CCAI Newsletter August-21

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Vol. L No. 05

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From the Editor’s Desk

As India, Asia’s third largest economy intends to build a greener future by gradually introducing more and more clean energy project s over the next few decades, it is evident that the country’s dependence on coa l to meet its growing energy needs is not going to wear off any time soon.

The International Energy Age ncy forecasts that India is exp ected to account for the largest share of energy demand growth over the nex t two decades, with its energy consumption alm ost doubling to meet the nee ds of an expanding economy and urbanisation.

Even as the Nation aims to grow its ratio of renewables in its energy mix by achieving the target of 450 gigawatts of clean energy by 2030, coal-based power still accounts for abo ut 65 per cent of total elec tric ity generated in the country. Given that coa l will continue to play a vita l role in stimulating the country's economy despite the impact of fossil fuel on the climate, the Government is taking up new initiatives to curb wasteful use of coa l and improve generation efficiency.

Measures to boost efficiency of the sector include improv ing the operational performance of mines and plan ts, streamlining logistics and bringing in more private sector investment thr ough commercial auction of coa l. India this year launched its largest-ever auc tions of coal mines as par t of the Government’s plans to open up the industry to allow the private sector to play a larger role in coal mining, allowing winnin g bidders to produce and sell the fuel.

Despite the global meltdown caused by COVID-19 pandem ic throughout FY 2020-21 which led to weaker demand of coal, production by national miner CIL and other coal producers remains on an upward traj ecto ry. As per the analysts, India's total coal pro duction is expected to increase to 827.8 MT this year from 777 MT tonnes in 2020.

While the Coal Ministry is tak ing measures to reduce coal imports at one hand, it is also focusing on exporti ng coal to neighbouring nat ions like Nepal and Bangladesh. India exported 8 lakh tonnes of coal to its neig hbouring nations, including Nepal, in FY 2020-2 1.

Along with improved perform ance of CIL in production and off-take, the coal companies are aiming to achieve carbon neutrality through var ious environmentfriendly measures, such as extensive plantation and ado ptio n of clean coal technologies. During this yea r, coal and lignite PSUs of the coa l ministry have set an ambitious target under the 'Go Greening' drive to cov er 2,3 85 hectares of area under bio-reclamatio n and plantation.

It is evident that with these initiatives, the country looks set to take up twin challenges of fulfilling its com mitments to decarbonising the energy sector as well as meeting the country's rising power demand, which wou ld primarily be reliant on coal due to its affo rdability and indigenous ava ilability.

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Content Vol. L No. 05 August 2021

Official Organ of the Coal Consumers’ Association of India. Disseminates News and Views on Coal and all other sources of Energy.

4, India Exchange Place - 7th Floor Kolkata - 700 001 Landline : +91 33 22304488 E-mail : sec.ccai@gmail.com Website : www.ccai.co.in

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Consumers' Page

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Power

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Domestic

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Global

Editor : Subhasri Nandi Annual Subscription Rs. 400/(including postage) MO/DD to be made in favour of “Coal Consumers’ Association of India” CCAI do not necessarily share or support the views expressed in this Publication.

34 Monthly Summary Of

Imported Coal &Petcoke

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Production And Offtake Performance Of Cil And Subsidiary Companies

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CONSUMERS’ PAGE Present Coal Scenario: Buoyed by increased Industrial activities across all sectors and rising power demand, national miner Coal India’s production and offtake of the dry fuel has remained steady in August. Total production of CIL for the month was 42.6 MT, which was 14.6% higher than August ‘20. For the period of April ’21 to August ’21, CIL’s cumulative coal production has been 209.2 MT, more than 7% higher than the same period last year that was hit hard by the pandemic.

The Maharatna company has registered a total coal offtake of 48.60 MT which is slightly lower than last month but 9.5% higher than August last year. Considering the period of April ’21 to August’21, CIL’s total offtake has been 259.30 MT, nearly 50 MT more than the same period last year. This positive trajectory has certainly helped country’s coal sector to ensure uninterrupted supply of fuel and reduce coal imports.

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Issues faced by Power Sector Consumers: 1. Soliciting dispensation for Case 2 Scenario 4 Power Plants under Section 63 of Electricity Act, 2003 to avail rationalisation of coal Linkages without any requirement of Supplementary Agreements: As per CIL’s notification to certain IPPs which had submitted Expression of Interest (EoI) for availing the facility of linkage rationalization, the IPPs are required to sign a supplementary agreement approved by the appropriate Electricity Regulatory Commission with DISCOMs to pass on the entire benefit of actual cost saving.

However, IPPs which belong to Section 63, Case 2 Scenario 4 Power Plants established through a bidding process of Competitive Bidding Guidelines for determination of tariff for procurement of power by Distribution of Licensees for long term power procurement of the Electricity Act, 2003 raised concern over signing of the supplementary agreement.

As per the PPA, actual landed cost of coal is passed on by these IPPs to the State Discoms irrespective of source/grade of coal. Therefore, any savings due to this linkage rationalization would automatically get passed through as per the Energy Charges Formula under Schedule 7 of the PPA. Request has been made to Ministry of Coal and Ministry of Power so that for the Case 2 Scenario 4 under Section 63 Power Plants, the Supplementary PPA is not required as the actual benefits/ cost savings acquired through rationalization of linkages would be passed on to the State Distribution Companies.

