Coal Insights, September 2022

13 Thermal coal witness mixed trends in September

14 Seaborne coking coal offers fall in September

15 India’s August coal imports up 36.4% y-o-y

16 CIL’s coal production up 8.5% in August

17 SCCL’s coal production down 17.5% in August

20 NLP aims to bring down logistics costs for industry

24 Zero emission trucking can bring down lifecycle costs by 46%: study

27 CIL tendering process mostly within time limits: committee repor t

29 India, US coal sector jobs provide high social security: IEA

33 India’s August sponge iron production up 8%

34 No power capacity addition in July

38 Cement makers plan to double capacity by FY31

39 Coal handled by major ports up 28% till August

40 Indian Railways’ coal handling up 20% till August

41 China brings down coal consumption in green shift

44 US coal production to rise by 22 MMst in 2022: EIA

45 ISMC brings together steel sector leaders

50 Corporate update

52 Government update

54 E-auction data

56 Port Data

6 | COVER STORY

Time to go green: CIL aims to rebound UG production

B Veera Reddy, Director (Technical), CIL shares CIL’s focus on green mining.

18 | FEATURE

Steel sector calls for strategy to rein in coking coal costs, dictate prices

ISMC organised by mjunction services ltd delves into critical sectoral issues.

31 | FEATURE

CEA sees 25 mt import need for power sector in FY23

Coal requirement estimated at 788.5 mt.

43 | INTERNATIONAL

Polish cos start process to sell coal mines to state agency

NESA to complete takeover by end of 2022.

46 | CORPORATE

“In coming years, we will have to increase prices”: CIL CMD

To achieve 1-billion tons target in FY25FY26.

Time to go green CIL AIMS TO REBOUND UNDERGROUND PRODUCTION

After clocking a modest growth in output during the Covid-19 induced slowdown in last couple of years, Coal India Ltd (CIL) is all set to achieve the 700 million tons (mt) mark in the current fiscal. While this jump in production (and despatches) is there for all to see, a more silent revolution is happening within the fold of the state-owned miner, in the form of changing the production mix from opencast (OC) and underground (UG) mines and embracing the concept of green mining. Stewarding this movement is Mr. B Veera Reddy, Director (Technical), CIL. Mr. Reddy assumed charges on February 1, 2022, after having a stint as Director (Technical) Operations of Eastern Coalfields Ltd (ECL). Prior to his joining ECL, he worked as General Manager of Adriyala Longwall project of Singareni Collieries Co Ltd (SCCL). In an exclusive interview to Arindam Bandyopadhyay, Reddy shares the roadmap, major projects and strategies that CIL is working on to be on the forefront of the green mining movement in the country.

Coal India is having a dream run in FY23 in terms of production growth and despatches. Which factors helped the miner to unlock this growth after putting up a modest performance during the last couple of years? What are the numbers you expect to end up with during FY23?

The commitment and perseverance exhibited by company’s energy soldiers was exemplary, especially bouncing back strongly after Covid-induced placid growth. Officials at all levels of hierarchy have donned leadership role in keeping the spirit up and elevating their respective company’s performance.

The workforce toiled throughout the pandemic period to achieve the goal of the company. Strong directional leadership at CIL and constant support from the Ministry of Coal has made this possible.

Earlier, the outbreak of pandemic Covid-19 and imposition of subsequent lockdown had resulted in subdued demand by power and non-power sectors which adversely affected coal despatch from CIL.

Coal production was regulated due to high pit-head coal stock, sufficient coal stock at power houses end and less offtake.

CIL made a strategy to emphasize on OB removal to ensure accelerated production whenever demand picks up.

Presently, raw coal production target of CIL in FY23 stands at 700 million tons (mt). CIL has scripted a new height in raw coal production (253.31 mt), OB removal (577.51 million cum) and offtake (283.10 mt) in FY23 till August, registering a growth of 21.1 percent, 15.9 percent and 9.1 percent in production, OBR and offtake, respectively, over the same period last year.

Raw coal stock of CIL as on August 31 was 31.07 mt. CIL achieved 98 percent of production target and 103 percent offtake target in FY23 till August.

Consequently, with planned enhancement of OB removal for sufficient coal exposure, CIL is confident to achieve production and offtake target in FY23.

Despite the high growth in supply, CIL was compelled to float tenders for importing coal this year. Given that demand from the power has subsided recently, is there a possibility that such imports may not fructify?

Yes, CIL had floated tender and issued work order to the successful bidder for supply of imported coal.

