Coal Insights, October 2020

FROM THE CHIEF EDITOR Chief Editor Dr Mahul Brahma, Tel: +91 85840 08241, E-mail: mahul.brahma@mjunction.in Editor Arindam Bandyopadhyay, Tel: +91 91633 48016 Email: arindam.bandyopadhyay@mjunction.in Associate Editor Sumit Kumar Maitra, Tel +91 85840 08181, Email: Sumit.Maitra@mjunction.in Editorial Board Alok Srivastava, General Manager, MMTC Ltd Amitabh Panda, Group Director (Shipping & Logistics Operations), Tata Steel Group Anil Razdan, Energy Consultant, Formerly of the IAS, Former Secretary Power & Sp. Secretary Petroleum & Natural Gas, India Anirudha Gupta, Mining & Metals professional and former Director, P&H Joy Mining Equipment India Ltd Ashok Jain, Managing Director, Saumya Mining Ltd Deepak Bhattacharyya, Chief - Horizon 1 businesses, mjunction services ltd Ganesan Natarajan, Former Whole Time Director, Ennore Coke K C Gandhi, Joint President (Material), Shree Cement Ltd Lawrence Metzroth, Vice President – Analysis & Strategy, Arch Coal Inc Sandeep Kumar, Managing Director, Tata Metaliks Ltd Senior Correspondent Ritwik Sinha, Tel + 85840 08234, Email: ritwik.sinha@mjunction.in Balaka Ghosh Chatterjee, Tel + 85840 08190, Email: Balaka.Chatterjee@mjunction.in Analyst Sanjoy Bag, Tel +91 85840 08215, Email: sanjoy.bag@mjunction.in Business Lead Soumitra Bose, Tel: +91 92310 00232, Email: soumitra.bose@mjunction.in Advertising Soudipto Malakar, Tel: +91 91633 48243, Email: soudipto.malakar@mjunction.in Sumit Jalan, Tel: +91 83369 25981, Email: sumit.jalan@mjunction.in Subscription Niladri Kar, Tel: +91 83369 96510, Email: niladri.kar@mjunction.in Email: publication.vspl@mjunction.in Toll free number 1800 41 920 001, press 6 for publication.

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Dear Reader, Despite surface conflict and contradiction, everything coheres towards unity and a higher synthesis. But it is hard to deny the underlying agonistic dualism pointed out by French anthropologist Jean Baudrillard. The self-moving non-unification that is “evil”, all the singular forms that are irreducible to this empire of the good, the process whereby power produces its own retroversion and in which meaning destroys itself.

And then there is the banality of evil, a concept developed by German philosopher Hannah Arendt where she asks a question – can one do evil without being evil?

Dear reader, we pray that the good prevails over both banality and intelligence of evil.

So I, on behalf of the entire team of Coal Insights wish you a Happy Dussehra.

As we wrap up this edition of Coal Insights, the historic auction of coal mines for commercial purpose is set to take off.

There has been some revision of deadlines for various reasons. But those factors can’t take away any of the profundity associated with the event.

The interview of coal and mines minister Pralhad Joshi, featured in this month’s Special Edition, brings out just that.

In our obsession with short term fixes and quarterly targets, we sometimes miss out the big picture, clearer in hindsight. Since 1991, several major reform measures were triggered by a crisis.

With the removal of end user criteria from the bidding process, the run-up to the auction has seen almost 65 percent bidders from the ‘nonend user’ category, as rightly pointed out by the minister.

In contrast with the limited success witnessed in captive coal block auctions that placed rigorous eligibility criteria, the current tranche of auction of mines for bidders – many of whom have no prior sector experience – would open up new possibilities.

We had seen how smaller and inexperienced players enriched the privatisation of sectors like aviation and telecom before selling off to bigger players through sector consolidation processes.

A similar phenomenon in the coal mining sector too would be a happy experience.

While the impact of the coal sector opening up would play out over the medium to long term, a more immediate pay off would be seen in another reform measure being orchestrated.

