, the price of coal mining is $40 per ton; if you go to Australia it is a bit less than that. However, just because our domestic prices are cheaper, does not mean that we can raise the prices. Some people may consider CIL prices to be cheap, but I don’t, because on per GCV basis the price of CIL is much higher than what is perceived to be. The average price of CIL coal is around `1,500 per ton for 3,500 to 4,500 Kcal per kg of material and that cannot be called cheap. And you shouldn’t compare CIL prices with trading prices of international coal. It is not a good comparison. There are various issues like spot prices and long term prices in the international market and these two cannot be strictly compared. The main issue is the prices of coal should be stable. The input price for power sector should be cheaper, and only then can the Indian power sector survive. Even gas prices have to be reasonable in order to be able to support economic growth. What are your views about gas based generation? Can it be an alternative viable input for the power sector? That is happening in the US. The availability of shale gas is likely to improve in that country and because of that overall availability of CNG is likely to improve. Because of the availability of shale gas the power plants in the US are not taking coal. So their coal is also being exported to Europe at a much cheaper rate. Even the Indian companies are exploring the opportunity as to how to
Govt sets 2017 date for universal, uninterrupted access to power The Government of India (GoI) has set a 2017 date for providing universal and uninterrupted access to electricity to all the households in the country. Announcing this, Prime Minister Manmohan Singh said the government aims to provide 24x7 electricity to all households and affordable access to power in the next five years. To this end, the government is stressing on tapping renewable energy sources such as solar power, the prime minister said while inaugurating “International Seminar on Energy Access” in New Delhi. About one million households in India are now using decentralised solar energy to meet their lighting energy needs, he said, adding that the government is also striving to light up around 20 million rural households with solar home lighting by 2022. “The Jawaharlal Nehru National Solar Mission, launched under the aegis of India’s National Action Plan on Climate Change aims to install 20 Gigawatt of grid connected solar power by 2022….Overall, we aim at accelerating the overall deployment of renewable energy in India to achieve around 55 GigaWatt of renewable power by the year 2017,” the prime minister said. “In our planning processes in India, we consider access to energy services as vital to inducing rapid development, reducing inequality and making economic growth processes more inclusive. Under the ongoing Rajiv Gandhi Rural Electrification Scheme, our goal is to electrify all the 600,000 villages of India. As a result of our efforts, more than 100,000 villages have been provided with electricity connections in recent years. Now, only a few thousand villages in the country remain un-electrified,” he added.
bring that coal to India. But because of the transport cost it may not be feasible. But it is important to understand that how much the Asian market is going to be affected because of the availability of shale gas in the US. In Asia, the issue is that we do not have major pipelines here and so gasification will be done at one place and liquefaction at other which will increase cost. So unless and until the benefit of piped gas is available and that too at low prices, the Asian situation will not improve till the prices come down. In any case, the price of gas for Indian
“People have started saying that electricity tariff should be increased in India. But we have to see all the aspects. If you go to Tamil Nadu, which generates maximum power through imported coal, the tariff is already very high. You have to strike a balance and ensure that the country’s economic growth is not affected.”
26 Coal Insights, October 2012
plants should not be more than $7-8 per MMBTU and the same equation is applicable to coal based power plants and gas based power plants. If it is not so, and the gas is available at international prices, then it will not be economical for the Indian power plants. So the basic issue for the Indian power plants is that the input cost has to be managed so that the power tariff which is regulated by the regulators does not go beyond a certain level. If it goes beyond that level, it will not be able to fuel the economy. Recently, after the discoms reported huge losses, people have started saying that electricity tariff should be increased in India. But we have to see all the aspects. If you go to Tamil Nadu, which generates maximum power through imported coal, the tariff is already very high. You have to strike a balance and ensure that the country’s economic growth is not affected.
coal market fundamentals
Indian demand for low CV Indonesian coal picks up Coal Insights Bureau
I
ndian demand for lower calorific value Indonesian thermal coal picked up in October leading to tight supply of October-loading cargoes, industry sources told Coal Insights. However, despite demand from India for Indonesian thermal coal remain strong, Indian buyers are awaiting better deals in the absence of Chinese market players, sources said. Some Indian buyers are expecting further correction for Indonesian thermal prices in the near term so much of buying is not happening, sources said. The retail market in India for Indonesian thermal coal has picked up this year, especially in Kandla and Mundra ports on the west coast of India and Paradip port on
NTPC to procure 7 mt imported coal
value 6,000 kcal/kg GAR US coal being offered into India at $85-87/ton CFR. Meanwhile, four December loading South African cargoes traded at $ 83.75 a ton FOB Richards Bay. Traders and utilities said that there is a substantial amount of Q4 South African coal in the hands of traders which they are now offering and this is helping to weaken prices. They said that both India and China, the two biggest spot buyers of thermal coal, remain sidelined, and this will further weigh on prices. India’s imports of coal in general and South African in particular have been strong all year despite the current lull in spot buying. India took 1.7 million tons of South African coal in September, down from 1.6 million in August, trade sources said. In the international market, Australian
Steam coal CFR India ($/ton) West (6,300 kcal/kg GAR)
West (5,900 kcal/kg GAR)
West (5,000 kcal/kg GAR)
East (6,300 kcal/kg GAR)
East (5,900 kcal/kg GAR)
East (5,000 kcal/kg GAR)
1-Oct-12
97.50
79.95
63.30
98.50
79.25
62.75
2-Oct-12
97.50
79.90
63.15
98.50
79.05
62.65
3-Oct-12
97.25
79.70
63.05
98.25
79.05
62.55
4-Oct-12
98.60
79.70
63.05
99.60
79.05
62.55
10-Oct-12
99.60
79.90
63.50
100.60
79.25
62.90
11-Oct-12
98.40
79.70
63.50
99.40
79.05
62.90
12-Oct-12
97.75
80.00
63.70
98.75
79.35
63.10
Date
the east coast. India had imported nearly 25 million tons (mt) of coal for retail business in fiscal 2011, while it is expected to touch 40 mt this year, industry circles felt. With China remaining on the sidelines amid strong hydropower and high stockpiles, Indians are trying to take advantage of a buyer’s market. Meanwhile, the thermal coal market remained oversupplied, with several US cargoes being offered into Asia-Pacific markets, sources said, with higher calorific
28 Coal Insights, October 2012
thermal coal of heating value of 6,300 kcal GAR is currently being offered at around $83/ ton in October compared to $89.55/ton in September. Offers of South African thermal coal of heating value of 6,000 kcal NAR remained stable at $86.30/ton in October compared to $86.55/ton in September. Offers of Indonesian coal of heating value of 5,900 kcal GAR is hovering around $72.5/ ton in October compared to $72.8/ton in September, while coal of heating value 5,000 kcal/kg GAR is quoted at $56/ton.
NTPC Limited, India’s largest power utility, has floated seven invitation for bids (IFB) separately to procure a total of 7 million tons (mt) of imported steam coal for its various power plants, according to information available with Coal Insights. Out of the total amount of imported steam coal to be procured, 0.8 mt is for Simhadri and Ramagundam power plants, 1.25 mt for Dadri, Tanda & Unchahar plants and 0.8 mt for Rihand, Vindyachal & Singrauli power plants, the last date of bid submission for which is scheduled on November 15, 2012. Out of the remaining quantity, 0.4 mt of the material will be procured for Simhadri power plant, bids for which can be submitted till November 14, 2012. On the other hand, 1.25 mt will be procured for Farakka, Kahalgaon & Badarpur plants, 1.25 mt for Talcher Thermal & Talcher Kaniha plants, 1.25 mt for Korba, Sipat & Mouda plants bids for which can be submitted till November 16, 2012. The material to be procured should have GCV of 5,800-6,500 Kcal/Kg with up to 20% total moisture, 20% ash content on air dried basis and up to 0.9% Sulfur on air dried basis. The total amount of imported coal will have to be delivered to power stations over a four-month period, as per delivery schedule to be given to the successful bidder. NTPC Limited, which had floated invitation for bids (IFB) for procurement of a total of 5.1 million tons (mt) of imported steam coal for the utility’s 14 thermal power plants, had placed the order to MMTC Limited and Adani Enterprises after a prolonged delay.
coal market fundamentals
Spot coking coal prices firm up marginally Coal Insights Bureau
S
pot coking coal prices firmed in October after a flurry of trades in the last few weeks took supply out of the market, giving producers a chance to raise their offers. Premium low-vol HCCs traded at around $143/ton FOB in October, up from $141/ton FOB Australia. Low vol PCI prices recovered to $109/ton in October compared to $103/ton with some buying interest. The semi soft variety was quoted at $97/ton in October compared to $94/ton in September. Spot availability was more limited especially for premium low-vol HCC, and low-vol, low-ash PCI, sources said. Appetite in China was strong, suppliers said. This
coincided with higher indicative bids for the whole spectrum of metallurgical coals. Chinese steelmakers expressed interest in buying premium low-vol Australian HCC at $157-160/ton CFR. Traders were bidding a touch lower at around $155-157/ton CFR. Outside of China, end-users were willing to consider higher prices, but it was unclear what their requirements were. Firm buying interest was also evident in India. Buy-side interest was said to be at $145-150/ton FOB, for premium mid-vol HCC. Pricing for second-tier HCC was also higher, with mid-vol Indonesian HCC heard offered at $145/ton CFR China. Prospective buyers now pegged the tradable value of such coal at around $140/ton CFR.
Coking coal CFR India ($/ton)
Date 4-Sep-12
HCC Peak Down Region
Premium Low Vol
HCC 64 Mid Vol
Low Vol PCI
Low Vol 12 Ash PCI
Semi Soft
Met Coke
171.50
172.00
147.50
125.00
106.50
112.50
331.00
10-Sep-12
161.50
161.50
145.00
120.50
108.00
112.00
329.00
11-Sep-12
161.00
161.00
145.00
119.00
108.00
112.00
325.00
12-Sep-12
159.00
159.00
144.00
118.50
107.50
111.50
325.00
13-Sep-12
157.50
157.50
142.00
117.50
107.00
111.50
325.00
Tata Steel to get first Benga cargo Tata Steel Europe will receive its first cargo of coking coal from the Benga mine in Mozambique by the end of this month or the beginning of November, Managing Director Karl-Ulrich Koehler said during a press briefing at the World Steel Association’s annual conference in New Delhi. The first delivery of about 35,000 ton will arrive in Scunthorpe, UK, and it will be followed by other shipments from December on, Koehler said. Tata Steel holds a 35% stake in the Benga mine while Rio Tinto holds the rest. Rio Tinto started exporting hard coking coal from the mine in June this year. The mine is expected to produce 1 mt of coking coal in 2012, and output is set to increase to 20 mt/year by 2015. Separately, US-origin semi-hard with below 20% VM, 8-9% ash, 1.25% sulfur with 8-9 CSN was heard offered at $140/ton CFR China for a Capesize cargo. India imports 30-35 mt per year of coking coal currently. India plans to invest about $1 trillion in the infrastructure sector during the 12th five-year plan period running from April 2012-March 2017. Sources have earlier estimated this would generate some 200-250 mt of steel demand in the period.
14-Sep-12
155.50
155.50
139.50
118.50
108.00
112.50
325.00
20-Sep-12
155.50
155.50
139.50
118.00
109.00
109.50
324.00
21-Sep-12
154.50
154.50
138.50
117.50
109.00
109.50
324.00
Met coke prices rebound marginally
24-Sep-12
154.50
154.50
138.50
117.50
109.00
109.50
317.00
25-Sep-12
155.00
155.00
139.50
116.50
109.00
108.50
317.00
Metallurgical coke rose slightly in October as new, higher offers for CIS material hinted at higher tradable values for 62% CSR material. 62% CSR, 12.5% ash blast furnace coke is quoted $4/ton higher at $323/ton CFR India. Two new offers for CIS coke were heard in the Indian market. Both were around $310-315/ton CFR India by different traders, and were said to be approximately 61% CSR. However end-users in need for November cargoes was only willing to consider $300/ ton CFR India for such coke. 