Imported coal sale agreements (ICSA) were also signed with 20 power utilities (state gencos and IPPs) and orders were placed with the vendor for supply of imported coal.

Delivery schedule of a few ships have been placed with the vendor, which have already arrived and some are in pipeline to the unloading port for supply of imported coal to the respective power houses. Two ships have arrived at Vizag Port and Kakinada Port. Two more ships are on the way.

Green mining has become the buzzword in today’s mining sector. In this context, CIL is reportedly aiming to enhance production of underground (UG) coal to 100 mt from the current level of 25 mt. Could you please elaborate on the roadmap and the execution plan?

The Vision 2047 of the nation, which is under finalisation, has highlighted a number of important would-be for the future. What evolved from the exercise clearly indicated that coal continues to remain a major player in the energy supply mix of the nation for a few more decades. Further, more and more energy should be sourced from environment-friendly modes which include environmental-friendly mining methods.

A UG Vision Document of CIL is under preparation and finalisation wherein CIL envisages 49 mt production by 202425, in line with its 1 bt projection and reach about 90 to 100 mt by 2027-28 from the current level of 27 mt.

Detailed exercise for assessing

subsidiary-wise production plan has been taken up. Timelines of such identification, projectisation and approval for implementation is being carried out.

The roadmap so prepared shall granularly indicate the projects that are being taken up, schedule of approval of PR, production YOY, type of mines that are being considered along with their peak rated capacities (i.e. Highwall/Continuous Miner/Longwall/Shortwall) as well as mode of mining (MDO/HoE/Risk Gain sharing basis).

Action Plan of CIL for increasing UG coal production includes:

♦ Identification and approval of large number of CM/Shortwall/Longwall mines

CIL envisages to introduce about 100 CMs by 2027-28 in existing/ongoing and future projects including 21 CMs

Coal Insights, September 2022

“Delivery schedule of a few ships have been placed with the vendor, which have already arrived and some are in pipeline to the unloading port for supply of imported coal to the respective power houses. Two ships have arrived at Vizag Port and Kakinada Port. Two more ships are on the way.”

Steel sector calls for strategy to rein in coking coal costs, dictate prices

Coal Insights Bureau

The country needs to reduce cost of coking coal and reduce dependency on imports and studying the Chinese model would be a good lesson, A K Saxena, Director (Operations), Rashtriya Ispat Nigam Ltd said while chairing a session on the way forward for efficient procurement of raw materials at the Indian Steel Markets Conference organised by mjunction services ltd.

Stressing on the importance of coking coal in steel making, Saxena said: “Coking coal is the most critical and cost intensive raw material in steelmaking with 1 million tons of steel requiring 0.9 million tons of coking coal which constitute 65 percent of the cost of inputs.

“Of the total requirement of coking coal, 82-85 percent is imported, which, on an average is transported over 10,000 kilometer taking 25 days to reach, as a consequence, a lot money is locked in it,” he said at the event organised at India Habitat Centre at New Delhi over September 15-16.

Learning from the China model

Dependence on coal beneficiation and coal washeries, China has cut down on imports, he said.

Over the last 5 years, China increased crude steel production by 21 percent but reduced its coking coal imports by more than 29 percent in the same period.

“China, through better coal beneficiation, has reduced coking coal imports over 201722 despite rise in steel production. India can take a leaf out of it and can reduce its imports,” Saxena said.

“A key area of R&D should be how to raise beneficiation and blending of domestic coking coal”

Compared to imported coal, India coal has high ash content (18 percent - 49 percent), low coking properties, high inerts and low washability potential.

In addition, there is limited availability and logistics (rake availability for inland transport) is also a constrain.

As there is no perfect coal for perfect coking, blending assumes importance.

“So, Indian coking coal has to be used for blending and suitable imported coal has to be found out for blending,” he said.

As this issue impacts every steelmaker, Saxena called for industry-wide collaboration to know how best to utilise domestic coking coal and blend it with imported coking coal which is economically viable.

“Research inputs are the need of the hour to explore newer avenues,” he added.