Coal India’s subsidiaries may be given freedom to price and sell their coal at their own discretion thus creating competition within Coal India itself, making the mining behemoth prepare for a day when commercially mined coal is made available at a future date.

In our international segment, we take a look into the new geopolitical tussle being played out between China and Australia and its impact on coal trade and tried to get the hard facts from the posturing.

Enjoy this special issue of Coal Insights.

Articles are invited from industry partners for publication in Coal Insights. The selection of articles is subject to scrutiny by the editorial desk and its decision will be final and binding. The copyright of the published articles will be held by the publication.

Coal Insights, October 2020

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CONTENTS

6 | COVER STORY

20 Seaborne thermal coal offers firm up in October 21 Seaborne coking coal offers fall in October

“Private sector’s prospect in coal mining very promising”

22 India’s August coal imports down 18% on year

Pralhad Joshi, Minister of Parliamentary Affairs, Coal and Mines shares his plans for the coal sector in an exclusive interview.

23 CIL coal production, offtake rebound in September 24 SCCL’s coal production down 40.6% in H1 27 Power sector on fast-track recovery 30 No power capacity addition in August

25 | FEATURE Discom dues touch `1.2 lakh crore Rajasthan, Tamil Nadu, Uttar Pradesh, Karnataka, Maharashtra suffer most.

31 Cement production down 14.6% in August

35 | FEATURE

34 Power cos sign MoU for FY21 41 India to drive future energy demand: IEA

NTPC may put 7.4GW of preconstruction capacity on hold: IEEFA

44 Major Aussie coking coal project goes underway 45 China sends confusing signals on Aussie coal imports 47 US coal production output at 525 MMst in 2020 48 Traffic handled by major ports down 14% till September 49 Indian Railways’ coal handling down 18% in April-September 50 Coal slurry transport to power houses a present necessity 54 Corporate Update 56 Government Update 58 E-auction data 60 Port Data

4 Coal Insights, October 2020

The power producer to focus more on RE, the noted US-based energy research agency said.

37 | INTERNATIONAL

Thermal coal prices are expected to rise in 2021: Aussie report Longer-term trends will constrain the extent of the rise.

53 | CORPORATE

Coal India arms may get pricing freedom Competition will lead to reduction in power prices.

COVER STORY

6 Coal Insights, October 2020

COVER STORY

“Private sector’s prospect in coal mining very promising”

A

s the nation undertakes the historic auction of coal mines for commercial sale of coal, this single-most defining reform measure announced by the government amidst Covid pandemic looks set to reshape the dynamics of the Indian coal market. Spearheading this bold initiative, Pralhad Joshi, Union Minister of Parliamentary Affairs, Coal and Mines, Government of India, aims to steer the coal sector towards market economy, self-sufficiency and a greener and cleaner future. Arindam Bandyopadhyay of Coal Insights gets to ask the minister the most topical issues that confront coal, in an exclusive interview.

The government’s announcement on the launch of commercial coal mining amidst nation-wide lockdown came as a pleasant surprise for the market. How do you find the response of the market so far?

How upbeat are you about the long term prospect of private sector’s participation in coal mining in India?

For a country richly endowed with coal reserves, depending on coal imports at huge forex outgo of over `1.5 lakh crore, bringing in a whopping quantity of over 248 million tons (mt) of coal does

Coal Insights, October 2020

7

FEATURE

Discom dues touch `1.2 lakh crore Rajasthan, Tamil Nadu, Uttar Pradesh, Karnataka, Maharashtra suffer most Coal Insights Bureau

T

he finances of Discoms have got further constrained with their outstanding dues to power generators ballooning to `1.19 lakh crore as on August 31, a 13 percent increase over a 7 months period.

Rajasthan, TN, UP, Karnataka and Maharashtra account for about 65 percent of the outstanding amount.