26-Sep-12
156.00
156.00
141.50
116.50
109.00
108.50
317.00
28-Sep-12
156.00
156.00
142.00
118.00
111.00
108.50
317.00
1-Oct-12
157.00
157.00
142.00
118.00
111.50
108.50
317.00
2-Oct-12
157.00
157.00
142.00
118.50
111.50
108.50
317.00
3-Oct-12
157.50
157.50
142.50
119.50
112.00
108.00
316.00
4-Oct-12
157.00
157.00
142.00
120.00
111.50
107.50
316.00
10-Oct-12
159.50
159.50
144.00
127.50
114.50
112.50
319.00
11-Oct-12
164.00
164.00
146.50
128.50
116.00
113.50
323.00
12-Oct-12
164.50
164.50
147.50
129.50
118.00
116.50
323.00
30 Coal Insights, October 2012
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Feature
Coal shortage to grip nation
Blame it on generous grant of linkages: Rao Coal Insights Bureau
A
t a time when India Inc. is squarely blaming Coal India Ltd (CIL) for the ongoing coal shortage, CIL chairman S. Narsing S. Narsing Rao, Rao has fired a salvo, Chairman, CIL pointing a finger at the generous grant of linkages by the government during the last five years without taking supply side issues into consideration. In some way, today’s problem has its genesis in the New Coal Distribution Policy (NCDP) which was formulated in October 2007, suggested Rao. “Until then, it was very restricted. Only the lucky few used to get linkages.” The restricted availability however affected the user segments, as a cement company having coal linkage and another not enjoying the facility had different costs of production. It was under such circumstances that the NCDP was formulated. “But while the demand side of the story was looked into, the supply side was not considered,” he said. Rao, who spoke at length at a recent panel
200 180 160 140 120 100 80 60 40 20 0
discussion on Indian Coal Story in Kolkata, recalled that subsequent to the formulation of NCDP, new linkages were awarded for 420-425 million tons (mt). These new linkages were primarily granted to facilitate the power sector growth. Considering that a power plant takes a maximum of five years to be set up, the new linkages were to be ready with that period. But “nobody thought how this coal will come in five years.” In fact, in 2008 the CIL Board went on record urging the government not to grant any more linkage. At Singareni Collieries Company Ltd (SCCL), which was then headed by Rao, the situation was more or less similar. Beyond a point, the company expressed its inability to honour further linkages. However, given its smaller size and lesser command area, SCCL did not face as heavy a burden as CIL did. MoC projections
Earlier, in 1997, at the beginning of the Ninth Plan (1997-2002), the coal ministry analysed the demand growth projections and CIL’s capacity to increase supply. The ministry assessed that CIL production may reach 510 mt by the end of the Eleventh Plan (200712). Even CIL during that time expected to reach a production of around 520 mt. However, CIL ended up with total production of Incremental production of CIL (in mt) 435 mt in FY12, with an 85 mt shortfall visà-vis projections. This volume of coal, said Rao, could have fed 17,000-20,000 MW of thermal generation capacity. The same story could be repeated during the Twelfth Plan period (2012-17). During IX Plan X Plan XI Plan Total XII Plan the Twelfth Plan, over
32 Coal Insights, October 2012
60,000 MW of generating capacity would come up in the coal-based segment. Shortage of domestic coal will result in the projects becoming stranded. This new capacity addition would increase CIL’s commitment to the sector from current 320 mt to 560 mt by 2015. As per an estimate, CIL will have to achieve incremental production of at least 180 mt to satisfy the additional demand from the power sector during the Twelfth Plan. This estimated volume, noted Rao, would be equal to the total incremental production achieved in the last three Five Year Plans (Ninth, Tenth, Eleventh). Evacuation problem
Another major shortcoming for the coal sector has been the lack of evacuation infrastructure or railway links, the chairman said. There are huge potential of additional coal production in some coalfields which are not connected by rail links. “Unless you connect these coalfields we cannot start operations there,” he added. These mines are mostly located in
In 2008 the CIL Board urged the government not to grant any more linkage. At Singareni Collieries Company Ltd (SCCL), which was then headed by Rao, the situation was more or less similar. Jharkhand, Chhattisgarh and Odisha. Once these mines are linked and evacuation infrastructure is put in place, the domestic production shortage can be mitigated. “Until this is done, adding a few million tons here and there will not solve our problem,” he said. Also, improved rail links will help reduce the transportation cost to a great extent. For a large volume of coal supplied to the power sector, the cost of transport is greater than the cost of coal. For instance, the notified price of coal at Ib Valley (in Jharkhand) is around `600 per ton whereas the landing price in Karnataka is `1,800-2,400 per ton. “Except for pithead based power stations, the cost of transportation is very substantial,” Rao said, suggesting that the nation could have benefitted much if the power stations were planned to be set up near pitheads.
feature
CIL focusing on infra to step up production: Garg Coal Insights Bureau
C
oal India Limited (CIL), which meets almost 80 percent of India’s coal requirements, is bracing up to face the immediate challenges in the energy vertical. While the country keeps on blaming the world’s largest coal miner, CIL is embarking on several fresh initiatives to give coal production a major boost. To start with, the company has undertaken a number of projects to explore its already existing but hitherto unexplored reserves. In fact, a substantial portion of CIL’s incremental production is expected to come from six major coalfields, said D.C. Garg, chairman & managing director of Western Coalfields Limited (WCL), a subsidiary of CIL. These include Rajmahal of Eastern Coalfields Limited (ECL), North Karanpura of Central Coalfields Limited (CCL), Korba & Mand-Raigarh of South Eastern Coalfields Limited (SECL) and IB Valley & Talcher of Mahanadi Coalfields Limited (MCL). As success of CIL’s growth plan largely hinges on these six coalfields, CIL and four other subsidiaries have to ensure quick implementation of the new projects in these coalfields. Infrastructural upgradation
To step up total production, special attention is being given to overall improvement of mining infrastructure. Accordingly, vital railway infrastructure projects are being undertaken for planned evacuation of coal, Garg told Coal Insights. The Tori-Shivpur-Hazaribagh track extending for 95 km is being laid for evacuation of coal from upcoming fields of Magadh-Amrapali at North Karanpura Coalfields. Along with this, Magadh and Amrapali Railway Sidings branching off from Tori-Shivpur-Hazaribagh is being constructed while extension of railway sidings to Baroud-Bijuri (63 km) for harnessing full
34 Coal Insights, October 2012
potential of Mand-Raigarh coalfield is under implementation. Doubling of Anuppur-Bilaspur section for easing coal movement to up-country power stations from SECL is another major project on the cards. Moreover, construction of 53.5 km railway track from Gopalpur to Manoharpur at Ib Valley Coalfield is being carried out with special emphasis. Strategic initiatives
Apart from infrastructural upgradation, CIL is also training focus on involving the mine developer and operators (MDOs) on a larger scale. MDOs play a crucial role in increasing coal production and the MDO concept for operation of coal projects can be one of the best options for augmenting coal production through global bids, Garg said. Under this model, the mine is to be explored (if felt necessary by the contractor), planned, developed and operated by the contractor for production of guaranteed quantity of coal per annum for a minimum period of 20 years or life of the mine whichever is less on turnkey basis. Altogether, a total of 37 mines or blocks having total capacity of 164.25 mt have been proposed by production subsidiaries. Out of this, 18 blocks are opencast (OC) blocks having 137.80 mt capacity, 16 blocks are underground (UG) blocks having 18.45 mt capacity and 3 blocks are mixed mines having 8 mt capacity. To operationalise these blocks, certain strategic initiatives have been taken which include augmentation of exploration capacity to ensure development of coal blocks at desired pace, development of new projects alongside production increase from existing units. Besides, adequate focus is being given on deployment of state-of-the-art technology in UG mining. Upgradation of equipment, going for joint venture/strategic alliance in coal mining and allied areas, infrastructure development for coal evacuation are also important initiatives
D C Garg , Chairman cum MD, WCL
so far as enhancing production is concerned. Apart from these, Coal Videsh initiatives as well as Care for the People & Environment initiatives are utmost important strategic moves on the part of the company. For foreign acquisition, CIL is actively scouting for coal resources abroad through equity stake in working or green field projects. It has already acquired two virgin coal blocks in Mozambique and has also invited Expression of Interest (EoI) from global operators for selection of strategic partners for overseas operations. Five proposals from three countries are being considered for further due diligence, a senior official of CIL informed. In UG mining, CIL has identified seven greenfield properties and 18 abandoned mines with estimated reserves of over 1,600 mt for development on risk-gain sharing basis. The coal major has also decided to introduce a number of technological advancements to improve production. Some of the measures include deployment of higher capacity equipment for opencast operations for increased and more efficient operations. CIL is in an advanced stage of implementation of Highwall Mining for recovery of good quality coal in OC mines beyond economic stripping ratio limit. Moreover, the miner has also deployed Operator Independent Truck Dispatch System (OITDS) for efficient fleet management in 11 large OCP contributing 32 percent of the total production of the company. The company is actively working out
feature various control measures currently available for controlling UG mine fire (in Jharia and Raniganj) delineated in master plans. Implementation of Master Plan towards fire control, surface stabilisation, rehabilitation with an estimated capital outlay to the tune of `7,112.11 crore, may help CIL to recover locked coal to the tune of 1,453 mt to the possible extent. At the time of nationalisation, the surface area affected due to fire was 17.32 sq. km. However, after taking proper mitigation measures, the affected area was reduced to 8.90 sq. km. Beneficiation projects
Until now, CIL is operating 17 washeries with cumulative throughput capacity of 39.04 mt. The company is going to set up another 20 integrated coal washaries with total capacity of 111.10 mt to supply washed metallurgical as well as thermal coal to consumers. This will not only save transportation cost of high amount of ash contained in Indian coal but will also enable CIL to supply coal with much higher calorific value. Other initiatives
CIL is pursuing for development for recovery and commercial utilisation of coal bed methane (CBM) from deep seated seams or from abandoned mines. A project called ‘Collaborative Development of CBM’ by the consortium of CIL and ONGC is in the
36 Coal Insights, October 2012
implementation stage. The consortium has been allotted two blocks at JCF and RCF for development of CBM. A demonstration project named ‘CBM Recovery and Commercial Utilisation’ was taken up at Moonidih/Sudamdih mines of Bharat Coking Coal Ltd (BCCL). Secondly, a CIL R&D project titled ‘Development of capacity for delineation of viable CMM/AMM’ is under progress. The prospective CMM areas in ECL, BCCL and CCL have been identified. EOIs for two blocks in Jharia and East Bokaro Coalfields have been floated already. According to sources, CIL is also concentrating on UG coal gasification (UCG) of deep seated seams from where extraction of coal is difficult. CIL intends to develop UCG under the collaborative regime. EOI for development of UCG in two blocks have been put up. In India, there are 18 Degree-III & 102 Degree-II UG mines, which emit considerable quantity of methane. To reduce methane emissions, VAM could be trapped and utilised and CIL will be able to earn carbon credit out of it. EOI for development of VAM has been put on the website of CIL/CMPDI and India CBM/CMM Clearinghouse. Linkage rationalisation
According rationalise
to Garg, CIL intends to coal linkages to optimise
transportation costs. Presently, coal supply is based on linkages which were offered in the past and are not essentially optimal with respect to transportation of coal. Long haul coal transportation often results in major pilferages and delay in delivery. Therefore, the government is considering setting up of an inter-ministerial panel for rationalising the coal linkages. Coal India will play an active role in the same and provide all necessary key inputs. Exploration activities
CIL is taking initiatives to enhance annual drilling capacity to 0.582 mn meters by FY13 from 0.498 mn meters achieved in FY12. The company intends to achieve conversion of inferred and indicated to proved reserves thrice the historical performance. The company is also undertaking systematic exploration to arrive at reliable estimate of the country’s coal reserves and application of information technology to create an authentic geo database. Meanwhile, along with business the company aims to take multiple steps to create strong relationship with the communities which will ease land acquisition problems. CIL supports 665 educational institutions, provides 85 hospital services (with 1,495 doctors and 5,835 hospital beds) and supplies water to 2.3 million people in and around the mining areas. These initiatives have gained more significance in recent years.
feature
Indian refiners reduce pet coke prices in October after two months
Coal Insights Bureau
I
ndia’s leading petroleum coke (fuel grade) producers have marginally reduced prices for October loading after managing to keep prices unchanged for August and September despatches, an industry source said. While Reliance Industries Ltd (RIL) has reduced its basic price by Rs 150/ton to Rs 6050/ton (ex-refinery), Essar Oil Ltd has reduced the prices by similar margin to Rs 6000/ton for October despatches, the source said. Other refiners like IOCL and HPCLBhatinda too have reportedly cut prices by around same margin, but Coal Insights could not confirm. Both RIL and Essar, along with others, had last reduced prices by Rs 400/ton for
38 Coal Insights, October 2012
July deliveries tracking international trend to Rs 6200/ton and Rs 6150/ton respectively. Despite the reduction in basic prices by Rs 150, Coal Insights learnt that the reduction for major buyers, who get quantity discount over and above the basic price, is around Rs 300/ton. Industry sources said that reduction in prices for October despatches might have been prompted by a weak trend in international coal prices, particularly South African origin, due to low demand from China. Incidentally, Indian cement makers prefer buying South African coal the price of which is currently ruling at around $83/ton fob compared with a high of around $90/ton towards the end of June. It is expected that international coal prices would continue to move around current levels as any further reduction is unlikely in the
Gujarat NRE Coke consolidates Indian operations The board of directors of Gujarat NRE Coke Limited has decided to amalgamate Bharat NRE Coke Limited (BNCL) with Gujarat NRE Coke Limited (GNCL), the flagship Company of the group, the company said in a statement. According to the scheme of amalgamation, BNCL shareholders would receive two shares of GNCL for every share held by them in BNCL. This would result in increase of paid up capital of GNCL by approximately 8.8 percent. “This amalgamation would help in improving the organizational capability and leadership. We aim to achieve greater integration coupled with financial strength and flexibility for the amalgamated company that would finally result in maximising shareholder value,“ Arun Kumar Jagatramka, CMD of Gujarat NRE Coke Ltd, said while speaking on this amalgamation. “This amalgamation will bring administrative as well as operational rationalisation, organisational efficiencies leading to economies of scale as well as optimal utilisation of available resources,” he added. “We also expect that we will be able to minimize costs due to more focussed operational effort, standardization and simplification of business processes, thereby enhancing productivity,” he further added BNCL, a part of the Gujarat NRE group, owns a met coke producing facility at Dharwad, Karnataka with an installed capacity of 0.32 million tons per annum (mtpa). Due to this amalgamation, the company’s coke making capacity is expected to shoot up by 34.8% from 0.93 mtpa.
feature aftermath of alleged understanding among small and scattered miners of Indonesia that they will not sell the material below a particular level. Consequent to this decision in early September, it had been found that Indonesian coal prices had inched up a bit, whereas South African prices remained almost unchanged. The decision to go for marginal reduction of pet coke prices by refiners might have been prompted by the fact that during the past few months, a number of new pet coke facilities have come up in India and prices of imported petroleum coke has softened slightly. Meanwhile, facing a glut like situation in domestic demand, Essar Oil is exploring at opportunity to export pet coke. It is already in talks with some cement makers in Pakistan to export pet coke and has already despatched one small consignment on trial basis. RIL too had in the past exported pet coke in order to put a break on falling domestic prices. It is also believed to looking at export opportunity to avoid a situation wherein it will have to cut prices for domestic users.
