Coal Insights, September 2021

CONTENTS 14 Seaborne thermal coal offers rise in September 15 Seaborne coking coal offers surge in September 16 India’s July coal imports down 13% m-o-m 17 CIL’s coal production up 15% in August 18 SCCL’s coal production doubles in August 19 India’s 27GW of planned thermal capacity may turn surplus: Report 22 Abandoning coal by developing countries to be costly: Study 24 No single pathway to achieve a low carbon economy: East Asia energy summit 18 Next tranche of coal mine auction in October-November: Coal Ministry 35 India August sponge iron production up y-o-y, m-o-m.

36 Domestic met coke offers surge in September 37 Coal Min launches second attempt for 11 coal mines.

39 Power capacity addition at 113 MW in June 41 Coal handled by major ports up 37% till August 42 Indian Railways’ coal handling up 34% till August 45 US coal production estimated at 601MMst in 2021 46 BHEL develops tech to create methanol from high-ash coal 47 Coal India for major push to evacuation infrastructure 51 Prabha Energy signs pact with BCCL for Jharia CBM Block-1 project 53 Adani group plans $20 billion investment in renewable energy sector 54 Corporate update 56 Government update

4 Coal Insights, September 2021

6 | COVER STORY

“CIL geared up to meet the surge in power demand.”

Director (Marketing) S N Tiwary shares strategy to fight coal crisis.

25 | FEATURE Government launches special CBM bid round Bids for 15 blocks due on February 20.

29 | FEATURE Coal India sees availability crisis resolving soon Festive season to see demand surge.

43 | INTERNATIONAL

Global leaders pledge climate action at UNGA China to stop funding coal plants overseas.

49 | CORPORATE

“Huge potential for growth in power sector”: NTPC Company at advanced stage for starting 2 coal mines.

COVER STORY

“CIL geared up to meet the surge in demand from power sector”

I

ndia’s demand for power has rebounded at a steep rate. Coal India has risen up to the occasion, increasing mining activities and raising despatches to the power plants, but is overwhelmed by the sudden surge in electricity consumption. To add to the crisis, global coal prices have appreciated significantly putting additional pressure on the PSU miner to cater to the import-dependent power plants as well. S N Tiwary, Director (Marketing) shares with Arindam Bandyopadhyay of Coal Insights the strategy to address these issues.

6 Coal Insights, September 2021

COVER STORY The Indian coal sector is witnessing a highgrowth, high-demand scenario. Desptches are up by almost 70 million tons (till August), yet a large number of power plants are facing critical/sub-critical coal stock levels. How does Coal India, the major supplier of the dry fuel, plan to cope with the situation?

India’s GDP for April-June quarter of FY22 expanded at a record 20 percent year-onyear amid a low base effect from last year, and despite a second wave of Covid-19 infections and localised lockdowns.

Construction sector has surged by about 68 percent, manufacturing sector by about 49 percent, mining by about 19 percent and utilities by 14 percent.

In line with the above growth trends, it may be observed that the coal-based power generation, which was about 350 Billion Units (BU) till August last year, has gone up to 432 BU till August of FY22, resulting in a growth of 23.4 percent.

However, it can be observed that the generation from imported coal-based plants till August 2021 was about 20 percent less than last year’s level. This can mainly be attributed to a sharp rise in the prices of imported coal.

The price of imported coal from Indonesia for an average GCV of 5000 Kcal/Kg witnessed a threefold increase compared to last year.

The freight also has been doubled resulting in reluctance of imported coalbased power plants to generate power at such a huge cost. This, in turn, has resulted in shifting of power demand to the domestic coal-based plants.

As of August 2021, CIL has produced 209.16 million tons (mt) of coal and has registered a positive growth of 7 percent in production and 24.4 percent growth in offtake till August over the same period last year.

Though CIL is supplying about 80 percent of its total despatch to the power

sector, it has been seen that as on date several plants are in the critical list. This is primarily because of the poor inventory management and regulations in coal intake imposed by the power utilities from time to time along with a spike in coal-based generation.