The ongoing current Covid-19 induced lockdown has extended payment cycles as Discoms are unable to generate all bills while

collections drop as people are restricted at homes.

Overdue to NTPC rose significantly during April-June, led by breather given by Central government to Discoms for paying their dues in view of Covid-19 induced lockdown.

The power ministry has allowed for Discoms to get relief from payable during lockdown period in the form of special rebate from NTPC and PGCIL. However, with a stimulus package, Discom dues are expected to reduce in near future.

“Recent relief package of `90,000 crore to Discoms is expected to diffuse this situation,” analysts said.

Collection efficiency of discoms improved to 100 percent as customers started clearing old dues. As a result, discoms’ financial situation was averted from deteriorating further, which was also aided by the government’s Atmanirbhar scheme.

Sector reform measures

The government has now enhanced the concessional loan limit under the Atmanirbhar scheme to `1,25,000 crore enhancing the initial `90,000 crore concessional loan by the Power Finance Corp and Rural Electrification Corp under the Atmanirbhar scheme, which will bring in the muchneeded liquidity to the cash-starved sector to cover the outstanding dues as of June.

So far, loans worth 90,800 crore have been sanctioned and `2,900 crore in loan disbursed to nine states.

The power ministry is also working on a series of reforms, including the implementation of the Direct Benefit

Payments by Discoms

August 2019

August 2020

Source: PRAAPTI, JM Financial

Coal Insights, October 2020

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FEATURE

Power sector on fast-track recovery Coal Insights Bureau

I

ndia’s Power demand is staging a consistent recovery, thanks to the increase in consumption level.

In the first week of October, Central Electricity Authority (CEA) data shows power consumption grew by 13.65 percent over previous year led by close to 14 percent growth in thermal and 42 percent rise in renewable.

This double digit growth comes on the back of 4 percent on year increase in overall power generation in September, while median peak demand recovered, by 26 percent from April lows to 170 GW back to pre lock-down levels of March.

Power consumption in the first week of October at 25.95 billion units (BU) amid buoyancy in industrial and commercial activities, up from 22.83 BU in the same period last year.

Peak power demand met, the highest supply of power in the country in a day, during October 1 to 7 was recorded at 170.04 GW on October 7. In the previous year, peak power demand met for October stood at 164.25 GW.

Consumption reported a growth in September by 5.6 percent at 113.54 BU from 107.51 BU in the same month last year.

Peak power demand in September this year recorded a growth of 1.8 per cent at 176.56 GW, compared to 173.45 GW a year ago, the data showed.

Recovery not broad-based

The improvements in electricity consumption were not broad-based across regions despite the easing of lockdown restriction across the country. “While it was higher on a monthly basis in the northern, western and eastern regions, the southern and north-eastern regions witnessed a decline. This indicates that economic and business activity continues to be constrained in these regions and raises concerns about the extent and sustainability of the increase in demand,� said Care Ratings in a report.

The western region, which is home to the most industrialised states of the country

registered a 13 percent monthly increase in power consumption, affirming to the higher activity here. The northern and eastern regions saw electricity consumption increase by 8 percent and 4 percent respectively from that in August.

The lower power consumption in the southern states (2.4 percent lower than in August) indicates that industrial activity here has been lacklustre despite the easing of the lockdown and restrictions.

Rise in electricity generation

Not only was electricity generation in September higher than in August by 0.4 percent, it was also the first time in 7 months that it surpassed the generation in the same month of last year (3 percent higher than in September of 2019). It, however, continued to be lower than that in July by 1.8 percent.

The improvement in generation seen in September was led by coal-based power which rose to 7 months high.

Coal to power plants

Coal production and despatches to the power sector declined 3.3 percent and 10.1 percent on year, respectively, during July-August due to subdued power demand. However, coal inventory at power stations increased by 88.4 percent on year to 34.3 million tons by the end of Q2FY21.

All India electricity generation

Gradual revival in demand

Before the pandemic, data showed that electricity consumption grew by 11.73 per cent in February. But then it posted 8.7 percent decline in March. Power demand degrew sharply as lockown was imposed, by 23.2 percent in April.