If at all these refiners manage to find buyers for a few consignment in overseas market, they may jack up prices in domestic market on the plea that it will not affect them if domestic buyers are not willing to buy at higher prices. According to a calculation of Coal Insights, India’s current pet coke production is about 27,500 tons per day, which will go up by 2000 tpd from November as MRPL’s new capacity is likely to be on stream by then. At present, RIL is the largest producer with a capacity of 16,000 tpd, whereas Essar is the second largest with 5000 tpd capacity. Other major producers are IOCL (Panipat) – 3000 tpd, HPCL (Bhatinda) – 1500 tpd, Koilee – 2000 tpd. A large number of cement makers in India use high sulphur South African or US coal and it had been found that they switch to use of steam coal when prices are lower. However, at current prices of coal and pet coke, there is no reason for them to switch to use of the former, an official of leading pet coke user said.
However, if high sulphur steam coal prices fall to below $80/ton fob for South African coal and below $95/ton cfr India for US coal, the cement makers might consider switch to use of coal, an official of the cement maker said. Essar Oil Pakistan
exports
pet
coke
to
Essar Oil, a part of the Essar group, is looking at export opportunities in Pakistan. In fact, the company has already entered into an agreement with Maple Leaf Cement, a cement major in Pakistan, for supply of pet coke and has delivered 15,000 tons, a senior official of Essar Oil told Coal Insights. “We have sent the first consignment of pet coke to Maple leaf in August, 2012. However, post the Maple Leaf consignment, there have been a few enquiries and we are looking forward to sign more contracts but nothing has been finalized yet,” the official added. Essar Oil had started production of pet coke in April, 2012 with an annual capacity to produce 1.8 million tons of pet coke.
Coal Insights, October 2012
39
feature
SIMA to focus on cost cutting options
Coal Insights Bureau
T
he Delhi-based Sponge Iron Manufacturers Association (SIMA) is all set to become a knowledge partner and Deependra Kashiva, help its members to focus Executive Director, SIMA on reducing their cost of production and improve efficiency, at a time when availability and pricing of raw material has emerged as a major issue. SIMA has come a long way since inception to bring all sponge iron manufacturers together. From representing the Indian DRI industry and providing a common platform for regular interface with the government of India and other regulatory authorities, SIMA now wants to move a step forward, its new executive director Deependra Kashiva told Coal Insights. Chairman Alok Chandra and vicechairman Suresh Thawani share Kashiva’s vision as the association charts out a new
40 Coal Insights, October 2012
roadmap for itself. The association, which is in operation from February 1992, was formed in the midst of radical change when India took its first tentative step towards economic liberalisation in 1991. It was officially registered under the Society Registration Act XXI of 1860 on January 31, 1994. The fundamental premise behind the formation of the association was to promote and protect the interest of the Indian sponge iron industry. Explaining the rationale, Kashiva said, “Till now SIMA was into small kind of lobbying and organising small buyer seller meets and meetings with CIL officials, but we realised that this is not going to work because the sponge iron industry is not the priority of the government. Its first priority is the power sector. No matter how many letters we write, there will not be any result.” “When we know that nothing is going to happen by writing letters to government or meeting them, there is no point in wasting time. So we are looking at a shift in strategy and have told the members that they have to cut cost of production and improve efficiency
to survive in this competitive world,” Kashiva, who joined SIMA in August 2011, said. Towards achieving these objectives, the association recently organised an international conference in New Delhi in which nearly 200 experts from across the globe participated and focused on technical subjects. It included discussions on how to reduce the cost of production of sponge iron by reducing the cost of raw material and how to derive ways so that inferior grades of raw material – coal and iron ore – can be effectively used. The international conference in September 2012 in the aftermath of three regional conferences in Raipur, Joda and Kolkata, was the first in the history of India in which experts from the US, Japan, Austria, South Africa, China and even Germany participated in great numbers, he claimed. “We had two technical sessions in the conference. One was on dedicated coal based technologies and the other was on gas based technology. Of the total 10 papers, seven were presented by the foreigners belonging to world renowned companies in the technology or equipment areas,” Kashiva said. There was a delegation of 16 persons from China who wanted to know how India could become the largest producer of sponge iron and how they are making the material. “We are the world’s largest DRI producer while China is the world’s largest producer of steel. We have to learn from China on how to use lower grades of iron ore and in return we can provide our expertise on how we excelled in DRI production. During the conference, we found that China wants to learn something from India and that I feel is a great achievement,” he said. Explaining the rationale behind the conference and a shift in focus of SIMA, Kashiva said today the availability and pricing of key raw materials – iron ore, coal as well as gas – is an issue and in such a situation a shift in focus is definitely required. “Today whatever domestic gas is available, it has been earmarked for fertilizer and power sector and transport sectors because they are much more important. I agree with this and in such a situation, if we go and meet government officials and keep on writing letters nothing will come out. I was with the government and I know its priorities as well as its limitations,” Kashiva said. “We are concerned with the results so
feature far and so SIMA is now trying to become a knowledge partner. Over the past one year, the efforts of SIMA are towards this direction,” he said. “We are basically focussing on exploiting our members in a better way by making them knowledge partners. The era of availability of good quality raw material is gone wherein we used to get 64% plus Fe content iron ore or coal of B or C grade or 6500 Kcal/kg. Now we have to live with E and F grade domestic coal and imported coal and imported gas and iron ore with Fe content of 48% to 55%. And we have to be prepared to use magnetite ore instead of only haematite ore,” Kashiva felt. In this connection, he pointed out that already in Chhattisgarh two steel companies – JSPL and Godavari Ispat – are using magnetite iron ore for making sponge iron and they are getting this type of ore from Chhattisgarh itself. “I was surprised that their coal consumption has come down sharply to 132 kg per ton of sponge iron compared with earlier norm of 165 kg per ton,” he said, adding, there is advantage of using magnetite
ore (Fe2O3) in rotary kiln compared with haematite ore (Fe3O4) as it saves heating time and in turn coal consumption because if magnetite ore is used, one step is avoided which results in saving of energy. Kashiva, however, said the problem with using magnetite ore is its availability in India which is very low. These two companies are using in a combination for which they must have done some R&D. He feels that R&D is an issue in the country at present. It has been found that induction furnaces mainly use coal based DRI as gas based DRI is not available in abundance. Only Welspun is selling a limited quantity of gas based DRI on merchant basis, while others like Essar and JSW Ispat are using for captive purposes. Kashiva said with the introduction of quality control specification by the government for steel, there is an urgent need to address the problem related to high sulphur and high phosphorus in coal based DRI. Induction furnaces are of the opinion that they cannot adhere to the quality control order because the coal-based DRI that they
use has inherent problem of high sulphur and high phosphorus and similarly the rolling mills say that they too cannot adhere to the order because the billets made out of induction furnace route are not of high quality. “It is high time that all the stakeholders – DRI producers, induction furnaces and rolling mills – come together to solve the problem, because it is not a problem of individual industry but the problem of the country,” Kashiva said, adding that India produces around 30-35 million tons of steel through induction furnace route and it is high time that all worked together. He further said that already some R&D has been done in this direction by 4-5 coal based DRI makers to address the inherent problem in refining in the induction furnace to address high sulphur and high phosphorus problem, but it is yet to be verified by SIMA. “I have at least five members, who can provide DRI with desired phosphorus. But I would like to see the process on my own before saying that no further R&D is required in this respect,” Kashiva said.
Coal Insights, October 2012
41
feature prepared by the Central Electricity Authority (CEA) revealed. The capacity addition in August was 550 MW. With this total power generation capacity added during the first six months of 2012-13 (April-September) stood at 7576 MW, as per CEA’s revised data. The capacity Sanjukta Ganguly addition of 870 MW Categorywise energy generation in in September was September 2012 (in %) ndia’s power generation in September in thermal power fell to 73077.91 million units (MU), 1% sector in private down from 74338.11 MU generated in 20% sector companies August, according to provisional statistics of – Meenakshi the Central Electricity Authority (CEA). (150 MW) at The generation in September was Thammmminapatnam significantly lower than the target of 75971 TPP in Tamil 4% MU, the data revealed. Nadu, Adani Power The power generation in September Limited (660 MW) 2011 or the corresponding month of previous at Tirora TPP Ph-I financial year was 70497.50 MU against the in Maharashtra and target of 71238.75 MU, which means yearGEPL(60MW) at on-year generation was up slightly. 75% GEPL TPP Phase I in The country’s power generation during Maharashtra. Thermal Nuclear Hydro Bhutan Import the first six months (April-September) In August 2012 of 2012-13 stood at 455543.96 MU, up also, the entire capacity Source: Central Electricity Authority 0.71% compared with the target of 452334 addition of 550 MW MU for the period and up 4.69% compared Hydro sector and Bhutan imports was 928.80 was in thermal power sector also in private with 435131.89 MU generated during the MU (900.15 MU). sector companies – BPSCL (250 MW) at corresponding period of 2011-12. The actual generation was lower than Bina TPP Unit 1 in Madhya Pradesh and Of the total generation in September the target of 58432 MU for thermal sector Vidharba Ind. Power Ltd (300 MW) at 2012, 54986.55 MU (49172.99 MU in but higher than 14022 MU for hydro sector. Butibori TPP Unit 1 in Maharashtra. September 2011) was from thermal sector, However, it was lower from 2676 MU for Following is the detail of capacity 2657.92 MU (2679.95 MU) from nuclear nuclear sector but higher than 841 MU from addition during the first six months of 2012sector, 14504.64 MU (17744.41 MU) from Bhutan import. 13 and full financial year 2011-12 (in MW): In August 2012, Months 2012-13 2011-12 the generation stood Achievement vs target in capacity addition April 1760 735 at 56687.72 MU from (in MW) thermal sector, 2579.08 May 1070# 550 MU from nuclear June 2376 2224 1200 sector, 14036.04 MU July 950 1660 from Hydro sector and 1000 August 550 1200 Bhutan imports was September 870 786.5 1035.27 MU. 800
India’s September power generation falls m-o-m
I
600
Capacity addition
400 200 0
Thermal
Hydro Target
Source: Central Electricity Authority
42 Coal Insights, October 2012
Nuclear Achievement
A total of 870 MW of power generation capacity was added in India during the month of September 2012 taking the total installed generation of the country to 207876.04 MW, a provisional data
October
345
November
2807
December
1158
January
895
February
972
March
5482*
Total (Apr-Sept)
7576
6369
Total (Apr-March)
7576
18814.5*
*As reported by CEA, the capacity addition
feature in March was 5482 MW, but the total figure for 2011-12 was increased by them to 20501.70 MW instead of 18814.50 MW following revision in March 2012 figures. # CEA had earlier reported that capacity addition in May (2012-13) was 1070 MW, but it appears that the figures have been revised to 1130 MW. Critical coal stock
Inadequate coal supplies by domestic coal companies and lower imports by power utilities have led to critical coal stock position at a number of Indian power plants. According to data available with Coal Insights, a total of 35 plants of the total 89 in the country were faced with critical coal stock position of less than seven days as on September 30. The data further shows that out of the 35 plants facing ‘critical coal stock’ position, 22 were facing ‘super critical’ coal stock position of less than four days. On September 16, out of the 32 plants (out of 89 plants) facing critical coal stock position of less than seven days, 17 were facing ‘super critical’ coal stock position of less than four days. Plants in Maharashtra, Bihar, Andhra Pradesh and West Bengal were the worst sufferers.
maximum output it could produce, for the country for the month of September 2012 stood at 61.58 percent against the planned 65.8 percent. The PLF was 61.47 per cent, 66.84 percent, 72.05 percent and 73.89 percent for August 2012, July 2012, June 2012 and May 2012, respectively. The PLF of power plants of central sector run companies such as NTPC and DVC in September 2012 stood at 68.62 percent whereas the figure achieved in August 2012 was at 69.65 percent. In September 2012, the plants in the state sector recorded a PLF of 56.43 percent against the planned 61.79 percent. The worst performers were Muzaffarpur TPS and Koderma TPS both of which recorded nil PLF against a target of 18.94 percent and 39.89 percent, respectively. Neyveli TPS II Exp. which also recorded nil PLF against a target of 45.56 percent continued to be a poor performer. Power supply position
In the month of September 2012, the country’s peak power demand was estimated at 79,678 MU, but actual availability was only 72,791 MU, reflecting a shortfall of 6887 MU or 8.6 percent. Earlier, in the month of August 2012, the country’s peak power demand was estimated Plant load factor The Plant Load Factor (PLF), a measure of at 82,690 MU, but actual availability was only the output of a power plant compared to the 75,077 MU, reflecting a shortfall of 7,613 MU or 9.2 percent. An interesting All India PLF factor observation is that September 2012 (in %) despite overall peak shortage of power in the 80 country in September 70 2012, Chandigarh, 60 Dadar & Nagar Haveli, Lakshadweep and 50 Sikkim did not have any 40 peak power shortage, 30 according to CEA data. 20 Andhra Pradesh faced 10 the highest shortfall among all states during 0 Central State Pvt. Utl. All India peak period with a total shortfall of 1,842 MU. Sector Sector Tamil Nadu Program Achievement recorded the second highest shortfall during the month under review. Source: Central Electricity Authority
APP wants CIL to import, welcomes price pooling The Association of Power Producers (APP), an apex body of major power utilities of the country, has urged Coal India Ltd (CIL) to go for importing coal for meeting the supply gap and welcomed the price pooling mechanism suggested by the government. “Till such time that necessary policy interventions are introduced and domestic supply catches up with power sector’s requirements (of coal), the gap will need to be filled by imports and by pricing adjustments or price pooling mechanism,” Dr Ashok Khurana, director general, APP said. While addressing a panel discussion on ‘Indian coal story – current challenges and future outlook’, organised by Assocham and Financial Journalists Club (FJC), Kolkata, he said CIL should have no objection to the idea as price pooling will be revenue neutral for the coal miner. Meanwhile, “the government should go for augmenting domestic production through mining developers and operators (MDO), opening up of the sector for private mining and policy for disposal of surplus coal,” he said. However, as per current projections, there will be a shortfall of around 185 million tons (mt) of coal at the end of the Twelfth Plan (201617), he noted.