2. Submission regarding further deterioration in quality of coal supplied from Salanpur and Mugma area of ECL: As per the Power sector consumers, quality of coal supplied from ECL Salanpur and Mugma sidings through Rail mode further deteriorated during May-

June ’21 as coal supplied from these two sidings were 6-7 grades lower than the declared grade.

Though one or two collieries under Salanpur and Mugma are producing better quality coal, supply from most of the other collieries from these two areas are of much lower grade containing of high amount of shale and other substances.

Request has been made to ECL and CIL to take necessary measures to improve the coal quality supplied from these two areas as Power producers procuring coal from ECL, largely depend on supply from these sidings.

3. Request for reimbursement of idle freight on account of under-loading alongwith GST: Certain Subsidiary Coal Companies (CCL, NCL & ECL) are providing refund of idle freight alongwith GST components charged by the Railways to the Power Utilities but others such as SECL, MCL and WCL are not reimbursing the GST amount during refund of idle freight.

Request has been made to CIL so that all Subsidiary coal companies reimburse the idle freights for under-loading along with the GST amount.

4. Submission to SECL by the coal consumers for refund of huge coal value against lapsed quantities and EMD: Despite the extension in coal lifting period till 20th July ’21, consumers from the Power sector could only manage to lift a portion of their allotted quantities while the remaining portion got lapsed due to various reasons like unavailability of declared grade of coal, adverse weather conditions for production of coal, less production of auctioned grade of coal due to geological disturbance which has caused massive amount of working capital of these companies in the form of coal value including Royalty, DMF, NMET etc. and EMD worth crores of rupees to be blocked due to Non- materialization of remitted amounts through refund.

Request has been made to SECL for refund the

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coal value against lapsed quantity and EMD to the concerned customers at the earliest possible.

for the rest of the Sub-sectors under Tranche-IV, was last held way back in November- December, 2018.

Issues faced by the Nonpower Sector Consumers:

This delay in conducting Tranche-V of NRS Linkage Auction for CPP, Cement and Others Sub- sectors has made the functioning of a large number of Industries extremely difficult due to uncertainty over long- term coal supply commitment.

5. Submission by NRS consumers requesting extension of the term of Tranche-I NRS Linkage Auction FSAs expiring in 2021: As per CIL directive regarding expiring of FSAs under Tranche-I NRS Linkage auction in 2021 onwards on completion of initial term of 5 years, it has been notified that, NRS Linkage auction FSAs of Tranche-I of various sub-sectors will not be renewed after its initial term of five years.

However, clause 2.4 of the NRS Linkage Auction FSA states that there is a provision of extending the term of FSA upon the mutual agreement of both parties in writing.

There is an uncertainty in procuring coal of required quantity and quality from a particular source through competitive bidding in the next tranche of linkage auction and procuring through Exclusive auction often becomes difficult as the quantity offered is scanty in comparison to demand. Also, Offer by Rail through Exclusive auctions is insufficient and therefore disadvantageous for the plants situated at a long distance from the respective pithead while Price of imported coal is unviable for the industries.

Request has been made to MoC and CIL for provision of extending the FSA term through mutual consent of both parties (CIL and the NRS consumers) continuous supply of fuel to the Industries.

6. Appeal regarding urgent requirement of Tranche-V Linkage Auction for the rest of the Sub-sectors: The Tranche-V of NRS Linkage Auction for the Sponge Iron sub-sector was conducted in December, 2019, Linkage Auction of Non-coking coal

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Request has been made to CIL to conduct the Tranche-V of NRS Linkage Auction for rest of the Sub- sectors at the earliest possible and announce the tentative timeline for the Linkage auction well in advance so that the Industries may plan accordingly for long-term procurement of coal.

7. Request for expediting refund of Security Deposit against terminated FSAs: Certain NRS Consumers procuring coal from different Subsidiaries have not been getting the refund of Security Deposit made by them against their FSA by Road Mode that has been terminated earlier this year.

Request has been made to CIL and the Subsidiaries for early release of the Security Deposit to the respective companies, againstthe expired FSAs.

8. Submission by NRS consumers procuring coal from WCL's Sasti OC for extension of DOs expiring in August '21: Consumers from the Non-power Sector procuring coal from WCL through NRS Linkage Auction FSA are able to procure a small portion of their allotted quantity from Sasti OC as production of coal is stalled at the mine due to the ongoing rainy season.

As the FSA of these consumers are due to be expired soon, request has been made to WCL to extend the validity of DOs expiring within the third week of August '21 so that they can procure the allotted quantity as per the FSA.

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POWER

Power ministry sets up regulatory compliance division for monitoring The Union Power Ministry has said that it has set up a regulatory compliance division to monitor the adherence of regulatory parameters by the state-run electricity distribution companies (discoms) and state electricity regulators.

In a meeting with Union power minister R K Singh held the Forum of Regulators (FoR) said that it will prepare norms on various regulatory parameters and issues, which would be adopted by the state commissions.

To lower the cost of electricity, the power min-

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istry is also working on ‘resource adequacy guidelines’ and ‘guidelines for procurement of power’, keeping in mind factors such as load fluctuation requirement, contract term and energy mix.