Power consumption showed improvement after lockdown was eased for economic activities from April and demand shrinkage fell with decline coming down to 14.9 percent in May, then 10.9 percent in June, followed by 3.7 percent in July and 1.7 percent in August.

Source: CEA (provisional)

Coal Insights, October 2020

27

FEATURE

NTPC may put 7.4 GW of preconstruction capacity on hold: IEEFA

Coal Insights Bureau

N

TPC may discontinue 7.4 GW of pre-construction capacity as it focuses more on renewable energy, a noted US-based energy research agency has said in a recent report.

“There is also a clear risk of underperformance on its 11.7 GW of underconstruction power plants – evident in the consistently declining utilisation rates in the five years to FY20 due to the addition of new capacity well ahead of demand growth,” Institute for Energy Economics and Financial Analysis said.

NTPC has 11.7 GW of coal-fired power plants under construction and 7.4 GW of coal-fired capacity under pre-construction development stages with various regulatory and environmental approvals pending, the report claimed citing data from Global Energy Monitor’s (GEM) Global Coal Plant Tracker (GCPT).

Under continuing pressure from deflationary renewable energy tariffs, India’s coal-fired fleet’s utilisation rates have collapsed to an unsustainable low of below 60 percent for the last three years while thermal power sector is facing difficulties with getting domestic coal linkages, water unavailability, environmental litigation, financial stress of state-owned Discoms and delays in construction.

The addition of new coal-fired capacity amidst depressed power demand during FY20 cannibalised performance of NTPC’s own capacity.

Based on reported Plant load Factor (PLF) and Plant Availability Factor (PAF), IEEFA estimates that NTPC’s coal plant utilisation factors reduced to 61.2 percent in FY20 from 66.9 percent in FY19.

NTPC average tariffs

Coal Insights, October 2020

35

INTERNATIONAL

Thermal coal prices are expected to rise in 2021: Aussie report

Coal Insights Bureau

T

hermal coal prices are expected to rise in 2021 driven by an increase in seaborne thermal coal demand as the global economy recovers, says a report by the Australian industry ministry.

However, longer-term trends will constrain the extent of the rise: Europe and South Korea are looking to reduce thermal coal consumption, while the world’s two largest consumers (China and India) have signaled their intention to reduce thermal coal imports by increasing domestic production, the Australia Resources and Energy Quarterly – September 2020 said.

The Resources and Energy Quarterly

is brought out by the Office of the Chief Economist and contains forecasts for the value, volume and price of Australia’s major resources and energy commodity export.

Growing demand from South and Southeast Asia should help to offset declining thermal coal imports elsewhere.

Competition from LNG is also expected to weigh on thermal coal demand, especially while LNG prices remain near record lows in spot and short-term contract markets.

In 2021 and 2022, global thermal coal import demand is expected to grow weakly, as the world economies rebound from the impacts of Covid-19.

But the shift away from coal in power generation in some countries, combined

Thermal coal prices are expected to rise in 2021 driven by an increase in seaborne thermal coal demand as the global economy recovers.

However, longer-term trends will constrain the extent of the rise.

World’s two largest consumers, China and India, have signaled their intention to reduce thermal coal imports by increasing domestic production. with the drive for self-sufficiency in others, is expected to keep world trade in thermal coal below 2019 levels during the outlook period.

India to trigger 2020 coking coal trade fall by 12%

World metallurgical coal trade is forecast to fall by 41 million tons (mt) or 12 percent to 296 mt in 2020.

India alone is expected to account for around half of the fall, with the rest of the decline spread across some other major steel producers, such as Europe and Japan.

Coal production cutbacks – as a percentage of 2019 levels – are expected to be most severe in the US, but other major

Coal Insights, October 2020

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62 Coal Insights, October 2020

Tear along the dotted line

Tear along the dotted line