The state recorded total shortfall of 1,385 MU in September 2012, against 1,077 MU in August 2012. Uttar Pradesh was a poor performer recording a shortfall of 1,100 MU against 1397 MU in August 2012. Maharashtra recorded a shortfall of 265 MU in September 2012 against 361 MU during August 2012 whereas Bihar faced a shortfall of 164 MU which also stood at the 161MU figure in August.
Coal Insights, October 2012
43
feature
Coal meet dwells on demandsupply issues Coal Insights Bureau
T
Viresh Oberoi, MD & CEO, mjunction services
he euphoria generated about two dwelt on issues regarding the betterment of years and today we are paying the price years ago regarding India’s rising the coal industry in the country over the two by having to import coal to run our power coal demand appears to be slowing days. plants. We have power plants newly built down on the back of severe financial crisis The conference also provided an which may soon become NPAs on the books faced by state distribution companies who impressive networking opportunity to Indian of many banks. All this while, we have a are quite often unable as well as overseas delegates. power shortage of 124,995 MW, which will to draw power from the Speaking on the occasion, grow to 199,540 MW in 2016-17 and to generators due to lack of MD & CEO of mjunction 283,470 MW by 2021-22, as per the draft funds. services limited, Viresh Oberoi, 18th Electric Power Survey of India,” he This was an said: “I believe that we as a added. observation made by nation have failed to take suitable Amidst presence of eminent speakers industry leaders at advantage of the mineral wealth like the former chairmen of Coal India Ltd the 6th Indian Coal our country is endowed with. (CIL) – P.S. Bhattacharyya and N.C. Jha Markets Conference The policies that we have framed (currently CEO Mining Business, Monnet organised by mjunction since our Independence Ispat and Energy services ltd and HIS have either led to the Limited) – besides McCloskey Group from inequitable distribution former power secretary September 24 to 26 in of this wealth whereby R.V. Shahi (currently P.S. Bhattacharyya, former New Delhi. the eco-system that chairman Energy Chairman, CIL Besides the demandtoday lives on top of Infratech Limited), supply scenario, a and squarely in the the participants at the host of interesting topics like the country’s middle of some of the coal reserves conference tried to logistics infrastructure, tariff situation, global have benefited the least – which arrive at a consensus on economic scenario, stagnation in China’s has in turn led to what is termed what could possibly be coal demand, excess world coal availability as the “Maoist problem”, and not India’s coal requirement scenario amongst others were also discussed what it should actually be called – in the coming years. in detail. “poor policies”. The tone of the The conference attracted a select Unfortunately the poor policy was set N.C. Jha, CEO Mining conference Business, Monnet Ispat by I.A. Khan, adviser gathering from both India and abroad who formulation continued over the
44 Coal Insights, October 2012
feature (energy), Planning Commission who in his The South Eastern Coalfields Ltd (SECL) emerged brief address as the top coal producer of the year at the 3rd Indian highlighted Coal Markets Award 2012 on September 25 in the initiatives New Delhi held by mjunction services ltd and IHSunder taken McCloskey Group. by the Adani Enterprises Ltd emerged as the best government International Coal Trader Importer of the year to address whereas Geo-Chem Laboratories Private Ltd was country’s adjudged the topper in the Coal Inspection Agency growing R.V. Shahi, Chairman, category. Best coal port performer award went to Energy Infratech power and Essar Bulk Terminal Ltd and Andhra Pradesh coal demand. Power Generation Corporation Ltd (APGENCO) P.S. Bhattacharyya spoke on the obstacles Subhashis Chakraborty, was declared Thermal Power Plant of the year award. Head (Marketing), Geo Chem to increasing domestic production whereas receiving the award. There were four other nominees – Mahanadi Shahi raised the topic of interrupted fuel Coalfields Ltd (MCL), Neyveli Lignite Corporation supply and its impact on power project Ltd (NLC), Central Coalfields Ltd (CCL), Jindal Steel & Power Ltd. (JSPL) – in development in India. coal producer category and SECL pipped them all to emerge at the top. In coal trader BNP Paribas Securities’ analyst Girish importer category, there were three other nominees – Agarwal Coal Corporation Private Nayar felt that country needs a more flexible Ltd, MMTC Ltd and Coastal Energy Private Ltd, but Adani Enterprises beat them all tariff structure and improvement in access to in practically all parameters, including the quantity handled. In coal inspection agency, loans and other ways to help the commercial D&B had nominated only three companies – Inspectorate Griffith India Private Ltd, for power generators and distribution Therapeutics Chemical Research Corporation (TCRC) and Geo-Chem Laboratories companies. Private Ltd. NTPC’s executive director (fuel security) The nominees in coal port performer category were Adani Ports and Special talked about the problems being faced by Economic Zone, Essar Bulk Terminal Ltd and Krishnapatnam Port Company Ltd the utilities in India in getting fuel supply (KPCL), while in thermal power plant category the nominees were Andhra Pradesh whereas Western Coalfields Ltd (WCL) Power Generation Corporation Ltd, NTPC Ltd, The Madras Aluminium Company chairman and managing director D.C. Garg Ltd (MALCO), The Tata Power Company Ltd, JSW Energy Ltd and Jindal Power highlighted various initiatives taken by Ltd. (JPL). ACC Limited and Tata Steel Limited were adjudged the winners of Energy Coal India Ltd (CIL) to meet the country’s Efficiency in Cement sector and Iron & Steel sector respectively. growing coal demand. The process of receiving nominations for the various award categories and shortlisting Dr R. Srikanth, chief executive, Thiess of nominated companies on various set parameters was handled by Dun & Bradstreet India, highlighted the unique challenges Information Services India Pvt Ltd, this year. of contract miners in India whereas Karam Chand Thapar & Bros. (coal sales) president Virendra K. Arora raised the H&W Worldwide whereas Tata Steel Ltd’s chief procurement issues of coal consumers in Consulting, provided an officer Amitava Baksi talked about challenges the countries and suggested overview of coking coal and in procurement. ways to improve the situation. coal availability in M.K. Palanivel, Gurudas Mustafi, CEO, the world while president, All India Bulk MBE CMT India Pvt Ltd Steel Authority and Car Carrier Services, (a global leader in coal and of India Ltd Samsara Group, felt that mineral beneficiation) dealt (SAIL)’s director India needs a regulatory on the status of the coal and (technical) S. S. body for ports also to mineral beneficiation industry Mohanty spoke improve the performance. in India and highlighted the on steel demand According to Palanivel, issues hampering growth of and changing India has enough bulk this vital segment. He also D.C. Garg, CMD, WCL raw material cargo handling capacity, pointed out the substantial requirements. but the outcome is not benefits that washed coal could bring to the that encouraging because Tapan Prakash Dash of Tata user industries and the coal supply chain as of inherent problems that Sponge Iron highlighted the a whole. I.A. Khan, Adviser (Energy), need to be addressed. prospects of sponge iron industry Dr Neil J. Bristow, managing director, Planning Commission
SECL wins coal producer of the year award
Coal Insights, October 2012
45
technology
Technology options for washing non-linked washery coals of Jharia T Gouri Charan
T
he relative abundance of coal in India compared to other fossil fuels makes it a natural choice as the primary source of fuel, be it for steel making, power generation or for other uses. As on today, the total reserves of coal in India is 291 billion tonnes. Out of which about 83 percent constitute noncoking coal, 14 percent coking coal and the rest are others (GSI, Report). Coking coal is an essential input for production of Iron & Steel through blast furnace route. To save steel industry facing acute dependence on imported coking coal, domestic availability of coking coal in desired quality has become imperative. The good quality coking coals of the upper seams are fast depleting leaving behind the inferior quality lower seam coal. Coking coal requirements for the Indian steel industry are estimated to be around 50 to 60 million tons (mt) for the year 2012-13. The indigenous supply of coking coal is about 10 to 15 mt, the rest is being imported from countries like Australia, USA, China etc., thereby putting considerable pressure on the foreign exchange reserve of the country. To meet the increased demand of coking coal concerted efforts have to be made to correct the imbalance between need and availability by increasing the production of coal of desired quality through better management of available resources of inferior grade. The earliest record of systematic coal washing study in India was an attempt by Prof. William Galloway using a preBaum type Jig washer before World War I to test Assam coals. Sometime later Prof. Henry Louis of Newcastle-upon-Tyne
46 Coal Insights, October 2012
conducted similar experiments on Jharia coals. However, Rev. E. H. Roberton, Prof. of Mining at the Bengal Engineering College, Shibpur during World War I made systematic washability study, for the first time Again, in 1920 E. C. Evans, a chemist from London conducted experiments for washing of Jharia coals in a Draper Washer. All of them concluded that Indian coal couldn’t be economically washed, to the level of British coals. It is interesting to note that K. Reinhardt (Germany) invented the present day Float and Sink method in 1926. Before that, the washability characteristics used to be determined by pulsating crushed coal on a perforated pan, dipped in water, simulating jigging. A. Farquhar of the Tatas carried out washability studies on Jharia coals from 1918 to 1924 and confirmed in 1938 that Jamadoba, Malkera and Bhowra coals can be washed economically. After further studies during 1938 to 1940, Tatas decided for two washeries in 1946 and established West Bokaro Washery in 1951 and
Jamadoba Washery in 1952 (K.Sen, 2009). With coming up of number of steel plants in public sector, the requirement of coking coal for steel making increased manifold and a number of new coking coal washeries came up over the years. Since then, about twenty three coking coal washeries in India with a designed input capacity of 36 mt/yr were installed. Different schemes have been adopted for different washeries to tackle various problems and to upgrade a wide variety of coking coal feed. With passage of time, the upper seam coal for which the washeries were designed started depleting and lower seam coals are being mined and sent to washeries. Beneficiation of the lower seam coals in the existing washery circuits (2 or 3 product) does not yield requisite quality demanded by the steel sector of the country and thus entire production is supplied to the thermal power stations). Due to technological compulsion, steel sector have been using washed coal almost since its inception. The coal preparation in India was concentrated primarily for coking coal only. The total coking coal production is routed through Washeries. But there are still some un-categorized coking coals in BCCL and CCL and are called low volatile (LVC) coals due to low content of volatile matter, (around 15 to 20 percent) and is fit for coke making. To conserve the scarce indigenous resource of coking coal, it has become imperative to also use such coals for the steel industry. Resources of such coals are
Heavy medium drum separator
technology estimated to be around 6.4 Billion tonnes. These coals are termed as Non Linked Washery (NLW) coal or Low Volatile high Rank (LVHR) coking coal and they generally occur in lower seams (combined seam V/ VI/ VII/ VIII and even seam IV, III, II) of Jharia Coalfield and Karo group of seams (IV to XI) in East Bokaro Coalfield. It has been tested by SAIL and CIMFR that these LVC coals may be a potential source of energy for steel industry in India for use in blend with imported prime coking coal, if it is beneficiated to 17.5 + 0.5 percent ash level. This paper presents the various options for washing typical high ash, difficult-to-wash LVC/NLW coal samples of Jharia coalfields from both Eastern & Western sector and suggests the concept of beneficiation for the improvement in the quality of ROM coal Characteristics of NLW/LVC coals
The LVC coals of BCCL and CCL are generally characterized by high ash, high inert content and is difficult to wash. The near gravity materials content is generally high (~50 percent) at the desired specific gravity of cut, average raw coal ash is as high as 35 to 50 percent. Due to intimate mixing of micro-components, these coals have extremely poor liberation characteristics; even progressive crushing to 13 or 6 mm do not produce significant yield of clean coal. Beneficiation of the lower seam coals in the existing washery circuits (2 or 3 product) does not yield requisite quality demanded by the steel sector of the country. Jharia coalfields are the store house of coking coals where prime coking coals are available. The coking coals in the Jharia coalfields may be segregated into two major sectors i.e., Eastern and Western. The characteristics of the coals in the Eastern sector are generally superior in quality than the Western sector. Technological options
Central Institute of Mining & Fuel Research has been entrusted by the Govt. of India to explore the possibility of better utilization of these coals in cost-effective manner. The decade long study on the LVC coals of Eastern Sector has led to the concept of multi-product beneficiation of such ‘difficult-to-wash’ coal. The concept involves a) multi-stage beneficiation of raw coal to four saleable products, and b) multi-stream
beneficiation of worse coals selectively to three products, specifically suitable for industries like, Steel, Foundry, PF and FBC Power Plants (K.Sen, 2002, T. Gouri Charan, 2009). Unfortunately, when the same scheme of beneficiation was adopted for the LVC/NLW coals of Western sector, the results were not at all encouraging due to the fact that the characteristics of these coals are still worse (T.Gouri Charan, 2010). Option-1
Detailed R & D work on development of a suitable flow scheme was carried out on various sources of coal samples from the Eastern Sector and the technological option for washing coals is detailed as below and shown in Figure 1. ♦♦ I t has been proposed to crush Run of Mine coal (maximum size range of 1500 mm by Feeder breaker or suitable crushing equipment to crush ROM coal down to size 200mm. Coal of size – 200 mm will then be crushed to 75 mm, which will be feed to the washing plant. ♦♦ T he crushed product may be fed to a three product Baum Jig, wherein a pre cleans will be generated, along with middlings, which may be used for power generation through PFC route while the rejects may be used for power generation through FBC route. ♦♦ T his pre cleans may be screened at 13/6 mm and deslimed at 0. 5 mm mainly to achieve trhee products viz., 75 – 13/6mm, 13/6 – 0.5mm and below 0.5mm ♦♦ T he fraction 75-13/6 mm may further be treated in a Heavy M e d i u m D r u m S e p a r a t o r, depulping and rinsing of both the products will be done in screens for recovery of magnetite.