A recent report by FoR to measure the impact of power purchase cost on retail electricity tariffs had pointed out that discoms in 12 states are cumulatively paying a hefty Rs 17,500 crore a year for the power they don’t use as fixed costs.

Under contractual requirements, discoms have to continue paying fixed cost to thermal power plants to recover the projects’ capital expenditure and cover debt obligations even when they do not procure electricity during periods of low demand.

India achieves 28 per cent emission reduction over 2005 levels: R K Singh India has achieved emission reduction of 28 per cent over 2005 levels, against the target of 35 per cent by 2030 committed in its Nationally Determined Contributions, power and renewable energy minister R K Singh said.

This makes India among one of the few countries globally which has kept to its Paris Climate Change commitments along with an exponential increase in renewable energy capacity, Singh said.

“Considering the pace of development in the energy sector, India is determined to not only achieve, but to exceed its NDC commitments well within the committed time frame,” He said that the key is to allow the regulatory and policy support to keep the sector afloat till the supply-side strengthens, technology develops, and competitive market takes root resulting in a fall in prices, and the industry becomes self-sustainable.

Power sector gives boost to coal off takes though CIL still saddled with huge pit headstocks Even as the country’s appetite for coal is on the rise with offtake from the coal-fired plants rising sharply to 166.3 million tonnes during AprilJuly this fiscal against 127.2 MTs during the same period last fiscal, Coal India (CIL) is still saddled with a buffer of 55.8 MTs stock despite its marketing efforts reduced pit headstocks by 43.4 MTs at the end of July this year.

The company achieved the highest ever coal off-take, production and overburden removal (OBR), for July of any year since the company’s inception 46 years ago, posting growths of 16.7%, 14.1% and 3.6% respectively.

In terms of supplies to the power generators,

CIL’s coal supply accounted for about threefourths of the country’s total coal-based power generation of 82.119 billion units during July including generation through imported coal.

57 lakh energy saving certificates issued to 349 units: Power Minister As many as 57 lakh energy saving certificates (ESCerts) was issued to 349 industrial units for saving more energy than their targets, the power ministry said.

These units will be able to trade certificates through Power Exchange Portal after a month to those units who could not achieve their targets.

The leadership role being played in the energy transition efforts is highlighted by the Ministry and India, being the only G-20 country that is on the track for below 2 degree rise as per the Paris agreement.

The Ministry of Power has taken several initiatives to enhance energy efficiency of major industrial sectors. The objective is to reduce consumption of fossil fuel, coal, oil and gas thereby leading to low carbon economy. One of the flagship initiatives known as Perform, Achieve and Trade (PAT) was implemented under Cycle II (during 2016-19) covering 621 large industries from 11 sectors.

Regulators feel high return on equity jacks up power tariffs Higher return on equity (RoE) granted for power-sector units is proving to be a fixed-cost factor driving retail electricity tariffs up, according to analysts. The Central Electricity Regulatory Commission (CERC), guided by a policy objective to incentivise investments in the sector uses to provide RoE as high as 18% for gencos about two decades ago.

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The ROEs have since come down, but continue to jack up tariffs. Now that the prime lending rate and the 10 year G-Secs rates have fallen substantially, there is a pressing need to lower the RoE build into tariff determination, the analysts feel.

A recent study by the Forum of Indian Regulators of 12 discoms across India with RoE of 14-15.5%, said if RoE is reduced to 12%, there would be reduction of 7 paisa per unit of retail tariffs.

The regulators from Uttar Pradesh, Rajasthan, Tamil Nadu, West Bengal, Assam, Haryana and Madhya Pradesh who were part of the study, noted that the RoE for generation and transmission must be linked to the 10-year G-Sec rate (average for previous 5 years), along with capping of the risk premium as decided by appropriate commission.

India's largest power utility NTPC to work with Coal India, Railways to solve fuel crisis While the shortage of coal is causing a power generation crisis for many coal-fired power plants, India's largest power utility NTPC Ltd has initiated measures to get its production back on track. NTPC has said it is working with Coal India and Railways for augmenting coal supplies, where the stock position is critically low.

It said power production will soon increase as commercial operation of its Darlipalli Unit 2 (800 MW) will start from September 1. Further, it is arranging 2.7 lakh million tonnes (MT) of imported coal-based on earlier contracts and is increasing coal production from all its captive mines. The pit head Darlipalli Unit 2 will get coal from its Dulanga captive mine.

As per the Central Electricity Authority (CEA) data as of August 29, a total of 135 coal plants with a capacity of 1,68,456 MW have a total stock of 13168.96 MT, enough for seven days

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and have a daily requirement of about 1,910.28 MT.

Amid rising power demand, coal stock at 57 plants ‘critical’ Coal stock at 57 thermal power stations representing about 21% of the country’s total generation capacity have become ‘critical’ or ‘super critical’ amid rising electricity demand, prompting the power ministry to regulate for a week fuel supply to plants that have stocks for 14 days so that inventories can be built up at the units facing a crunch.