Need for stamp-charged coke ovens

The current production of hot metal from the BF-BOF route is 78 million tons (mt) which

“If we resolve that now onwards, all expansion and new projects would only have stamp-charged coke ovens then need for utilisation of domestic washed coking coal would rise by an additional amount of 28 mt by FY31 considering 35 percent usage in coal blend,” A K Saxena, Director (Operations), Rashtriya Ispat Nigam Ltd

China coking coal import and crude steel production

Source: RINL presentation

India, US coal sector jobs provide high social security: IEA

Coal Insights Bureau

Coalsupply jobs often provide more benefits and worker protection than competing industries, IEA has said in a report citing examples from US and India. While in US coal workers see a wage premium over average jobs of about 50 percent, in India, “coal is the only sector with its own pension scheme covering both permanent and contract workers”, the report says.

The report, however, has warned of impending job losses in coal sectors across the globe due to energy transition.

“Low-skilled and informal coal supply workers will require retraining as well as productive inclusion programmes. Several countries where historic transitions from coal have taken place provided policy and financial support for miners to assume new employment,” IEA has said.

In United States, former miners have been upskilled to work on wind turbines and rooftop solar installation, and in IT.

Coal miners can also transfer to jobs in the growing critical minerals industry if the geographies of resources are compatible.

In contrast, clean energy sectors also have lower rates of union representation.

“In India, for example, the clean energy sector is predominantly private and lacks labour unions, which stands in stark contrast to the heavily unionised coal sector where wages and benefits are negotiated within committees formally established through the government,” IEA said.

Sectors that rely heavily on contract or part-time staff often do not offer these workers the same labour protections as permanent employees. This is common in construction for efficiency retrofits, rooftop

solar installations, bioenergy harvesting, and coal mining.

The coal mining workforce – which had been decreasing rapidly with increased mechanisation – saw this trend let up with coal mining on the rise in China after shortages in 2021, and could climb in India with mounting concerns for energy security in 2022, IEA said.

Established industries such as nuclear, oil and gas typically offer the highest wages. Industries with a high share of workers in construction, such as installing solar panels or carrying out energy efficiency retrofits, typically have lower wage premiums.

Newer energy sector sectors, such as solar, also have less union representation than established fossil fuel industries.

“Labour representation has led to higher wages in parts of the energy sector. For example, coal jobs in India receive compensation around three to four times the national average,” IEA said.

In 2019, around 6.3 million employees worked in coal supply – 3.4 million in China, 1.4 million in India, and another 790 000 in other Asia Pacific countries.

These jobs are predominately in mining, and also cover the transport, washing, and processing of coal, as well as the manufacturing of specialised mining and conveying equipment.

Coal power employs 2 million globally

Coal power employs 2 million globally, largely concentrated in emerging market and developing economies in Asia, including a high share of informal workers.

Coal capacity worldwide stands at 2,100

GW in 2021, of which three-quarters is located in the Asia Pacific region.

Global coal power employment totalled 2 million in 2019 and was largely concentrated in Asian region, the report says.

“An estimated 740,000 were employed in China and another 600,000 in India, where around one in four are informal workers, not included in company records but contributing as plant operators and in elementary occupations,” the report says.

Despite the decrease in coal-fired power generation in Europe, 150,000 were still employed as of 2019.

Manufacturers of coal power equipment can also find new opportunities in other parts of the power generation value chain, such as turbine manufacturing and engineering, including redesigning power plant equipment for co-firing or running with carbon capture, utilisation and storage (CCUS), which are being pursued at pilot scale in certain regions.

Energy transition risks job loss

With an unprecedented number of countries committing to phase out unabated coalfired power at COP26, 750 plants around

Coal Insights,

“In India, the clean energy sector is predominantly private and lacks labour unions, which stands in stark contrast to the heavily unionised coal sector where wages and benefits are negotiated within committees stablished through the government.” IEA

CEA sees 25 mt import need for power sector in FY23

In order to enhance coal availability, multidimensional efforts are underway by CIL to enhance production of domestic coal. A road map has been prepared by CIL to substantially enhance coal production level to 1 billion tons.

The

National Electricity Plans recently issued by Central Electricity Authority (CEA) has estimated 25 million tons (mt) of shortfall of coal requirement which can’t be met through domestic availability and, hence, has to be imported.

“For 2022-23, coal based gross generation programme of 1080BU has been estimated by CEA. Based on the generation program, the total coal requirement of 788.5 mt has been estimated,” the document says.

Total domestic availability of coal has been estimated at 735 mt consisting of 565 mt from Coal India (CIL), 57 from SCCL and 113 mt from captive mines.

“It is observed that power plants on domestic coal may not meet their requirement of coal from domestic sources and may require import of coal for blending,” the plan document says.