♦♦ The fraction 13/6-0.5 mm may be treated in Heavy Medium Cyclone and depulping and rinsing of both the products will be done in screens for recovery of magnetite. ♦♦ T he fraction below 0.5 mm may be treated in flotation circuit either conventional or column floatation cells. ♦♦ T he cleans of H. M. Drum Separator, H. M. Cyclone and Flotation may be combined (after dewatering) to achieve total clean coal for metallurgical purposes. ♦♦ T he sinks of H. M. Drum Separator and H. M. Cyclone may be combined and used as foundry fuel. Option-2
Detailed R&D work on development of a suitable flow scheme was carried out on various sources of coal samples from the Western Sector and the technological option for washing coals is detailed as below and shown in Figure 2. ♦♦ I t has been proposed to crush Run of Mine coal (maximum size range of 1500 mm by Feeder breaker or suitable crushing equipment to crush ROM coal down to size 200mm. Coal of size – 200 mm will then be crushed to 75 mm, which will be feed to the washing plant. ♦♦ J igging of – 75 mm coal in a 2-product washery preferably, wherein pre-cleans will be generated and used for further processing and the second product
Figure-1: Flow scheme for beneficiation of difficult-to-wash LVC/NLW coals of Eastern Sector, Jharia coalfields
Coal Insights, October 2012
47
technology i.e., the rejects will be used for power generation,. ♦♦ T he pre cleans may be screened at 13/6 mm and the fraction 75-13/6 mm may further crushed to 13/6 mm and the crushed fraction may be mixed with natural 13/6 mm. The combined fraction may be deslimed at 0.5mm, to achieve two products viz., 13/6-0.5 mm and – 0.5 mm. ♦♦ T he fraction 13/6-0.5 mm may be treated in Heavy Medium Cyclone, depulping and rinsing of both the products will be done in screens for recovery of magnetite. ♦♦ T he fraction below 0.5 mm may be treated in flotation circuit either conventional or column floatation cells. ♦♦ T he cleans of H. M. Cyclone and Flotation may be combined (after dewatering) to achieve total clean coal for metallurgical purposes.. ♦♦ T he Heavy Medium Cyclone rejects may be mixed with the Jig rejects to get a combined rejects, which may be used for power generation through FBC route. Conclusion
♦♦ T o meet the requirement of coking coal from indigenous sources, washing of difficult-to-wash lower seam coals has become a must for the nation. The inferior quality low volatile coking coals
Pilot scale flotation cells
from lower seams of Jharia Coalfields may be upgraded to the desired quality if the coals are judiciously beneficiated. ♦♦ These coals after beneficiation showed immense potential in application in the metallurgical industries. ♦♦ The washability characteristics of LVC coals from Eastern Sector are better comparatively to that of Western Sector. ♦♦ The studies reveal that the novel multistage concept of washing LVC/NLW coals may be an alternative suitable strategy to achieve cleans of desired quality.
References
♦♦ G eological Survey of India (GSI) Report, Government of India. Inventory of Indian Coal Resources, 2012. ♦♦ K .Sen, “History of Coal Washing in India”, CPSI Journal, Vol 1, Issue 1 September, (2009), pp 29-34. ♦♦ K .Sen et al “Multi product beneficiation of inferior coals to user specific products”, XIV International Coal Preparation Congress, 2002, pp 21-28. ♦♦ T .Gouri Charan et al “ Washability and Pilot Plant Studies to Generate Bulk Cleans at Desired Qualities from Low Volatile Coking Coal of Jharia Coalfields, BCCL, CIL India”, International Seminar on Coking Coals and Coke Making: Challenges and Opportunities, 2009 pp 219-229. ♦♦ T. Gouri Charan et al “Beneficiation Studies on difficult-to-wash Low Volatile Coking Coals from Western Sector of Jharia Coalfields, BCCL, CIL India.”, 10th Anniversary International conference “Indian Coal Preparation Industry Challenges and Opportunities, New Delhi November 25-26, 2010.
Figure-2: Flow scheme for beneficiation of LVC/NLW coals of Jharia Coalfields (Western Sector)
48 Coal Insights, October 2012
T Gouri Charan is Principal Scientist & Head, Coal Preparation Division, Central Institute of Mining & Fuel Research Institute, Dhanbad
EXPERT SPEAK
Captive block allocation deadlock needs to be broken
J.P. Panda
I
n this issue, we will examine whether it was a good idea to have allocated coal blocks to companies other than CIL. In order to do that, we first need to take a close look at the overall energy scenario in India, where 70 percent of the electricity is produced from coal and thus evidently coal has a huge role in the energy security of India. Out of the total 771,173 million units of power, 539,251 million units are being produced from coal. The country’s demand for coal for the year 2011-12 is 713.24 million tons (mt) but the production is likely to stand at only 629.91 mt or less and therefore the shortfall will be 83.33 mt or more, which has to be imported. Can India achieve even this modest target of 629.91 mt, is the question.
The shortfall in coal supply may touch 269 mt by 2021-22, from the current level of around 80 mt as domestic producers fail to keep up with the growing demand for the commodity. The demand for coal in 2021-22 is projected to be around 1,353 mt against the production assessment of 1,084 mt, resulting in a shortfall of 269 mt, the coal minister, Sriprakash Jaiswal, said recently. The issue here is that the huge quantum of import that the country will have to depend on. The cost of importing nearly 270 mt of coal will be around `1.08 lakh crore at a rate of nearly `4,000 per ton or more. To handle such large quantity of import, India has to build port, rail and road infrastructure, which may cost another `10 lakh crore. Potentially this could cripple India’s economy. Captive blocks allocation
When the demand of coal in the country outpaced the growth capabilities of CIL (including SCCL), the Ministry of Coal
took a policy decision in 1993 to allocate coal blocks to non-CIL companies, both in the private and public sectors, for developing coal projects for “captive use” of coal in power, steel and cement sectors. This decision was welcomed for sustaining the economic growth of the country, particularly for the growth of the energy sector. There were certain factors which had prompted the government to take this decision. In spite of the spectacular growth of the coal sector after nationalisation of the coalmines of the country in 1972-73, later CIL and its subsidiary companies were not able to cope with the ever increasing demandsupply gap in coal requirement of the country, particularly in the energy sector. In the present era of global competition, it was not desirable that the country should continue to encourage government monopoly in the coal sector by relying on one government company, CIL, for its entire indigenous coal requirement. India is bestowed with a huge reserve of 285 billion tons of coal (latest figure by GSI) and multiple agencies, both in the public and private sectors, should be given the scope to develop the huge coal reserves to meet the increased requirement of coal. In an assessment by the Planning Commission, the requirement of coal by the terminal year of the Twelfth Plan period (i.e. in 2016-17) would be 1,125 million tons (mt). The indigenous production of coal in the country is now stagnating at the level of 550 mt per year. Hence, the decision of the ministry of coal to allocate coal blocks to non-CIL companies was definitely a timely step in the right direction. It has already allocated 213 coal blocks, with a total reserve of 49,641 mt of coal, to various non-CIL companies both in the public and private sectors. For operational convenience of the coal projects of CIL companies, a conscious and correct decision had been taken by the ministry of coal to allocate new and virgin coal blocks to non-CIL companies, geographically away from the area of operation of CIL companies. This policy had a precedent; in 1976, the Coal Mines Act was amended to allow captive mining by private iron and steel manufacturers. The amendment also allowed coal mines to be sub-leased to private companies in isolated areas that were not amenable to economic
Coal Insights, October 2012
49
Expert Speak development. The calculation back then was that public sector monopolist Coal India Ltd (CIL) would not be able to meet the growing demands of industry. As a result, almost all the allocated coal blocks are located in greenfield areas, where no infrastructural facilities, not even any railroad connectivity, exist for development of new coal blocks. As the coal blocks allocated to non-CIL companies are not within the area of operation of CIL, naturally such coal-blocks are not covered within the ambit of future planning by CIL or CMPDI and hence were not fully explored History of allotments
On July 14, 1992 – that is, a year after P.V. Narasimha Rao’s famous “reform” government took power – a screening committee under the coal secretary was set up through an administrative order. Its remit was to consider applications by companies interested in captive mining and to allocate coal blocks for development. A list of 143 blocks was put up on the coal ministry website. They were mostly un-mined blocks belonging to CIL and Singareni Collieries Company Limited. Every government since then, including the Congress, Janata Dal and the Bharatiya Janata Party-led National Democratic Alliance (NDA), has allocated coal blocks to private companies and the number has risen progressively as economic growth picks up. Allocating responsibility
Period
Government
No of applications allotted coal blocks Private
Public sector
Jun 21,’91May 16,’96
Congress+
2
3
May 16,’96Mar 19,’98
UDF+
4
0
Mar 19,’98May 22,’04
NDA
16
14
May 22,’04till date
UPA
167
83
Note: A total of 289 applications were approved for allotment of blocks independently and jointly; 195 blocks allocated since 1993; 25 blocks got de-allocated and out of which 2 blocks re-allocated Source: Coal ministry
50 Coal Insights, October 2012
In fact the NDA tried to go a step further. On April 24, 2000, it introduced the Coal Mines (Nationalisation) Amendment Bill, 2000, in the Rajya Sabha seeking coal block allocation to Indian companies for commercial mining. Trade unions at the time strongly opposed the Bill. The bill was not passed. Interestingly, the Bill is still pending in the upper House. So, discretionary allocation to private companies, based on the recommendations of an inter-ministerial screening committee, had been standard operating procedure for all governments since at least 1993. The point to note, however, is that previous CAG audits did not raise the question of notional losses as a result of such allocations. In 2003, the NDA government evolved a set of guidelines to ensure transparency and consistency. Why was this done? Because the number of applicants had swelled. This is a year before the UPA first came to power so the guidelines were put in place during the NDA regime. Before these guidelines, the process tended to be bottom-up in that the applicants themselves identified coal blocks and applied for allocation. In September 2005, a little over a year after the UPA-I came to power; the guidelines were modified to invite applications through advertisement in the interests of greater transparency. It is said that the allocations were decided on merit and the process was intensely consultative. So, how did blocks come to be allocated to companies like JLD Yavatmal Energy, which has links with Congress MP Vijay Darda’s company? The Central Bureau of Investigation (CBI) is currently investigating Yavatmal and five other companies that were allocated coal blocks during the period by allegedly providing fraudulent information about their financial strength and backing. The biggest problem, as the CAG report indicates, is that allocations like this were made after UPA-I led by the Congress party came to the power in 2004, and at a time when the question of competitive bidding was under serious consideration. The official version is that a large number of applications for coal blocks for captive mining were pending before June 28, 2004. In order to clear the backlog, the government decided in October 2004 to consider for
allotment only applications received up to June 28, 2004. But the concept of competitive bidding was first made public at a meeting with the stakeholders chaired by the coal secretary on June 28, 2004. A comprehensive note on the issue was submitted on July 16, 2004 by the secretary to the ministry. It highlighted the substantial difference between the price of coal supplied by CIL and coal produced through captive mining, resulting in windfall gain to the allottee. The note prompted the ministry of coal to decide that, going forward, blocks would be put up for competitive bidding only. It is against this background that the coal secretary sought the law ministry’s opinion. According to the prime minister’s Lok Sabha statement, the law ministry’s broad opinion was that the competitive bidding process would require an amendment to the Coal Mines (Nationalisation) Act, 1973. Since this would take time, the policy of allocations continued. Instead, as the CAG report indicates the Prime Minister’s Office (PMO) issued directions to the coal secretary to introduce competitive bidding only after the amendment was passed in Parliament and not apply it for applications that were pending at the time. Subsequently, in August 2006, again the law ministry suggested that competitive bidding could be introduced by administrative fiat and a law simultaneously tabled in Parliament to provide a “sound legal footing”. Despite this, the UPA continued with discretionary allocations and 39 coal blocks were allocated between July 2004 and September 2006. When the possibility of introducing competitive bidding was doing the rounds in government, 71 more blocks were allocated to various government and private companies through discretionary allocations. For competitive bidding, each block had to be fully geologically explored and reserves estimated scientifically. People will bid only when they know the geological reserves, quality of coal and the depth at which the coal is occurring. Except a few, most of the blocks allocated were not fully explored and for exploring all the blocks would have taken years as neither CMPDIL nor MEC has the resource to explore so many blocks. So, the Prime Minister was factually correct in saying that it was UPA-I that considered competitive bidding in June
Expert Speak 2004 and that the situation could well have been worse if the idea of commercial mining on an allocation basis had been cleared by Parliament. But he did not explain that the blocks were not explored and hence they could not be shifted to competitive bidding even if they wanted. It is this gap between stated intent and the ground reality, that probably forced the government to go for mass allocation of coal blocks. With details emerging of questionable allocations under UPA, the possibility of similar deals under previous regimes cannot be ruled out. So, it was no surprise that the Public Accounts Committee has now indicated that it would look at the coal block
allocations made during the NDA regime (1998-2004). Minister of State in the PMO V. Narayanasamy has already hinted at the government’s intention to extend the CBI probe to coal blocks allocated during the NDA regime. Indeed CBI has been asked to enquire into all allocations made from 1993 onwards, meaning thereby to enquire if all the allocations made during NDA regime were above board. It may be worthwhile to scrutinise all allocations starting from 1993 till December 2011, when the practice was suspended. Current status
Although more than 18 years have passed
since the coal ministry started allocating coal blocks in 1994, only 28 blocks which are located near already existing infrastructural facilities for rail-road connectivity, have come to production stage, giving a total production of only 35 mt of coal in 2011-12. From this poor progress in development of the allocated coal blocks, it is evident that the very objective of overall increase in the coal production capacity of the country has not been achieved up to the desired level so far. There are some serious problems now being faced by CIL companies and also by non-CIL companies in the development of new coal blocks. They are the rigid, unhelpful and non-cooperative attitude of the MoEF
Status of coal blocks in Odisha Sl.
Coal block
Company
1.
Baitarani West
OHPC
2.
Bijahan
3.
Bankhui
4.
Chendipada&Chendipada- II
Reserve Mill. T
Projected production Mill/yr
Status
500
EC,EMP,ML and LA are pending
BPSL
200
EC,FC,ML and are pending
SIPCL
1589
MAHAGENCO
1589
15 5.26
EC, FC, EMP,ML and LA are pending
20
EC, FC, EMP,ML and LA are pending
50
5.
Dulanga
NTPC
260
EC, FC, EMP,ML and LA are pending EC, FC, EMP,ML and LA are pending
6.