Central Electricity Authority documents show five plants with ‘zero’ coal stock and running on daily supplies. Six plants have a day’s buffer stock, while 15 plants have inventories for three days, 13 plants for four days, four plants for five days, and three stations for six days and two units have stocks to last a week. Industry executives blame the low fuel stocks on poor supply and lack of advance planning in anticipation of rising power demand.

But Coal India Ltd blamed the reduced inventories on generators failing to heed its advice given since October 2020 to stock up for summer and monsoon when electricity demand spikes.

The arguments indicate that no one prepared for the sharp rebound in power demand or put too much emphasis on renewables. Power demand rose at 8% and 12% in the third and fourth quarters of 2020-21 and continues, jumping 18% in July. As a result the average plant load factor of thermal plants too has risen above 60% from about 52% as hydel production came down.

Govt proposes flexibility to Gencos on 3rd party sale of electricity meant for discoms in default

By the year 2024, more than 50 per cent of the power needs of a large section of the city would be met through green energy, comprising solar, wind, water, waste to energy and hybrid power.

By the financial year 2023-24, 3,300 MW of green power will be operationalised by BSES discoms. Discom sources said that out of this, 2,291 MW will be “pure play renewable”, comprising solar, wind and waste to energy and around 1,000 MW comprising hydro power. This means that by 2024, 36 per cent of BSES’s longterm arrangements will comprise pure play renewable energy and 16 per cent, would be hydro power, adding up to a total of 52 per cent.

The BSES discoms recently inked a power sale agreement with the Solar Energy Corporation of India to procure 510 MW of solar and bundled hybrid power. Of the total quantum of 510 MW, 300 MW is solar power and 210 MW, hybrid power, including Mumbai, Nashik, Pune, Igatpuri and Nagpur, the company said in a statement.

Ladakh's power scenario changed for better in a short span of time: Lt Guv The power scenario of Ladakh has changed for better in a short span of time, Lt Governor R K Mathur said, asserting that with solar, hydrogen and geothermal projects in the pipeline, the sector has great potential for changing the face of the union territory. Mathur said many new areas have been electrified and power consumption in the last one year has grown by more than 10 per cent, while reiterating the need for time-bound removal of all diesel generator sets to achieve carbon neutrality in the region.

The secretary power informed the meeting of upcoming projects such as installation of new transformers in Leh city to address the issue of low voltage, introduction of smart metering system, maintenance and replacement of DG sets. It was noted that smart metering systems would help strengthen the mechanism of rev-

enue collection and the department is pacing up the implementation of the project.

'Turnaround in J&K's power transmission, distribution helps achieve sustainable electricity supply' The turnaround in the power transmission and distribution sector in the past one year in Jammu and Kashmir has helped in achieving reliable, quality, and sustainable electricity supply, Lieutenant Governor Manoj Sinha said as he dedicated seven power infrastructure projects worth Rs 10.11 crore to the public. The new projects inaugurated by Sinha target four districts of the Kashmir Valley - Pulwama, Bandipora, Ganderbal and Budgam - and would benefit 30,400 households.

The lieutenant governor (L-G) said that hardly any work was done in the past three decades to strengthen the power infrastructure in the J&K UT and the administration inherited a plethora of problems confronting the power generation, transmission, and distribution sectors.

"But, we are determined for a time-bound solution to the problems. Rs 5,000 crore has been allocated to transform the power infrastructure and I am certain with a pragmatic approach, we will be able to mitigate the challenges of this sector," the L-G said.

SECI plans 2,000 MWh capacity standalone energy storage project The Solar Energy Corporation of India (SECI) is planning a 2,000 MWh standalone energy storage system which will be executed by the private sector. The state-owned solar energy focused corporation said the projects will be set up on a build-own-operate (BOO) basis with a 25-year agreement.

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"SECI has initiated a project for 2,000 MWh standalone energy system. The detailed tender In yet another reform initiative aimed at streamlining the payment mechanism in the power sector, the power ministry proposes to extend freedom to generating companies to sell power to a third party to the extent of default by discoms and recover their cost.

As per the draft Electricity (Late Payment Surcharge) amendment Rules, 2021 rules, if a distribution licensee has any payment including late payment surcharge outstanding after the expiry of seven months from the due date of payment as prescribed in the (power purchase agreement) PPA then notwithstanding anything contained in the PPA or the Power Supply Agreement, the generating company may sell power to any consumer or any other licensee or power exchanges, for the period of such default.

While doing so, the Genco will retain its claim on payment of fixed charges or capacity charges from the distribution licensee, after giving a notice of at least fifteen days to the distribution licensee for the power supplies it made without getting paid. The claim, if any, shall be reconciled on annual basis and shall be limited, to only under recovery of the fixed charges or capacity charges, the amendment rules state.

Collaboration plans capture facility in India

carbon

Carbon Clean and Green Power International (GPIPL) have been selected to design and build a carbon capture plant with NTPC, India’s largest power utility provider.

The NTPC Energy Technology Research Alliance (NETRA) – the R&D section of NTPC – is establishing a CO2 to methanol demonstration plant at NTPC Vindhyachal, India.

The agreement will see Carbon Clean’s technology capture 20 t/d of CO2 from the coal-fired boiler.

Carbon Clean will collaborate with GPIPL who won the contract from NTPC.