However, in order to tide over the crisis situation, CIL has launched a multipronged effort to help build up coal stocks at power plants and stressed that supply to the electricity units carrying stock of less than 7 days has to be prioritised by increasing supply to the power sector. In this regard, CIL has offered coal on ‘as is where is’ basis through rail-cum-road mode from sources where high stock is available. There are 22 such mines carrying stock of 38.3 mt as of September 1. In case of availability issue at linked mines, alternative sources have already been allocated for smooth running of the plants.

It is believed that with planned increase in production, strengthening evacuation infrastructure and adequate coal stock at pitheads, CIL is geared up to meet the surge in coal demand from the power sector by supplying commensurate quantities of coal on a continuing basis.

On the coal production front, a 7 percent growth during the first five months is commendable, but will CIL be able to achieve its yearly target of 670 mt? What is your take on this?

The extraordinarily difficult time for our nation is over and a positive growth in GDP is clearly visible. In spite of Covid pandemic in the first quarter and excessive rain thereafter in major coalfields of Eastern Coalfields, Bharat Coking Coal, Central Coalfields, Northern Coalfields and South Eastern Coalfields, Coal India has registered a positive growth of 7 percent in production and 24.4 percent in offtake up to August 2021 over the same period last year and the trend is still continuing.

CIL has made a roadmap with a timeline to achieve its target by awarding required contracts for coal, Over Burden Removal (OBR) and transportation, and follow-up action is being taken for implementing the same.

Timely action has also been taken for land acquisition, resolving R&R issues and Environmental Clearances with active coordination from government agencies.

CIL is fully prepared and geared up to achieve its target in the remaining period of FY22.

What is CIL’s production roadmap for the next five years?

The production projection for the next 5 years including the current year as envisaged in CIL’s long term projections of coal supply for the country with the presumption that adequate market demand is likely to exist at that juncture is as follows: (Figs. in mt)

2021-22

2022-23

AP Target 670

2023-24

2024-25

2025-26

Projections* 700

756

785

810

(* by Deloitte)

What is the current volume of linkages CIL has? Please give a sector wise break-up of the same. How much of these linkages are going to expire this year and how much will be offered anew?

The current volume of linkage at CIL for FY22 is tabulated below: Sector Power (Utility)

Commitment (mt) 595.00

Cement

5.13

Fertilizer

1.93

Spong Iron

13.83

Captive Power Producer

53.54

Others

16.50

Total

685.94

This year, around 20 mt linkages under NRS linkage auction regime will be expiring during the remaining months of this fiscal. However, CIL has commenced

Coal Insights, September 2021

7

FEATURE

Abandoning coal by developing countries to be costly: Study Coal Insights Bureau

I

nstead of abandoning coal all at once, developing countries should, at the very least, should aggressively plan for making clean alternatives viable, a new working paper by Rahul Tongia of Centre for Social and Economic Progress says.

Given that phasing out of coal can take time, developing countries should minimize or avoid new coal-fired power capacity and clean up existing capacity instead of wishing it away.

“The best solution in the short run would be to increase the efficiency of existing coal power plants, especially younger ones.

This not only lowers fuel use and carbon emissions, but also lowers local air pollution, which is a pressing challenge,” Tongia said in his paper: Flatten-the-curve: Why total carbon emissions matter much more than ‘date of zero’ The paper shows, there is a small window ahead for below average emitters to continue using fossil-fuel technologies.

As electricity access grows, there is

a clamour for these countries to avoid traditional development through the traditional grid, which may have relied on domestically available resources like coal.

Experts hope, instead, they ‘leapfrog’ to renewable energy (RE)-based minigrids. While this is especially true for many post-Covid plans, this ambition turns out expensive because quality RE supply needs extensive back-up.

Also, given that new users consume less electricity, fixed costs, such as for last-mile wiring, dominate costs. Such high costs hold true for the traditional grid as well, but such a grid design scales cost-effectively to meet rising demand, Tongia said.

Misguided worries over coal use by newly electrified

A billion consumers (200 million homes) supplied quality power traditional grid powered entirely by coal would use about 35 kWh/month, enough for a fan, TV, fridge, etc. adding just 0.25 percent to global CO2 emissions.

While decarbonization is important,

ending energy poverty is more pressing. The actual impact of electrification would be even lower because few incremental supply solutions rely 100 percent on new coal – RE is the dominant growth for new electricity supply.

For developing regions, costs matter.