Jamkhani
BSPL
100
FC stage II and ML are pending
2.6
7.
Manhorpur& Dip of Manoharpur
OPGC
531.68
EC, FC,ML and LA are pending
16
8.
Meeinakshi, dip Meenakshi B
PFCL
EC, FC, ,ML and LA are pending
20
9.
Mahanadi, Machhakata
GSEL & MSEB
10
Mandakini
MIEL,IPL&TPCL
11
Mandakini B
MBCCL
12
Naini
13
New Patrapara
285.24+600
EC, FC –stage II, EMP,ML and LA pending
30
200
EC, FC, EMP,ML and LA pending
7.5
322.8
PL is pending, FC and LA pending
15
GMDC &PIPDICL
250
EC, FC, EMP,ML and LA pending
12.5
BSPL, AML, DSPL, OSIL, ACL, VSL & PGL
500
EC, FC, EMP,ML and LA pending
16
PL pending, FC & LA pending
50
14.
North - Akrapal Srirampur
SETSL
15
NuagoanTelisah
OMC & AMDC OMC & AMDC
1400.65
8
3035.46
16.
Radhikapur East
TSIL, SIL & SPSSIL
17.
Radhikapur west
RML, OCL, OIL
18.
Ramchandi promotional
JSPL
19.
Rampia and dip side rampiaRampia and dip side rampia
SEL, GMR,AMIL, LGL, NPL& REL
20
Utkal B-1
JSPL
21
Talabira-I
HINDALCO
22
Talabira-II &Talabira-III
MCL,HIL & NLC
23.
Utkal A
MCL, JSL, JSESL,
24
Utkal B-2
MIEL
25
Utkal C
UCL
100
EC, FC, EMP,ML and LA pending
4
172
EC, FC, EMP,ML and LA pending
5
288.44
EC, FC, EMP,ML and LA pending
4
900
EC, FC, EMP,ML and LA pending
50
PL, ML and LA are pending
17
FC, and LA are pending
5.5
645.235 228.14 37.5
SDRIL
Only running mine
3
589.21
FC, and LA are pending
20
951.68
FC, and LA are pending
15
114
FC stage II,and ML are pending
2.2
196
EC, FC, EMP andML are pending
2
26.
Utkal –D
OMC
145
FC stage II,and ML are pending
2
27.
Utkal –E
NALCO
194
EC, FC, EMP,ML and LA are pending
2
10270.115
399.56
Coal Insights, October 2012
51
Expert Speak in granting “statutory clearances” for the new coal projects. The controversy of “Go” and “no-go” areas has also resulted in abnormal delay. After this was lifted the MoEF decision making process is in shambles and hardly any clearance has been granted of late. As per one study, Coal India can more than double its output to 1132 mt from its present production of 464 mt, provided it secures the necessary clearances for its 179 projects and start production from these projects by 2016-17. Out of 179, 130 proposals are awaiting stage I clearance and the remaining 49, stage II forestry clearance. This process can take anything from to five years and sometimes up to 10 years. The total area needing forestry clearance is 15,656 hectares for stage I and 13,115 hectares for stage II. Out of the 179 projects waiting for clearances, 45 are awaiting approval at the MoEF level, 26 are awaiting forestry clearance at MoEF Stage I level, and the 19 proposals awaiting stage II clearance will contribute 26 million tons per annum (201617). The 57 environmental clearances of incremental capacity of 137 mtpa are awaiting clearance at various levels. Eight proposals with capacity of 14.44 mt awaiting terms of reference (TOR) and three proposals, with capacity 21.86 mt, are awaiting clearance from Expert Appraisal Committee (EAC). A total of 29 proposals, with capacity of 77.26 mt, are awaiting final clearance. Infrastructure
Infrastructure is yet another bottleneck in the green field projects. Without advanced, comprehensive and macro-level planning, it is not possible to develop the coal blocks allocated to a large number of independent companies in greenfield areas. Only a few of the allocated blocks, which are located near existing infrastructural facilities, with rail-road connectivity, can be developed for production. But the majority of them cannot be brought to production stage without any comprehensive and macro-level planning for the greenfield areas of the coalfields. The inadequate infrastructure in most of the allocated coal mines has made matters worse. Even if MoEF clearances are obtained, the infrastructure like rail and road development around the coal mines will take
52 Coal Insights, October 2012
years. The Railways will have to go through the same route for environment clearance as the coal mines. It will take time. Even if clearances are obtained, the Railways, one of the slowest organisations in India, will take years for rail connectivity. For example, a rail corridor is supposed to be built by railways to evacuate coal from the Talcher Coalfields is still in planning stage for the last five years. Similarly, the Rail corridor of Ib Valley coalfield is hardly progressing even though CIL has paid money in advance to the Railways three years ago. The road transport of coal from Basundhara and Garjanbahal mines in Ib Valley Coalfields is dependent on road transport and one of the biggest bottlenecks for increasing production. Thousands of trucks plying between Basundhara and Sundergarh in the narrow road has made the road a road of misery and has also caused lot of environmental problems. The second problem is that of fragmentation of the coal reserves into small and medium size coal blocks and allocation of the fragmented coal blocks to a large number of independent companies. The objective behind the decision of allocation of coal blocks to non-CIL companies was not to create a handful of favoured industrial units (power plants, sponge iron/steel plants and cement plants)
by allocating them coal blocks and ensuring their coal availability at a much less cost in comparison to their majority counterparts who do not have coal blocks. The objective of allocation of coal blocks to non-CIL companies was to substantially increase the overall coal production capacity in the country. But, in order to satisfy a higher number of applicant companies, the coal reserves in a coalfield were fragmented into small and medium size coal blocks and allocated to a large number of companies, both in the private and public sectors. These small and medium size coal blocks are not suitable for planning modern, high-capacity coal-projects. There are possibilities of greater loss of coal reserves in such small-size coal blocks. The reason is that sub-dividing them into small blocks, results in mining loss of around 40-50 percent of the reserves due to coal loss in barriers, safety zone and maintaining angle of repose etc. Can India afford to lose such a huge resource of nearly 40-50 percent due to mining loss? The allocattee companies of these small and medium size coal blocks do not have the professional competence and capacity for long-term planning and investment for the coal projects. But, except a few, the majority of the allocattee companies are small companies both in the private and public sectors, who do not have either the competence or the capability to develop the required infrastructural facilities for the coal projects. These allocattee companies are independent companies with diverse objectives and diverse priorities. It is neither practical nor commercially viable for each of them to independently make investments for constructing the required infrastructural facilities (viz. rail-connectivity from the main-line of Indian rail network up to their allocated coal block. Left to themselves, these companies cannot develop any common forum or syndicate for planning and executing common infrastructural facilities, which can serve a group of coal-blocks. In hindsight, if even 50 percent of the blocks had started production the coal crisis faced by India would not have been there at all. The MoC and the Prime Minister allocated the blocks but forgot that the blocks cannot produce a single ton of coal unless:
Expert Speak ♦♦ E nvironment and forest clearances are given;
more to go for competitive bidding. The cost of all these will add up to more than `3-10 lakh crore. Our country can illafford to lose time by de-allocating.
♦♦ Land acquisition is done; ♦♦ Infrastructure for coal evacuation is built. For example, take the case of coal blocks allotted to different power, cement and steel plants etc. in the state of Odisha which has the potentiality to produce 400 mt but is suffering from the above maladies. There are about 27 coal blocks allotted in the state of Odisha between 1998 to 2008, but only one small mine has started production. Most of the blocks are awaiting EC (environment), FC (forest clearance), EMP (environment management plan clearance), PL (Prospecting lease), ML (mining lease approval) and LA (land acquisition). These 27 blocks have an estimated reserve of 10,000 mt and are to produce nearly 400 million tons per annum. Normally by this time they should have been producing at least 200 mt, had all the clearances been made available. The allotment letter to the allottees provides that coal production has to start on 36 months for OC mine and 48/54 months for underground mine. Most of the blocks have been delayed by five years and many are delayed as much as 10-12 years. If one was to work out the Loss caused to the nation by non-governance by the authorities, then the loss works out to be phenomenal, much more than what CAG has assessed. ♦♦ L oss of valuable foreign exchange for 200 mt import @ $150 (taking `55 per $) per ton is nearly `165,000 crore; ♦♦ L oss of revenue to state and governments by way of royalty (@ of `100 per ton) is `2000 crore; ♦♦ L oss of sales tax (4 percent)and income tax (30 percent) to the government is `10,000 crore. The total losses work out to `270,000 crore per year and that is a huge price to pay for non-governance. De-allocation
De-allocation will be suicidal for the economy of this country. All power plants, steel plants and cement plants coming up will come to a grinding halt. Can the public sector Coal India meet the needs of all the industries. The answer is obviously no.
CAG should calculate:
♦♦ C ost of import of coal, which will result if coal blocks are de-allocated; ♦♦ C ost of loss to the nation due to power/ steel/ cement shortage; ♦♦ C ost of employment opportunities lost if de-allocation is done; ♦♦ C ost of social unrest the country will face if there is no power.
CIL’s production has stagnated for the last three years to about 465 mt. it just cannot take further load because it faces all the constraints mentioned above and added to that huge demand for employment by land losers which it cannot fulfill. Let us look at what will be the consequences if de-allocation is done: ♦♦ W e have to import coal in huge quantities at a great cost; ♦♦ W e will face acute power shortage in the country and there will be unrest in the country of unimaginable magnitude; ♦♦ We have to import steel and cement; ♦♦ W e will lose employment opportunities of local population; ♦♦ W e will have to build infrastructure like road and rail etc. which would now be done by private sector; ♦♦ W e have to do the prospecting at a great cost for competitive bidding. The competitive bidding probably cannot be done in the coming 3-4 years without detailed prospecting by CMPDIL and MEC etc. and therefore how the bidding can be done without accurate assessment of coal reserves. The prospecting of such large scale will require many years to complete. Therefore it will take few years
All these will add up to more than `10 lakh crore. There are two aspects to the current coal imbroglio. The first is the legality of the policy adopted by the government and the second is the manner in which the policy was implemented. Whether to allocate coal blocks by auction or selection is a matter of policy, which can be questioned to a limited extent on the touchstone of constitutionality. The recent Supreme Court decision that auction is not the only option for natural resources, probably vindicates the government’s decision of block allocation through selection process. The question whether bidding could be resorted to without an amendment is a pure question of law and matters can only be settled when the apex court delivers its opinion. It will be in the best interest of this country to solve this problem urgently. Otherwise we shall be heading for an unprecedented crisis which may lead to huge social unrest. 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 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, October 2012
53
Expert Speak
Chinese package may boost Indian coking coal prices
Ganesan Natarajan
T
he recent stimulus package announced by China to give a push to its infrastructure sector, coupled with a cut in production of high-cost coal by Australian miner BHP Billiton, is likely to push up prices of Indian coking coal. Contract prices of coking coal, $170 a ton for the October-December quarter, are set to go up by at least $10 a ton in the January-March period. The Chinese stimulus package of $1 trillion is bound to boost coking coal prices and I feel contract prices will reach the level of at least $180 a ton for January-March. For October-December, BHP Billiton has fixed the contract deal with Nippon Steel of Japan at $170 a ton. However, any price movement is expected to happen only after end of December, since it will take some time for investments in infrastructure to happen and steel output to grow. Spot prices of coking coal were ruling at $148 a ton but they are also expected to rise by $8 to $10 a ton after December, following an uptick in demand. Currently, spot prices of coking coal
54 Coal Insights, October 2012
are lower than the contract prices owing to slump in demand. But gradually, spot prices will close in on the gap with contract prices as demand picks up. India is currently seeing an acute shortage of coal, which is primarily used in steel Industries and power plants. Steel industries need 0.9 tons of coking coal to produce 1 ton of steel, and the consumption of coking coal in India is roughly about 35 to 40 million tons (mt), out of which about 12 to 15 mt is available in India. That too is medium grade soft coking coal which is not of very good quality. Thus about 30 to 35 mt has to be imported every year, of which SAIL imports about 14 mt. About 60 to 70 percent of this import is from Australia, which is close to India and the rest from US and New Zealand. India plans to expand steel production from the current 80 mt to 200 mt by 2020. Though newer technologies are coming up, like on-going talks with Posco to set up furnace based steel plants, they would take a long time to frutify. The expansion and capacity addition is going to happen in India mostly on the blast furnace route, for which larger quantities of coking coal is needed. Japan, the biggest recipient of sea-bound
coking coal, recorded a year-on-year drop of 19 percent and 12.6 percent in demand in April and May, respectively. The island nation’s May imports were, however, up 21.3 percent at 6.12 mt. The recovery in the coking coal market has to be led primarily by Japan. But, the signs are not very encouraging as of now. A few Japanese steel makers have shifted their base to Korea after the nation was ravaged by tsunami. Coking coal imports by Japan are set to fall to 65 mt in 2012 from 73 mt in the previous year. However, there will be no upsurge in price movements of coking coal till the end of December this year. Globally, crude steel output is not seeing the growth it is expected to. Chinese economy is also decelerating and this is bound to dent coking coal shipments. Japan is still rebuilding its devastating economy and infrastructure and it is expected to increase steel production as well as consumption. Price level of coking coal shall depend on the overall demand-supply situation in the global market, where Japan will have a large role to play. China is one of the largest consumers of coking coal and any fluctuation in Chinese demand impacts the international thermal coal market significantly. Thus, if Chinese steel mills reduce production, it will certainly have impact on global metallurgical coal prices. China’s coking coal import order has remained sluggish till June-end, with its economic growth contracting. The country, the second biggest importer after Japan, had imported 44.6 mt of the commodity in 2011. Price movements of coking coal are also bound to impact India, which trails only Japan and China in volume of imports. Industry sources have pegged the domestic steel making industry’s import requirement of coking coal at 36.8 mt in 2012-13. Currently, import accounts for more than 50 percent of the coking coal consumption in India. In the future, as steel production increases, this import dependence is expected to increase, and thus, any change in international coal prices impacts Indian steel manufacturers hard, where coking coal accounts for more than 30 percent of the production cost. Amid such growing needs, it has become imperative for major Indian firms to have merger and acquisition of overseas coal
Expert Speak assets and also looking to get coking coal securitisation, as there was no quality coking coal mines at home. India is in talks with Mongolia to acquire coal mines in Mongolia and also set up the first steel plant in the quality coal rich country. Despite being a growing economy with abundant coking coal mines, Mongolia does not have any steel plant of its own. The plan is to acquire the mine, utilise the coal for the steel plant India proposes to set up in Mongolia and export the rest to India through Chinese ports as Mongolia is a land locked country. Now it is up to the Mongolian government to allocate some good coking coal mine and India will have reciprocal arrangement to set up a steel plant there. This will be the first attempt by India to break away from the excessive dependence of Australian coking coal, which has become too costly in recent years pushing up sharply the cost of steel production in India. Thermal coal
NTPC Ltd, India’s biggest power producer, needs 166 mt of coal in the current fiscal year, of which around 16 mt has to be imported.