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Aniruddha Sharma, CEO of Carbon Clean, said: “This partnership is a perfect fusion of Carbon Clean’s low-cost capture technology and Green Power and NTPC’s deep industry knowledge.

India has been a primary market for Carbon Clean since our formation. We are excited to have won another contract that will contribute to India’s reduction in greenhouse gas emissions by expanding the country’s circular carbon economy.”

Govt expects Rs 39,832 crore from sale of power generation assets by FY25 Government's think tank NITI Aayog has valued state-owned power generation assets at Rs 39,832 crore which can be monetised by the financial year 2025, according to the National Monetisation Pipeline. Finance Minister Nirmala Sitharaman has announced a Rs 6 lakh crore National Monetisation Pipeline (NMP) that will look to unlock value in infrastructure assets across sectors ranging from power to road and railways.

The assets considered for monetisation over FY 2022-25 aggregate to 6.0 gigawatt. Out of which, about 3.5 GW is from hydel assets and about 2.5 GW is renewable energy (RE) assets which includes solar and wind. The total value of assets considered for monetisation is estimated at Rs 39,832 crore over FY 2022-25, the NMP document said.

Together, 6.0 GW asset base considered for monetisation constitute about 6 per cent of the total generation capacity under central PSUs. Key entities whose assets have been considered are NHPC, NTPC and SJVNL who own bulk of the hydel assets and NTPC (under Ministry of Power) and NLC (under Ministry of Coal) that own renewable assets.

States yet to submit categorisation of thermal power plants A day ahead of the latest deadline to categorise their thermal power plants (TPP), the states sought clarification from the Central Pollution Control Board (CPCB), further delaying the process to control air pollution.

The State Pollution Control Boards (SPCBs) or the Pollution Control Committees (PCCs) were supposed to send categorisation of captive power plants by August 25 to the task force headed by the member secretary, CPCB. While the overall work for retrofitting of the pollution control technology for the TTPs has shown pathetic progress, even the categorisation of TTPs has been delayed. Considered the most polluting industry in India, coal-powered plants across the country were directed to introduce stricter environmental standards on December 7, 2015 to be implemented within two years.

However, the reluctance of the states and even some Centre-owned power plants has meant that not all of them have complied with the directives.

India committed to work with US on clean energy: Environment minister India stands committed to working with the US on clean energy, Union Environment Minister Bhupender Yadav said after a telephonic conversation with US Special Presidential Envoy for Climate (SPEC) John Kerry.

During the conversation with Kerry, the minister discussed the Climate Action and Finance Mobilization Dialogue (CAFMD) Track under the India-US Climate, Clean Energy Agenda 2030 Partnership, and other related issues, the environment ministry said in a statement.

Kerry is likely to visit India in September to

further India-US partnership on clean energy, the ministry said.

“Both sides agreed that India and the US, will engage for a constructive engagement under the India-US Climate and Clean Energy Agenda 2030 Partnership. The environment minister stated that these platforms provide greater opportunities for working together for climate actions and emphasised that India stands committed to working with the US on Clean Energy," the official statement said.

Govt floats draft green energy open access rules To increase the use of renewable energy, the Union power ministry has circulated the “draft electricity (promoting renewable energy through green energy open access) rules, 2021”. The draft proposes that there shall be no capacity limit for industries and large power consumers for setting up solar power generation units for self-consumption.

The proposed rules also say that state power regulators will have to frame a mechanism to allow consumers wanting to procure green energy through the open access route, and all such applications for green energy open access will have to be cleared within 15 days.

The rules are seen to standardise the open access regulations all across the country, as currently differ rent states have different norms regarding this. As power minister RK Singh recently said, to make it easier for industries to source all their electricity requirement from renewable energy (RE) based power sources, the Centre is planning to come up with a green tariff mechanism policy to enable discoms supply electricity sourced only from RE sources to interested users, and also levy separate tariffs on such consumers. The draft rules are seen to CCAI Monthly Newsletter August 2021

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be a step in that direction as well. Stakeholders have to submit their comments on the draft rules within 30 days.

India plans to emerge as a global leader in green hydrogen: R K Singh India plans to emerge as a global leader in green hydrogen and the country is proposing to mandate using green hydrogen in fertilizer and in refining, power minister R K Singh has told the US Special Presidential Envoy for Climate (SPEC) John Kerry. In a telephonic conversation last evening, Singh also informed Kerry that India will invite bids for green hydrogen in the next 3-4 months to encourage viable usage of hydrogen as a fuel, according to a power ministry statement.

Singh underlined to the US Presidential envoy that Prime Minister Narendra Modi places the highest importance on the environment.

He suggested to him that India and the USA could work together in the areas of innovations for power and technology, pointing out the requirement of bringing down the cost of storage of renewable power.

The minister informed Kerry about the recent milestone the country had achieved by crossing 100 GW in Installed solar and wind capacity. “If we add Hydro capacity also, the total installed renewable capacity is 147 MW. Further, 63 GW of renewable capacity is under construction which makes India one of the fastest growing in terms of renewable capacity addition,” it stated.

Renewable capacity target of 175 GW to be met by FY26: Icra The target of having 175 giga-watt (GW) of installed renewable energy capacity set by the government will likely be achieved only in FY26 as against the target of meeting it by December

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2022, analysts at Icra said.