This is a major reason developing countries have relied disproportionately on locally available fuels, which can also provide jobs and energy security.

This includes coal, even if it pollutes the air and soil.

Green financing

To help non-carbon energy displace fossil fuels, developed countries at Copenhagen COP15 in 2009 pledged to support developing countries with $100 billion annually by 2020.

Monitoring how this has played out has been a vexing challenge. We need a much sharper definition of international climate finance flow.

Much of the financing is for RE projects.

However, that is business as usual energy finance, focusing on RE that would be built anyway because it’s now cheap. For such support to be meaningful, the principle of additionality should apply. Otherwise, this simply amounts to creative accounting. As studies have pointed out, a loan for a solar panel is treated as the same as a grant under climate accounting.

While most global financiers are abandoning investing in coal or in cleaning up existing coal, they continue to fund oil and

“While decarbonization is important, ending energy poverty is more pressing. The best solution in the short run would be to increase the efficiency of existing coal power plants, especially younger ones. This not only lowers fuel use and carbon emissions, but also lowers local air pollution, which is a pressing challenge.”

Rahul Tongia, Senior Fellow, Centre for Social and Economic Progress 22 Coal Insights, September 2021

FEATURE

Government launches special CBM bid round Coal Insights Bureau

G

overnment has launched auction of 15 Coal Bed Methane (CBM) blocks under Open Acreage Licensing Policy through international competitive bidding, offering such blocks for the first time in a decade.

The blocks are situated in Maharashtra, Madhya Pradesh, West Bengal, Jharkhand, Odisha and Chhattisgarh, according to a notice inviting offers put out by the Directorate General of Hydrocarbons (DGH).

Bids under the special CBM bid round 2021 are due on February 20.

“Companies are invited to bid for exploration, development and monetisation of 15 CBM blocks likely to contain both conventional and/or unconventional hydrocarbon resources, distributed in the sedimentary basins of India. Eligible companies, either alone or in consortium of unincorporated or incorporated joint ventures, may bid for one or more blocks.

Companies either singly or in consortium can put in only one bid either as an operator or non-operator for one particular block,” the document issued by DGH said.

The blocks shall be awarded to successful bidders by entering into a Revenue Sharing Contract (RSC) with the government along the lines of published Model Revenue Sharing Contract (MRSC).

“The MRSC is in line with the Government’s efforts to promote ‘Ease of Doing Business’, to attract domestic and foreign investment and is based on a simple and easy to administer contractual model with optimal regulatory oversight for exploration and development of India’s petroleum reserves,” DGH said.

Some of the attractive features of the

terms offered by the Government are as under: (i) Contractor is allowed to explore and extract both conventional and unconventional hydrocarbons under a single license

(ii)

Contractor is allowed to carry out exploration activity throughout the contract period.

Bidding criteria

Bidding Criteria will be as under: A) Blocks falling in Category –I Basins: Bid for Committed Work Programme and Revenue Share; B) Blocks falling in Category –II and III Basins: Bid exclusively for Committed Work Programme In case of blocks falling in Category-I

Location map of blocks on offer under special CBM bid round-2021

Coal Insights, September 2021

25

FEATURE

Coal Min launches second attempt for 11 coal mines Out of these 11 mines, six are fully explored and five are partially explored.

These were the mines which were offered in the first attempt launched on March 25 and had fetched single bids.

The auction shall be held online through a transparent two stage process, on the basis of percentage revenue share.

Coal Insights Bureau

M

inistry of Coal has launched the second attempt of auction process for 11 coal mines including 4 mines under the Tranche 12 of CM(SP) Act and 7 mines under the Tranche 2 of MMDR Act.

List of coal mines Sl. No.

Coal Mine

State

Act

Category

1.

Choritand Tiliaya

Jharkhand

CMSP

Fully Explored

2.

Dahegaon/Makardhokra-lV

Maharashtra

CMSP

Fully Explored

3.

Lalgarh (North)

Jharkhand

CMSP

Fully Explored

4.

Shankarpur Bhatgaon II Extn.

Chhattisgarh

CMSP

Fully Explored

5.

Alaknanda

Odisha

MMDR

Partially Explored

6.

Beheraband North Extn.