The company has already placed orders for importing 12 mt. NTPC, which generates 8 MW of every 10 MW it produces by burning coal, is looking to increase installed capacity from 34,854 MW now to 75,000 MW by 2017 and 128,000 MW by 2032. Coal India Ltd has an 82 percent share of the country’s coal production, but has been unable to keep pace with rising demand. It is to supply NTPC with about 145 mt in the current fiscal year. JSW Energy, a subsidiary of the JSW Group, is also importing coal from the overseas market to meet its fuel requirements as it does not have any captive mines in the country. India has a known coal gross resource base of 264,000 mt, the fourth largest in the world, of which proven reserves are around 101,000 mt. Demand is around 600 million tons per annum (mtpa) and is set to touch 2,340 mtpa by 2030. Coal India Limited (CIL), the country’s largest producer of coal, has moved a step forward with its plans to acquire coal mines abroad by initiating the process of forming a subsidiary in South Africa. Coal India intends to select South Africa based consultant(s) to assist its venture of formation of a wholly-
owned subsidiary company. The public sector firm has invited bids for appointing consultants to help it form a wholly-owned subsidiary in Africa. The development follows Coal India Ltd (CIL) signing pact with the Limpopo province of South Africa, for jointly identifying, exploring and developing coal mines. Last year, the government of Limpopo, the northern province of South Africa, had approached CIL for a joint venture (JV). The PSU has set aside `6,000 crore for acquisition of mines overseas. CIL, which accounts for more than 80 per cent of the domestic coal production, has a demand-supply gap of the fossil fuel of about 161.5 mt last fiscal. As CIL has a commitment of minimum of 80 percent requirement of power consumers, it wants to improve coal availability both by increasing domestic production and also through overseas sources. The author is whole-time director and president of Kolkata-based Ennore Coke 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, October 2012
55
Corporate
DVC to produce over 2 mt from captive blocks in FY13 Two other captive blocks, namely Khagra Joydev and Gondulpara are yet to come amodar Valley Corporation (DVC), to the production stage. The state power a state-owned electricity generator utility is facing land acquisition problems in catering to the eastern Indian states, Khagra Joydev and forest clearance issues in is aiming to produce more than 2 million Gondulpara. The company has joined hands tons (mt) of coal from its captive mines to with EMTA Group to raise coal from its feed its coal-based generation units during newly acquired coal blocks. 2012-13, R.N. Sen, chairman, DVC, said. There however was another block called DVC currently has three captive coal Kasta (East) allotted to DVC, but it was blocks, namely Barjora (North), Khagra later de-allocated due to alleged delay in Joydev and Gondulpara (allotted jointly with development and related issues. Tenughat Vidyut Nigam Ltd). Besides, the Commenting on the coal crisis facing utility has an old block Bermo which was the power sector, the chairman said, “The acquired from Indian Railways way back in government should consider allocating the 1951. The Bermo block however has seen abandoned mines to state owned utilities. declining production trend over the years. These mines were abandoned earlier as they During 2012-13, production from became unviable. But with the coal prices Barjora (North) is expected to be around 2 going up in recent years, these mines would mt, while that from Bermo would be less now be viable if operated.” than 1 mt, Sen said. Currently, the company The abandoned mines would not is trying to increase production from Bermo require any statutory clearances as they were in coming years. operational earlier and may start production immediately. All in all, DVC thermal power stations these mines can produce an Name Location Capacity Commissioning additional 30-40 mt of coal U-I Mar 86 for the power sector, he said. Dist- Bokaro 630 MW Bokaro ‘B’ U-II Nov 90 State- Jharkhand (3 X 210 MW) About imports, Sen said U-III Aug 93 DVC has planned to import U-I Oct 64 890 MW 3 mt of coal in 2012-13. The U-II May 65 Dist- Bokaro (3 X 130 MW) bulk of the requirements is Chandrapura U-III July 68 State- Jharkhand + going to come during the U-VII Nov 11 (2 X 250 MW) U-VIII Jul 11 second half of the year. “So far we have imported 350 MW Dist.- Barddhaman (1X140 MW) U-III Dec 66 only 150,000 tons of coal,” he Durgapur U-IV Sept 82 State- WestBengal + said. Coal Insights Bureau
D
(1X210 MW)
Mejia
Dist.- Bankura State- WestBengal
2340 MW (4 X 210 MW) + (2 X 250 MW) + (2 X 500 MW)
U-I Mar 96 U-II Mar 98 U-III Sept 99 U-IV Feb 05 U-V Feb 08 U-VI Sept 08 U-VII Aug 11 U-VIII Aug 12
DSTPS
Dist.- Bardhaman State- WestBengal
500 MW (1 X 500 MW)
U-I May 12
Total thermal
56 Coal Insights, October 2012
4710 MW
Concern over quality
Along with coal shortage, DVC has a serious concern over the quality of coal being supplied to its plants by Coal India Ltd (CIL). “The quality of coal being supplied is of major concern for us. Only a few days ago, we received a rake full of
mud and muck. We couldn’t unload it and had to ask for replacement,” Sen said.He also resented the ad-hoc shift from UHV based pricing to GCV based pricing. “Even today, the coal quality is not measured scientifically through a bomb calorimeter, but through a conversion formula. Most of the mines do not have the instruments required for GCV measurement. There are still boulders and mud mixed in coal supplied,” he said. He said he didn’t expect the grade slippage problems to be addressed even after the signing of Fuel Supply Agreements
The government should consider allocating the abandoned mines to state owned utilities. These mines were abandoned earlier as they became unviable. But with the coal prices going up in recent years, these mines would now be viable if operated.” (FSA) with power utilities. “There will still be boulders. If they assure us the impurity will be contained to a certain limit, we will be grateful,” Sen added. Pricing issues
About coal pricing, Sen said, “The ideal situation could be to get market driven price for both coal and power. However, power is a very price sensitive market. So we need to procure coal at minimum prices available. For this, captive mining is very helpful.” For instance, at Barjora, the mining cost incurred by DVC is around Rs 1,000 per ton. At Bermo, it is even lower, at around Rs 800 per ton. “The same grade coal would be available from market at a much higher cost of Rs 3,500 per ton.” Coal procured from CIL, due to impurities, also raises the effective cost of coal. “We have to bear higher freight and unloading cost and then damage to the plant. Instead, if more captive blocks are allotted to power generators, cost of power would be much more affordable.”
Corporate
CIL expected to report 25% y-o-y growth in PAT in Q2 Coal Insights Bureau
A
nalysts tracking the Coal India Ltd (CIL) counter expect the company to report 25% year-on-year growth in the profit after tax in the second quarter of 2012-13 at around Rs 2,800 crore. The company expects revenue to grow 12% year-on-year at Rs 14,700 crore. Analysts estimate production at 90 million tons (mt) and dispatches at 104 mt, up 12% year-on-year. During second quarter of 2012-13 till September 9 CIL’s production was 69 mt, up 9% year-on-year and dispatches were 79 mt, up 6% year-on-year. Some analysts estimate a 3.7% quarteron-quarter decline in blended realizations
because of lower e-auction volumes of 10.5% against 12% in the first quarter of 2012-13 and lower e-auction realizations of Rs2,350/ ton compared to Rs 2,562/ton in the first quarter of 2012-13. Indian demand for coal is expected to rise to 980 mt a year by 2017 and domestic supply is projected at 795 mt a year and imports at 185 mt a year. The existing coal nationalisation law, which governs Coal India Limited (CIL), a government company, had the sole rights to extract coal. CIL, the world’s largest coal miner, was the holding company of subsidiaries like Bharat Coking Coal, Central Coalfields, Eastern Coalfields, Mahanadi Coalfields, Northern Coalfields, South Eastern Coalfields, Western Coalfields and the
Central Mine, Planning and Design Institute. CIL, with current production of 430-mt a year, had set a target of increasing production by another 420-mt a year by implementing 133 projects by 2017. But over 45% of these projects were already delayed over five years, following failures to secure various mandatory approvals.
Coal Insights, October 2012
57
International days during the fourth quarter of 2011 and the first quarter of 2012 was 18 percent below the thirty year normal. Temperatures this winter are expected to be colder than last winter. In particular, projected heating degree days in the southern states, where a majority of homes heat with electricity, are 27 percent higher than last winter. As a result US coal consumption (in MMst) of the colder 300 weather, EIA projects retail sales 250 of electricity to the 200 residential sector this winter will 150 average 6.2 percent 100 more than retail 50 sales last winter. Natural gas 0 prices have risen Q1 Q2 Q3 Q4 steadily since this Coal Consumption (MMst) past spring. In September, the 2012 2013 Henry Hub price averaged $2.85 Source: EIA per million Btu, which was 46 percent higher US coal supply (in MMst) than the average in 300 April. With higher natural gas prices 250 it is expected that natural gas will lose 200 some of its recent gains in electricity 150 generation market 100 share. The share of 50 total generation fuelled by natural 0 gas in the fourth Q1 Q2 Q3 Q4 quarter of 2012 is projected to 2012 2013 average 27.8 percent compared Source: EIA with 25.4 percent inventories, will begin to put downward during the same period last year. By the pressure on coal prices and contribute to the beginning of 2013, higher natural gas shut-in of higher-cost production. According prices should contribute to year-overto a forecast, the delivered coal price will year declines in natural gas’s share of total average $2.40 per MMBtu in 2012 and $2.42 generation. per MMBtu in 2013. It is expected that natural gas to fuel 25.8 percent of generation during the first quarter Electricity consumption of 2013, which is 2.8 percentage points lower During this past winter, US heating degree than during the first quarter of 2012. 
US coal production to be 1,027 MMst in 2012: EIA Coal Insights bureau
A
ccording to a forecast by the US Energy Information Administration (EIA), coal production will decline by 6 percent in 2012 as domestic consumption falls. The production will total 1,027 million short tons (MMst) in 2012, 68 MMst below the 2011 total with EIA expecting production to fall by 1 percent (12 MMst) in 2013 as inventory draws and lower exports offset an increase in domestic consumption in the forecast. Electric power sector stocks, which ended 2011 at 175 MMst, are set to total 187 MMst at the end of the 2012 whereas the inventories are expected to decline slightly in 2013, but they will remain at elevated levels. Coal trade
EIA expects US coal exports to remain strong in 2012 and exceed the 107 MMst exported in 2011. The US exported 11.6 MMst of coal in July, the fifth consecutive month with exports exceeding 11 MMst. It is projected that coal exports will total a record 125 MMst in 2012. EIA expects that coal exports will decline in 2013 but remain above 100 MMst for the third straight year. Falling international coal prices and slower economic growth, particularly in China, are primary reasons for the expected decline in coal exports. US exports could be higher if there are significant supply disruptions from any of the major coal exporting countries. US coal exports averaged 56 MMst in the decade preceding 2011. Coal prices
Delivered coal prices to the electric power industry increased steadily over the 10-year period ending in 2011, when the delivered coal price averaged $2.40 per MMBtu (a 6 percent increase from 2010). However, EIA expects the decline in demand for coal, combined with large coal
58 Coal Insights, October 2012
INTERNATIONAL
India’s Jan-Aug coal imports from South Africa up y-o-y Coal Insights Bureau
I
ndia’s total coal imports from South Africa during the eight months of 2012 stood at 12,955,498 tons, up 22.08 percent compared with 10,612,349 tons imported during the corresponding period of 2011. With the rise in imports during the first eight months, India’s share in total export through RBCT rose to 29.23 percent compared with a share of 27.44 percent during the corresponding period of 2011. India’s coal import from Richards Bay Coal Terminal (RBCT) of South Africa fell marginally in August to 1,649,635 tons compared with 1,696,305 tons imported in July, but was down 7.13 percent compared with 1,776,332 tons imported in August 2011, according to data made available by one of the promoters of the terminal to ICMW, a high-end coal report. India accounted for 28.04 percent of the total coal exported through the terminal in August compared with 27.01 percent share in July. Its share in total export from RBCT in August 2011 stood at 25.78 percent. India’s coal imports from RBCT fell in August after witnessing rise in July and June. The import had fallen continuously between March and May 2012. In 2011, India’s coal import from South India’s coal imports from RBCT (in tons)
Month
2012
2011
January
12,55,412
15,14,421
February
19,15,301
8,65,548
March
19,06,978
14,80,596
April
15,77,256
12,17,071
May
13,71,460
12,65,774
June
15,83,151
12,06,449
July
16,96,305
12,86,158
August Total
16,49,635
17,76,332
1,29,55,498
1,06,12,349
Africa stood at 16,132,140 tons, down 23.18 percent as compared with 20,999,761 tons in 2010, but import in 2012 is likely to shoot up. According to an exporter, “India has been a strong buyer throughout the year despite moves in prices and although spot business has been slow recently, we expect India to take more than 20 million tons for the year as a whole.”