The key reasons for the delay were cited as issues related to land acquisition and the higher period required to build associated transmission infrastructure to evacuate the electricity generated from solar and wind plants.

Since 40 GW of the 175 GW target capacity was expected to come from rooftop solar plants, limited progress on that front has also thwarted achieving the 175 GW renewables target on time.

The “passive resistance” from state-run power distribution companies (discoms) towards installing rooftop solar — in the apprehension of losing revenue from discoms’ higher-paying commercial and industrial consumers — is seen as one of the major reasons why rooftop solar did not take off as planned.

The key challenges constraining the growth remain on execution front, mainly associated with land and transmission infrastructure as well as the slow but improving progress in signing of power purchase agreements and power sale agreements by intermediate procurers with discoms Renewable can stand on its own but the nature of power is intermittent, that is the challenge we have today. Soon with technological advancement around storage, we will overcome that as well.

Solar energy to contribute 300 GW to India’s RE target: Amitesh Sinha, Jt Secy, MNRE Solar energy will contribute almost 300 gigawatt (GW) to the 450 GW of renewable energy target that India aims to achieve by 2030, said Amitesh Sinha, joint secretary, Ministry of New and Renewable Energy on Wednesday. He said that the country has a clear road map on the part of demand visibility.

“India needs to add about 25 GW of solar energy capacities every year... Apart from this,

we are also moving towards a green hydrogen ecosystem,” he said at a virtual event organised by industry body, the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Sinha also said that the government was now focusing its attention on how manufacturing equipment can be supplied and how India can become self reliant in this sector.

“The earlier efforts were not encouraging to the solar equipment manufacturers. Now, with the government deciding to impose 40 per cent basic customs duty on solar modules and 25 per cent on solar cells from 1 April 2022, imports would become more expensive and local manufacturing would be encouraged,” he added.

Solar energy set to double demand for base metals by 2040: WoodMac Solar power will have a significant impact on demand for aluminium, copper, and zinc, with the usage of all three metals in the sector set to double by 2040, according to a recent report by Wood Mackenzie.

It added that the global energy transition and country-level decarbonisation targets will create new markets for non-ferrous metals in the coming years.

and several other countries across the globe.

As costs continue to fall, solar’s share of power supply will rise and begin to displace other forms of generation. This presents a huge opportunity for the base metals sector,” he added.

PM likely to declare Modhera India’s first fully solar-powered village Prime Minister Narendra Modi is likely to visit Modhera village, famous for its Sun Temple, on September 5 and declare it to be the first fully solar powered village of the country.

The PM had earlier suggested that the state government take up the project to convert the village housing the Sun Temple to India’s first fully solar powered village.

The Gujarat government has developed a 6MW solar power facility which provides 24x7 power to the village.

Modhera village and the Sun Temple is a protected archaeological site. The state has spent around Rs 69 crore on the project. The government allocated 12 hectares of land for the plant, which is 3km from the village. The 6MW solar power plant will be connected with a Battery Energy Storage System for storage of solar power. It is from this BESS that Modhera village will receive solar power at night.

“Base metals are an integral component of solar power systems. A typical solar panel installation requires aluminium for the front frame and a combination of aluminium and zinc for structural parts. Copper is used in high and low voltage transmission cables and thermal solar collectors,” said Kamil Wlazly, senior research analyst, Wood Mackenzie.

He said that falling production costs and efficiency gains has driven down the price of solar power around the world.

“As a result, solar has become cheaper than any other technology in many parts of the US CCAI Monthly Newsletter August 2021

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DOMESTIC CARE Ratings: Expect coal production to grow by 2-3% at 730745 mt in FY22 CARE Ratings in its latest coal update expects production to grow by 2-3% in the financial year FY22. India's coal production has risen by 19.3% yoy to 54.4 million tonnes (mt) in July 2021 over a low base.

Further, CARE said that the "sharp uptrend in seaborne coking coal prices during the June quarter is likely to continue and we expect stronger prices in the second half of CY2021 as the global supply-demand balance continues to remain tight."

The country's coal despatch increased by 21.7% yoy to 62.3 mt in July due to higher demand from the power and the cement sector.

India faces twin challenges of decarbonising power sector, meeting rising energy demand: Coal Minister

"Demand for both thermal and coking coal is expected to remain strong as global economic activities improve after the covid-19 downturn in the second half of CY2021," CARE added.

The Indian economy faces twin challenges of fulfilling its commitments for decarbonising the energy sector as well as meeting the country's rising power demand, which would primarily be

18 | CCAI Monthly Newsletter August 2021

reliant on coal due to its affordability and indigenous availability, the coal ministry said.

India's coal sector has to play a crucial role in the foreseeable future in fulfilling the country's energy demand for meeting various developmental needs, and at the same time, be responsible towards environment and society, the ministry said in a statement.

Against this backdrop, India's coal sector has been taking several innovative initiatives to promote sustainable mining.

One of the key initiatives has been 'Go Greening' drive in and around mining areas, thereby not only ameliorating the local ecosystem but also creating additional carbon sink to mitigate the causes of climate change. Further, coal companies are also aiming to achieve carbon neutrality through various environment-friendly measures, such as extensive plantation and adoption of clean coal technologies.