Madhya Pradesh

MMDR

Partially Explored

7.

Burapahar

Odisha

MMDR

Fully Explored

8.

Dip Extn of Belpahar

Odisha

MMDR

Partially Explored

9.

Gondbahera Ujheni East

Madhya Pradesh

MMDR

Partially Explored

10.

Ramnagar

Chhattisgarh

MMDR

Partially Explored

11.

Tokisud Block II

Jharkhand

MMDR

Fully Explored

Schedule of tender process Publication of notice inviting tender

September 27

Pre-bid meeting

October 11

Last date of receiving written queries from Bidders

October 25

Last date for registration of bidder

November 11

Last date for sale of Tender Document

November 22

Bid Due Date

November 29

Opening of the Technical Bid

November 30

Start date of examination of the Technical Bid (s)

December 1

End date of examination of the Technical Bid (s)

December 22

Conduct of electronic auction (Financial Bid – Final Offer) for the Qualified Bidders Recommendation by the Nominated Authority to the Central Government for selection of Successful Bidder

December 23-January 5 January 10

The ministry also released standard agreement for second attempt of auction of coal mines.

Key features of auction process include introduction of national coal Index, ease in participation with no restriction for prior coal mining experience, full flexibility in coal utilisation, optimised payment structures, efficiency promotion through incentives for early production and use of clean coal technology.

The commencement of sale of tender document started from September 27.

Monthly payment

The successful bidder shall be required to pay revenue on monthly basis to the state government to be determined as product of final offer, total quantity of coal on which the statutory royalty is payable during the month and notional price or actual price, whichever is higher.

Notional Price shall mean the price arrived at after adjusting the representative price with sub-index of National Coal Index of the relevant basket of coal grades on the date on which royalty becomes payable.

Representative is a product of volume of coal in different components of notified price, auction price and imported price channel of the base year and prices of these components at the time of issuance of the tender document.

Actual Price shall mean the sale invoice value of coal, net of statutory dues including taxes, levies, royalty, NMET, DMF etc.

Introduction of rolling auction

In 2nd tranche, the auction process for 67 coal mines was launched on March 25 and is currently under progress. This is the largest tranche of mines ever being put up for auction. The mines are a mix of small and large mines, and fully explored and partially explored mines.

A big change from this new tranche of auction is that the Ministry of Coal has enabled the mechanism of rolling auctions of coal mines. Previously, auctions were

Coal Insights, September 2021

37

INTERNATIONAL

Global leaders pledge climate action at UNGA

China to stop funding coal plants overseas Coal Insights Bureau

C

hina will stop supporting setting up coal-fired power plants overseas as part of its effort to a Global Development Initiative, President Xi Jinping said at the United Nations General Assembly (UNGA) on September 22.

“China will step up support for other developing countries in developing green and low-carbon energy, and will not build new

coal-fired power projects abroad,” he said in a pre-recorded message to UNGA. The decision is likely to adversely limit financing of coal plants in several developing countries including some neighbouring countries of India which are part of the Belt and Road Initiative. Also, a Global Development Initiative proposed by President Xi talks of “harmony between man and nature”.

At UNGA, UK called on international partners for urgent Climate Action as the

“We need to improve global environmental governance, actively respond to climate change and create a community of life for man and nature.

We need to accelerate transition to a green and low-carbon economy and achieve green recovery and development. China will strive to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060. This requires tremendous hard work, and we will make every effort to meet these goals. China will step up support for other developing countries in developing green and lowcarbon energy, and will not build new coal-fired power projects abroad.”

Excerpt from the statement by Xi Jinping, President of China at the general debate of the 76th session of the United Nations General Assembly on September 21.

country starts building momentum towards the upcoming COP26 event.

Prime Minister Boris Johnson, speaking at the UNGA climate roundtable, said UK has already cut its carbon emissions in half and has all but eliminated coal from its energy mix.

UK, he said, remains committed to hitting net zero by 2050, with a huge chunk of the necessary cuts in emissions coming by 2030, by the end of the decade.

“And as COP26 looms large I need to see, we all need to see, a similar level of ambition from the major economies represented here,” he said.

“By 2030 renewables will be undercutting coal and gas almost everywhere.