Monthly coal export through RBCT
Coal export scenario
The coal export through the terminal during the first eight months (January-August) of 2012 stood at 44,309,523 tons, up 17.16 percent compared with 38,672,609 tons exported during the corresponding period of 2011. After registering considerable growth during the previous two months, the export of coal through Richards Bay Coal Terminal (RBCT) of South Africa fell in August on share decline in imports by China, according to data made available to ICMW by one of the promoters of the terminal.
(in tons)
Months
2012
2,011
January
44,63,987
43,89,925
February
60,87,111
45,67,807
March
63,39,413
53,53,497
April
51,74,739
48,10,185
May
46,27,648
35,26,751
June
54,54,166
47,75,898
July
62,79,244
43,57,091
August
58,83,215
68,91,455
4,43,09,523
3,86,72,609
Total
The export in August fell by 6.31 percent to 5,883,215 tons from 6,279,244 tons in July and was down 14.63 percent compared with 6,891,455 tons in August 2011. The export in July was up 15.13 percent compared with 5,454,166 tons in June and was up 17.86 percent in June compared with 4,627,648 tons exported in May.
Coal Insights, October 2012
59
logistics
Traffic handling by major ports down 3.28% in Apr-Sept Coal Insights Bureau
T
he 12 major Indian ports have handled 270.56 million tons (mt) of traffic during the first six months (April-September) of 2012-13, 3.28 percent lower than 279.72 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 15.27 mt of coking coal in April-September period, up 2.93 percent as compared with 14.83 mt handled in the same period last year. However, the movement of thermal coal through the major ports was up 4.6 percent to
25.56 mt during April-September, compared to 24.44 mt achieved in the same period last year. Movement of iron ore through the major ports showed a significant drop of 43.09 percent in AprilTraffic handled at major ports September due to (During Apr-Sept, 2012* vis-a-vis Apr-Sept, 2011) restrictions imposed on mining and a hike (*) Tentative (in '000 tons) in export duty on iron April to September traffic % Variation against Ports ore. The major ports prev. year traffic 2012* 2011 together handled KOLKATA 18 mt of iron ore in the April-September Kolkata Dock System 5754 6203 -7.24 period compared to Haldia Dock Complex 14054 17005 -17.35 31.64 mt handled in TOTAL: KOLKATA 19808 23208 -14.65 the same period last year. PARADIP 25629 27996 -8.45 Mormugao port VISAKHAPATNAM 30309 36097 -16.03 handled the highest ENNORE 7997 6527 22.52 volume of 7.42 mt CHENNAI 27128 29269 -7.31 of iron ore in AprilSeptember. This V.O. CHIDAMBARANAR 14037 13852 1.34 volume, however, was COCHIN 10134 9754 3.90 about 37.54 percent NEW MANGALORE 16736 16042 4.33 lower than the iron ore traffic moved MORMUGAO 12656 16406 -22.86 through the port in MUMBAI 28789 26662 7.98 the same period last JNPT 32653 32348 0.94 year. Movement of KANDLA 44686 41568 7.50 container traffic in TOTAL: 270562 279729 -3.28 terms of tonnage Source: IPA
60 Coal Insights, October 2012
and TEUs showed an increase in the AprilSeptember period. The major ports handled 60.90 mt of tonnage and 3.93 million TEUs in April-September period compared to 59.33 mt of tonnage and 3.89 mt of TEU 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 8.72 mt in April-September period. Visakhapatnam port handled the highest quantity of 3.45 mt of coking coal during the period. Movement of coking coal through Paradip, Kolkata, Visakhapatnam, Chennai, Cochin and Mormugao ports declined during the period when compared to the corresponding period last year. Seven major ports showed positive growth in traffic handling during the AprilSeptember period of the current fiscal, while the remaining five showed negative growth on a year-on-year basis. In terms of growth, Ennore port topped the list with a 22.52 percent increase in cargo throughput. JNPT’s growth was lowest at about 0.94 percent during the period. In terms of traffic volume, Kandla port clinched the top rank with a cargo volume of 44.68 mt recorded for the period. The Mormugao port registered the highest decline of 22.86 percent in traffic handling during the period due to fall in iron ore export.
Logistics
Railways commodity freight revenue down in Sept m-o-m
Commodity-wise revenue
Coal Insights Bureau
T
he Indian Railways’ revenue earnings from commodity-wise freight traffic fell month-on-month in September due to lower transportation of coal and iron ore. Revenue earnings from commoditywise freight traffic during September 2012 stood at `6,040.96 crore, down 4.54 percent compared with `6,328.28 crore earned in August, according to information available with Coal Insights. The Railway’s revenue from transportation of coal fell to `2,509.01 crore in September from 2,537.7 crore in August. The Railways transported 36.1 million tons (mt) of coal in September compared with 36.69 mt transported a month ago. Revenue from transportation of iron ore for exports, steel plants and for other domestic user in September fell to 518.07 crore, down 16.55 percent from `620.84 crore in August. The quantity of iron ore transported fell to 8.2 mt in September from 9.21 mt in the previous month. Revenue from transportation of cement in September stood at `575.41 crore (8.01 mt) as compared to `551.57crore (7.52 mt) in August, while that from foodgrains transportation fell to `488.2 crore (3.57 mt) in September from `597.09 crore (4.22 mt) in August. The Railways revenue from transportation of fertilisers in September rose sharply to `479.86 crore (4.77 mt) from `427.08 crore (4.29 mt) in August. Revenue from transportation of petroleum oil and lubricant (POL) in
September stood at `328.04 crore (3.2 mt), while the same from pig iron and finished steel from steel plants and other points was `367.58 crore (2.73 mt). Revenue from container services was `291.84 crore (3.23 mt) and from transportation of other goods was `387.56 crore (4.9 mt).
Commodity
Quantity (in mt)
Earning (in Rs crore)
Sept’11
Sept’12
Sept’11
Sept’12
(i) for steel plants
3.78
3.87
151.52
206.65
(ii) for washeries
0.15
0.09
2.17
1.02
20.13
22.05
1299.43
1695.28
7.09
10.09
391.6
606.06
31.15
36.1
1844.72
2509.01
1.24
1.22
91.25
95.39
(i) from steel plants
2.15
2.16
239.42
317.79
(ii) from other points
0.59
0.57
38.21
49.79
(iii) Total
2.74
2.73
277.63
367.58
(i) for export
1.03
0.47
265.08
105.93
(ii) for steel plants
3.69
5.04
127.59
205.79
(iii) for other domestic users
2.58
2.69
181.71
206.35
(iv) Total
7.3
8.2
574.38
518.07
Cement
7.66
8.01
438.54
575.41
Foodgrains
3.76
3.57
334.77
488.2
Fertilizers
4.35
4.77
314.53
479.86
Mineral Oil (POL)
3.06
3.2
247.21
328.04
(i) Domestic containers
0.77
0.74
71.91
75.55
(ii) EXIM containers
2.43
2.49
204.48
216.29
Coal
(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
Container Service
(iii) Total Balance other goods Total revenue earning traffic.
3.2
3.23
276.39
291.84
5.71
4.9
377.94
387.56
70.17
75.93
4777.36
6040.96
Coal Insights, October 2012
61
E-AUCTION Monthly data of offered quantity (road & rail) MONTH
OFFERED BY ROAD 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
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
Qty. In Tons
OFFERED BY RAIL 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
Monthwise quantity offered & sold MONTH 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
OFFERED QTY (in tons) 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
Monthly Data of Offered Quantity (road & rail)
Quantity offered & sold Quantity in Tons
4,000,000 3,000,000
6,000,000 5,000,000 4,000,000 3,000,000
2,000,000
2,000,000 1,000,000
1,000,000
Companywise data of sold quantity in August’12 (road & rail) Qty. In Tons BCCL CCL ECL MCL NCL NEC SCCL SECL WCL Grand Total
RAIL 0 105,138
43,483 148,621
62 Coal Insights, October 2012
ROAD 210,250 423,500 133,490 897,150 128,000 15,000 117,448 608,450 242,580 2,775,868
Grand Total 210,250 423,500 238,628 897,150 128,000 15,000 117,448 651,933 242,580 2,924,489
Aug'12
July'12
June'12
Apr'12
May'12
Mar'12
Feb'12
Jan'12
Nov'11
1,500,000
1,250,000
1,000,000
750,000
500,000
250,000
CCL RAIL
CCL ROAD
SCCL RAIL
WCL RAIL
SCCL ROAD
WCL ROAD
ECL RAIL
ECL ROAD
SECL RAIL
NEC RAIL
SECL ROAD
NEC ROAD
NCL RAIL
NCL ROAD
0
MCL RAIL
207,800 0 1,108,460 111,000 449,400 43,483 95,195 144,078 327,995 106,572 385,340 2,979,323
1,750,000
MCL ROAD
QTY SOLD
BCCL ROAD
210,250 0 897,150 128,000 15,000 608,450 43,483 133,490 105,138 242,580 117,448 423,500 2,924,489
QTY OFFERED 373,250 7,906 1,455,000 111,000 463,350 43,483 97,920 144,078 364,680 142,000 436,900 3,639,567
SOLD QTY (in tons)
Companywise Quantity Offered & Sold in August’12 Vs July’12
Quantity In Tons
QTY SOLD
Variation (In Percent) OFFERED SOLD QTY QTY -0.44% 1.18% 100.00% -5.50% -19.06% NA NA 15.32% 15.32% NA NA NA NA NA NA 42.39% 35.39% 0.00% 0.00% 36.37% 40.23% -27.03% -27.03% -28.31% -26.04% NA NA -1.41% 10.21% NA NA 4.55% 9.90% NA NA 1.81% -1.84%
Companies Aug'12 QTY OFFERED July'12 QTY OFFERED
Aug'12 QTY SOLD July'12 QTY SOLD
Companywise Data of Sold quantity in August’12 (road & rail) 1,000,000
Quantity (in Tons)
QTY OFFERED 371,600 15,812 1,375,000 128,000 15,000 659,750 43,483 133,530 105,138 261,450 140,000 456,800 3,705,563
July’12
Dec'11
OFFERED QTY (in tons)
OFFERED BY RAIL
Companywise Quantity Offered & Sold in August’12 Vs Qty. In Tons July’12 Via Rail & Road Aug’12
Sept'11
Aug'11
Aug'12
July'12
June'12
May'12
Apr'12
Mar'12
Feb'12
Jan'12
Dec'11
Nov'11
Oct'11
Sept'11
Aug'11
OFFERED BY ROAD
Oct'11
0
0
BCCL RAIL
Qty Offered In Tons
7,000,000
5,000,000
Client
Variation (In Percent) -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%
8,000,000
6,000,000
BCCL ROAD BCCL RAIL MCL ROAD MCL RAIL NCL ROAD NCL RAIL NEC ROAD NEC RAIL SECL ROAD SECL RAIL ECL ROAD ECL RAIL WCL ROAD WCL RAIL SCCL ROAD SCCL RAIL CCL ROAD CCL RAIL TOTAL
Qty. In Tons
SOLD QTY (in tons) 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
900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 BCCL
CCL
ECL
MCL
NCL
NEC
SCCL SECL
SUBSIDIARY NAME RAIL
ROAD
WCL
port data Major ports through which Coking Coal arrived in India June’12 - August’12 Port
Qty (in Tons)
VIZAG
1,773,763
KOLKATA
1,482,827
MORMUGAO
1,427,530
GANGAVARAM
1,336,081
PARADIP
1,198,332
MUNDRA
378,062
Port
2%
1%
5%
184,780
ENNORE
66,650
KANDLA
35,305
CHENNAI
508
Grand Total
0% 0%
Country of Origin
Qty (in Tons)
NEW MANGALORE
7,883,838
Major ports through which Coking Coal arrived in India June’12 - August’12 15%
Major Coking Coal supplier countries to India (through mentioned ports) June’12 - August’12 Qty (in Tons)
AUSTRALIA
5,816,379
UNITED STATES
1,021,765
CANADA
337,709
NEW ZEALAND
228,714
OTHERS
479,271
Grand Total
7,883,838
Major Coking Coal supplier countries to India (through mentioned ports) - June’12 - August’12 3%
4%
23%
6%
13%
17% 19% 18% VIZAG MORMUGAO PARADIP NEW MANGALORE KANDLA
KOLKATA GANGAVARAM MUNDRA ENNORE CHENNAI
74% AUSTRALIA NEW ZEALAND
Major ports through which Steam Coal arrived in India June’12-August’12 Port
Qty (in Tons)
Port
UNITED STATES OTHERS
CANADA
Major Steam Coal supplier countries to India (through mentioned ports) June’12-August’12
Qty (in Tons)
Country of Origin
Qty (in Tons)
MUNDRA
2,447,877
KANDLA
828,201
INDONESIA
8,530,459
PARADIP
1,581,636
VIZAG
565,363
SOUTH AFRICA
1,608,243
ENNORE
1,466,649
KOLKATA
330,768
COLOMBIA
163,580
MUMBAI
1,290,938
MORMUGAO
244,974
AUSTRALIA
126,950
NEW MANGALORE
1,041,260
COCHIN
OTHERS
282,267
GANGAVARAM
910,833
3,000
Grand Total
10,711,499
Major ports through which Steam Coal arrived in India June’12-August’12 7.7%
5.3%
3.1%
10,711,499
Major Steam Coal supplier countries to India (through mentioned ports) June’12-August’12
2.3% 0.0%
1.2%
22.9%
8.5%
1.5% 15.0%
2.6%
14.8%
9.7% 12.1% MUNDRA MUMBAI KANDLA MORMUGAO
Grand Total
13.7% PARADIP NEW MANGALORE VIZAG COCHIN
ENNORE GANGAVARAM KOLKATA
79.6% INDONESIA AUSTRALIA
SOUTH AFRICA OTHERS
Note: Figures are based on consignment lifted from these ports for which price details/break-up is available with ICMW team
64 Coal Insights, October 2012
COLOMBIA
Tear along the dotted line
66 Coal Insights, October 2012 Tear along the dotted line