Thermal energy to compensate for likely drop from other sources

Preliminary exercise has been carried out in CEA for assessing the power requirement of states considering past growth rates and the increase in electrical energy requirement on account of ‘Power for All’ and ‘Make in India’ initiatives, reduction in demand on account of DSM and various efficiency improvement measures being undertaken by the Government.

With the likely Renewable Energy (RE) capacity addition, the coal-based generation has been estimated and accordingly provisional coal requirement has been worked out.

Domestic coal requirement in FY27 have been estimated as 831.5 mt and in FY32 as 1018.2 mt and imports by plants designed on imported coal to be 40 mt.

The estimated generation from coalbased power plants is expected to be around 1133 BU during FY27 and about 1303 BU during FY32. However, in view of uncertainty associated with nuclear and hydro generation, the coal requirement for the year 2026-27 and 2031-32 has been worked out assuming 20 percent reduction in these power sources.

“This is to be compensated by coal-based generation,” the report says.

“With this programme there would be no shortage in the availability of coal for the power plants during 2026-27 and 2031-32. In addition, coal production from the captive coal blocks allotted to power utilities would also supplement the availability of domestic coal,” the report says.

The government has also allowed commercial mining and mines have already been allocated through auction to the participating bidders. This would further supplement the supply of domestic coal to the power utilities.

Coal requirement during 2026-27 and 2031-32

S. No Coal Requirement Calculation Unit2026-272031-32

1Coal based generation (gross)

BU 11331303

2Hydro based generation (gross) BU 196.6239.6

3Nuclear based generation (gross) BU 82.1134.3

4Wind generation(gross)

BU 169.8305.7

5Solar generation(gross) BU 326624.4

6Total VRE (Solar & Wind) + Hydro + Nuclear generation (gross) BU 774.51304

720% reduction in Hydro, Nuclear and VRE generation due to uncertainty BU 154.9260.8

8Total coal based generation (Sl no 1 + Sl No 7) BU 1287.91563.8

9Coal requirement @0.67 kg/kwh + 1% transportation loss MT871.51058.2

10Imported coal requirement MT40.040.0

11Domestic coal requirement MT831.51018.2

Coal requirement and likely availability for 2022-23

S.No. Description Units 2022-23

1COAL BASED GENERATION

1.1Gross Coal based generation programme during 2020-21 BU 1080

2COAL REQUIREMENT

2.1For plants designed on domestic Coal MT759.9

2.2For plants designed on imported coal MT28.6

2.3Total Coal Requirement MT788.5

3COAL AVAILABILITY FROM INDIGENOUS SOURCES

3.1From CIL MT565

3.2From SCCL MT57

3.3From Captive Mines MT113

3.4Total domestic coal availability MT735

3.5Shortfall in domestic coal availability MT25

3.6Requirement of imported coal for blending MT17

Coal Insights, September

Sumit Maitra

Polish cos start process to sell coal mines to state agency

Coal Insights Bureau

♦

an independent entity and following independent due diligence.

The individual valuations will take into account the financial liabilities that the generating companies, carved out as part of the transaction, have to their parent companies and/or financial liabilities to financing institutions.

♦

Polish

coal miners and power companies owning coal assets have begun the process to ultimately hand over these mines to the state-owned National Energy Security Agency by end of 2022.

PGE S A, a major power producer in Poland, has initiated the process of valuation of the assets, the company recently told its investors.

The company has begun “commencement of asset valuation process” and working to meet the government timetable, it told investors.

“The coal asset spinoff is going according to plan. The due diligence process aimed at evaluating the assets is underway and I hope we will know the details of the agreements soon,” PGE Chief Executive Officer Wojciech Dabrowski said during a briefing.

“In connection with this, it is currently not possible to determine the impact of this carve out on the future financial statements of PGE S A and PGE Group,” the company told investors.

Planned disposal of coal assets to National Energy Security Agency

On March 1, 2022, the Poland’s council of ministers adopted the document ‘Energy sector transition in Poland. Carve out of coal-based generation assets from companies with a state Treasury shareholding.’

According to the document, the carve-out process will follow the formula of purchase by the state treasury from companies like PGE, ENEA, Tauron Polska Energia

and ENERGA of all assets connected to generation of energy in power plants fuelled by hard coal and lignite, including the accompanying service companies.

In connection with the indivisibility of lignite-based energy complexes, the acquired assets will also include lignite mines.

Assets related to hard coal mining will not become a part of the entity operating coal-based energy generation units.