So going green isn’t just better for the planet, it means greater prosperity for your people. It means more opportunities for your businesses,” UK Prime Minister said.

“The power sector accounts for a quarter of global greenhouse gas emissions. To meet the Paris Agreement goals, we need to move away from coal and towards clean power about five times faster than at present,” COP26, the UN Climate Change Conference in Glasgow, said ahead of UK Prime Minister Boris Johnson’s speech at the event.

Addressing the event, United States of America President Joe Biden said that for limiting global warming to 1.5 degrees Celsius, every nation needs to bring their highest-possible ambitions to the table when they meet in Glasgow for COP26 and then to have to keep raising the collective ambition over time.

In April, Biden announced US’ new goal under the Paris Agreement to reduce greenhouse gas emissions from US by 50 to 52 percent below 2005 levels by 2030, as the country work toward achieving a clean-energy economy with net-zero emissions by 2050.

“My administration is working closely with our Congress to make the critical investments in green infrastructure and electric vehicles that will help us lock in progress at home toward our climate goals.

Making these ambitious investments isn’t just good climate policy, it’s a chance for each of our countries to invest in ourselves and our own future. It’s an enormous opportunity

Coal Insights, September 2021

43

CORPORATE

“Huge potential for growth in power sector”: NTPC Coal Insights Bureau

O

ver 17 percent growth in power generation in the first quarter of the current financial year coupled with ‘Atmanirbhar Bharat’ initiative would provide huge potential for growth in the power sector going forward, public sector power major, NTPC, has said in its recently released annual report of the company.

The recent all-time high peak demand of 200.57 GW and energy met of 4508 MUs in a day on July 7 indicates significant growth in the sector, NTPC said.

Power sector outlook

“Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on reducing the carbon footprint has accelerated growth of renewable capacity addition in the country and the renewable capacity targets have been revised to 450 GW and more by 2030,” NTPC said.

Many power sector reforms are being introduced by the Government for

bringing efficiency and discipline in the sector including proposed amendment to Electricity Act. Along with this, new market mechanisms are under discussion to promote competition thereby providing affordable power to the consumers. Additionally, Government has also recently issued guidelines allowing distribution companies to exit from Power Purchase Agreement (PPAs) of Central generating units which have completed 25 years of life.

“While these policies and reforms offer new opportunities and bring discipline into the sector, they will also offer certain challenges. The company is geared up to adapt to these changes and is working on various models to maintain leadership in the sector,” NTPC said.

Captive coal mining

In captive coal mining, the company achieved 11 million tons (mt) of coal production in FY21. Dulanga coal mine was declared commercial and works are in advance stage for opening two more mines.

For Chatti-Bariatu coal block, all

statutory clearances and priority land for commencement of mining are available.

Tender for appointment of Mine Developer and Operator (MDO) was issued in November 2020 and price bids opened on April 16, 2021 which is under evaluation, the company said.

In Kerandari coal block, priority land and major statutory clearances are in place except tree cutting permission from Jharkhand State Forest Department for which NTPC is constantly pursuing.

For Kerandari, NTPC earlier decided for departmental mining with limited outsourcing, but against that tender response was inadequate. So, process has been initiated for appointment of a Mine Developer cum Operator and NIT was issued on June 28.

In Badam coal block, though Stage-I forest clearance and environment clearance have been transferred to the company

by Ministry of Environment, Forest and Climate Change (MOEF&CC), proposals for Stage-II forest clearance, Government land transfer, Mining lease, etc. are pending with Jharkhand government for which the company is constantly pursuing.

Mandakini-B coal block was surrendered in December 2020 following continued protest by villagers since 2018.

The Coal Ministry however encashed the Performance Security of `168 crore in March 2021 citing delay in achieving the milestones of efficiency parameters which were beyond the control of the company.

NTPC has now has approached Ministry of Power to take up the matter in AMRCD (Administrative Mechanism for Resolution of CPSEs Disputes) for resolution of the dispute on BG encashment,” the company said.

Green Hydrogen

NTPC believes green hydrogen is going to occupy significant energy space in future and the interplay between electrons and molecules would lead to significant benefits.

Accordingly, NTPC has initiated development projects as well as field demonstration projects for Hydrogen production.

Coal Insights, September 2021

49

62 Coal Insights, September 2021