India exports 8 lakh tonnes of coal to neighbouring countries in FY’21 India exported 8 lakh tonnes of coal to its neighbouring nations, including Nepal, in the fiscal year ended March 2021.

Of the said quantity, the maximum 77.20 per cent was exported to Nepal, followed by 13.04 per cent to Bangladesh, according to the Coal Ministry’s Provisional Coal Statistics 2020-21.

To bridge the demand and supply gap as well as to provide high quality coal for use in various industries, the country has no option but to resort to import of coal, especially low-ash coal.

In FY’21, import of raw coal of the country was 214.995 MT valued at Rs 1,16,037.2 crore against import of 248.537 MT valued at Rs 1,52,732.1 crore in 2019-20.

Thus, in the year 2020-21, import of coal decreased by 13.50 per cent over the previous year.

Coal India expects to increase in average price realisation in Q3FY22 Coal India Ltd (CIL) is expecting around 10-15 per cent increase in average price realisation on a sequential basis through the e-auction route in Q3FY22. The average price realisation is expected to be close to 1,700-1,800 a tonne in Q3 this fiscal as compared with ₹1,569 a tonne in Q2.

The country’s largest miner is also contemplating an increase in coal prices and is in talks with stakeholders for the same.

According to Pramod Agarwal, Chairman and Managing Director, CIL, the average realisation in the June quarter was about 10 per cent more than the notified tariff. However, the company has been getting 30 per cent over its notified price in August.

CIL expects premiums to increase further in the third and fourth quarter of this fiscal, because of the firming up of international coal prices.

Depending on the demand situation, CIL injects a reserve price, which is basically the floor price, over and above the notified price, at which the auctions begin. This is done based on the kind of response received at e-auctions and the amount of premium garnered. An improvement in premiums over notified value is expected to boost the company’s bottom line. Coal sold through e-auction route accounts for around 15-16 per cent of the total volume of coal sold.

Coal India's capex growth zooms twofold to Rs 1,840 cr in Q1 State-owned CIL on Friday said its capital expenditure jumped more than twofold to Rs 1,840 crore in the first quarter of 2021-22 compared to Rs 844 crore in the year-ago quarter.

Coal India in a statement said the capital expenditure rose twofold in the first quarter of FY22 as it continues to step up investments in CCAI Monthly Newsletter August 2021

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evacuation infrastructure, land acquisition and procurement of heavy equipment.

CIL has achieved 94 per cent of the progressive target of Rs 1,960 crore, set for April-June quarter of the ongoing fiscal.

Underscoring the intent on strengthening evacuation infrastructure like setting up rail sidings and corridors, coal handling plants, (CHP), silos and haul roads CIL's capex has risen to Rs 504 crore on this account, the second highest among all capex heads.

This is a quantum leap of 109 per cent over the first quarter of FY21 when the capex spend on these infra projects was Rs 241 crore.

CIL gets high premium from eauction sales to coal importers Coal India’s (CIL) special spot e-auction meant exclusively for coal importers fetched the company a 52% add-on over the notified price for the April-June period this fiscal, owing to soaring international prices that touched an average $146 per tonne across categories as of Thursday.

Almost the entire 1.6 million tonne offered to coal importers in July was booked, giving an impetus to CIL to offer more quantity in this category.

The increasing cost of coal sourced from overseas meant that coal importers booked 70% of the 2.4 MT offered to them under the special spot e-auction during April-July.

E-auction bookings across all five windows for the first quarter fetched the PSU miner `4,700 crore, with 30.2 MT sold via e-auction as against 15.9 MT booked during the same period last fiscal. Revenue from e-auction sales witnessed a year-on-year jump of 87%, a CIL executive said.

At 35.5 MT, the company’s e-auction allocation in the first quarter under all five auction categories was higher by nearly 8 MT or 28.6% than the allocation in the same period a year ago.

20 | CCAI Monthly Newsletter August 2021

Coal India’s improving realizations add to investor optimism Coal India's performance for the June quarter came in line with expectations, being helped by the rise in power demand. The company saw its sales volume for supplies under the fuel supply agreement (FSA), rise 25% year-on-year to 127.5 million tonnes. It supplies majority of its produce to the power sector.

With good demand, FSA realizations were also up 3% year-on-year at ₹1,394 per tonne. Rising e-auction volumes, which were up 90% yearon-year to 30.2 MT, accrued further benefits and cushioned the impact of sequential decline in FSA volumes from 139.2 MT. The strong demand pulling up e-auction volumes and e-auction realization came at ₹1,569 per tonne.

Revenue was up 37% y-o-y and 6% ahead of the estimate of analysts at Motilal Oswal Financial Services Ltd. They said that the marginal beat on our estimates was on account of a better e-auction mix in volumes. Adjusted Ebitda (exOBR) was up 64% year-on-year, in line with estimates. The year-on-year jump in Ebitda comes on the back of volume growth, led by a recovery in power demand said MOFSL.

New players take lead in commercial coal auction Into the third day of the commercial coal auction which is into its second phase, saw newer players take lead in bidding for coal blocks.

For the three mines offered on Wednesday, Prakash Industries Ltd, CG Natural Resources Private Ltd and Shreesatya Mines Private Ltd were successful bidders.