The district heating assets in connection with their planned upgrades to low and zerocarbon sources will not be the subject of this transaction.

The assets may be carved out from the energy companies in the following process:

♦ Purchase of shares of each of the companies directly by the state treasury and their consolidation within NESAif this option is selected, consolidation within NESA

♦ NESA will operate in the form of a holding company with the companies acquired from ENEA, Tauron and Energa being subsidiaries included in its capital.

♦ The entity will be a fully self-sufficient entity, i.e. it will be able to provide on its own or – in the interim period - on the basis of agreements concluded with external entities, including the companies from which the assets are spun off, all internal and external functions necessary for uninterrupted operation, i.e. HR, IT, purchasing, trading.

♦ All transactions required under the selected structure, if any, relating to the carve out of assets will be carried out on the basis of a market valuation by

Given the debt of the generating companies to their parent companies, accounting for the transactions will be subject to detailed arrangements between the state treasury and the current owners and their lenders.

According to the document, after the carve-out of coal-based generating assets, the energy companies will focus on developing their activities on the basis of their assets in the area of distribution, heating, trading and generation of energy in low- and zeroemission sources.

“NESA’s role will be to provide the necessary capacity balance in the power system and will focus on maintenance and modernisation investments necessary to maintain the efficiency of the coal units in operation, including those aimed at reducing the carbon intensity of these units,” PGE said in a disclosure.

In July, 2021, PGE, ENEA, TAURON Polska Energia and ENERGA executed an agreement with the state treasury regarding cooperation on the carve out of coal-based energy generation assets and their integration into the state agency.

According to the framework schedule, the start of the due diligence process has been scheduled for Q3/Q4 of 2022, and the valuation of the carved-out assets for Q4 2022.

The sale of these assets to the energy agency is planned for the fourth quarter of 2022. The method of valuation and settlement of debt and other asset-related liabilities has not yet been determined.

During H1 of 2022, the company benefitted from better revenues from improved power tariffs, higher revenues from renewables segment (mainly effect of higherspot prices) and higher margin of pumped-storage plants.

“In coming years, we will have to increase prices”: CIL CMD Agrawal

Steel Insights Bureau

CoalIndia is unlikely to raise prices any time soon and the issue of raising prices of coal would be considered in “coming years”.

“In the coming years, we will have to increase the price because the price of the diesel and the price of the explosives have increased. Our input costs have increased and JBCCI (wage) negotiations are on. Once it is concluded, then we will have to make higher wages payment also,” Coal India Chairman Pramod Agrawal said while replying to queries of shareholders in the annual general meeting of the company.

“At a time when international coal prices are much higher, Coal India continues to supply its coal to the Indian consumers at highly competitive prices, with no price increase over last four years,” Agrawal added.

While prices of the energy has increased

substantially, “bringing all the stakeholders on board and increase the price become slightly difficult”, he said in response to a questions why price hikes are not being taken.

“But we are working on that,” he added.

To achieve 1-billion tons target in FY25-FY26

CIL expects to achieve 1 billion tons (bt) of production by FY25-FY26 depending upon demand growth.

Earlier, CIL was given a mandate to produce 1 bt of coal by FY24.

But following subdued demand during the pandemic and subsequent demand recovery, the company has made some realistic assessment according to which the target appears achievable either in FY25 or in FY26 depending upon demand prevailing at that time.

“Earlier, it was FY23-FY24, but as you know that we have lost two years because of Covid and the demand shortage I feel that

Output enhancement through MDOs

realistically speaking perhaps by FY25, we will reach something higher than 900 mt, and the year after, definitely it will be achieved. If the demand is there, we will achieve the 1 bt-ton target. But we’ll try to achieve this by FY25,” Agrawal said during a concall post the announcement of financial performance for first quarter of FY23.

Confident of meeting 700-mt target for FY23

“This year, I am quite hopeful of achieving the target of 700 mt” Agrawal said.

During the year, CIL has received Environmental Clearance for about 64 mt of mining capacity.

“There are certain problems in 1 or 2 subsidiaries, but we are trying to resolve it, and even then, even if it is not resolved, we’ll increase the production from other companies to compensate for that. And I’m quite hopeful that this year will be an outstanding year for CIL, both from a production point of view, secondly from meeting the need of the nation and all of this will contribute to

“In the coming years, we will have to increase the price because the price of the diesel and the price of the explosives have increased. Our input costs have increased and JBCCI (wage) negotiations are on. Once it is concluded, then we will have to make higher wages payment also.”