Prakash Industries quoted a premium of 55.7 per cent for Bhaskarpara mine in Chhattisgarh, the highest bid of the day. Shreesatya Mines quoted 54.5 per cent premium for Burakhap mine in Jharkhand. CG quoted 4 per cent premium for Khargaon mine of Chhattisgarh.

A record high bid of 79 per cent premium was quoted by Sunflag Iron & Steel Company for the Bhivkund mine in Maharashtra.

Coal ministry has put 19 mines for auction in the second round of the auction. Out of the total mines, 10 are fully explored, 9 are partially explored mines. There are four coking coal mines and the balance 15 mines are non-coking coal mines.

States get Rs 7,930-cr royalty from coal mining in Apr-Dec 2020 A total royalty of Rs 7,930.61 crore was provided to states from coal mining during AprilDecember 2020, Parliament was informed.

A royalty of Rs 2,102.01 crore went to Jharkhand, followed by Rs 1,575.73 crore to Chhattisgarh, Rs 1,489.44 crore to Madhya Pradesh, and Rs 1,165.48 crore to Odisha, Coal Minister Pralhad Joshi said in a written reply to a question in the Rajya Sabha.

A total royalty of Rs 12,962.92 crore was paid to states during 2019-20, Rs 14,746.11 crore during 2018-19, Rs 13,126.03 crore during 201718, Rs 11,227.14 crore during 2016-17, and Rs 10,736.7 crore during 2015-16, the minister said.

The 10 states that were provided royalty are Chhattisgarh, Jharkhand, Odisha, Madhya Pradesh, Maharashtra, Telangana, West Bengal, Assam, Uttar Pradesh and Meghalaya.

Coal India arm Northern Coalfields Ltd dispatches 3.87 lakh tonnes of highest-ever coal in single day Coal India arm Northern Coalfields Ltd dispatched the highest ever coal in a single day on August 27, the coal ministry said.

grew to a whopping 3.87 lakh tonnes,” the coal ministry said in a statement.

Northern Coalfields Ltd (NCL) also sent the highest ever, 38 coal rakes of Indian Railway to upcountry coal consumers of Rajasthan, Uttar Pradesh, Haryana, Gujarat, Delhi, and other states fulfilling the energy requirements of the country in this pandemic time.

In FY’21, NCL dispatched over 87 per cent of its coal through these modes of transportation. In a pro-environmental step, 24 per cent reduction in coal transportation from the road was seen in the last fiscal.

Singareni Collieries logs 102% growth in July coal production The Singareni Collieries Company Limited (SCCL) has had good coal production and dispatch numbers during July 2021 and April to July this fiscal.

Against the target of producing 47.56 lakh tonnes (lt), Singareni achieved 48.67 lakh tonnes with a growth of 102.34 per cent against 28.5 lakh tonnes achieved in the Covid-hit July last year.

Singareni dispatched 50.29 lakh tonnes of coal against the target of 45.56 lt with a growth rate of 110.39 per cent. Last year July, it had dispatched only 28.5 lt.

In the removal of overburden (OB) at the Open cast Mines (OCPs) it achieved 296.16 lakh cubic meters of OB as against 195.2 lakh cubic meters in July last year.

The company achieved coal production of 204.36 lakh tonnes during the last four months this year as against 123.5 lakh MT last year.

The coal dispatch was 217.25 lt this year when compared to 113.8 lt last year.

“On 27th August, 2021 the company’s offtake

21 | CCAI Monthly Newsletter May 2021

CCAI Monthly Newsletter August 2021

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Aluminium companies say coal curtailment brought industry to standstill Aluminium companies have said drastic curtailment of coal supplies by Coal India Ltd (CIL) without advance notice have brought the industry to a standstill as it has been left with no time to devise any mitigation plan to continue sustainable operations.

Coal India Ltd (CIL) has significantly reduced coal supplies and railway rakes for captive power plants (CPPs), resulting in coal crunch for the aluminium industry, Aluminium Association of India said in a press statement.

“Aluminium is a metal of strategic importance and an essential commodity for diversified sectors, crucial for the nation’s economy. Aluminium smelting requires uninterrupted and highquality power supply for production which can be met only through in-house CPPs,” it said.

The Aluminium industry CPPs have signed Fuel Supply Agreements (FSAs) with CIL and its subsidiaries for assured long-term coal supply. Any abrupt stoppage of this secured coal supply has a severe impact on the SMEs in the downstream sector resulting in increased prices of finished products and burdening end consumers.

STEEL

PLI scheme for specialty steel a game changer, to boost domestic output: Govt The production-linked incentive (PLI) scheme for specialty steel will prove to be a “game changer” for the industry as the move is expected to increase the output of value-added

22 | CCAI Monthly Newsletter August 2021

steel and see introduction of new age technologies in the sector, Union minister Faggan Singh Kulaste has said.

On July 22, the Union Cabinet chaired by Prime Minister Narendra Modi approved the Rs 6,322-crore PLI scheme to boost production of specialty steel in India, attract fresh investments and create new job opportunities in the sector.

The scheme aims to attract an additional investment of about Rs 40,000 crore and lead to a capacity addition of 25 million tonnes (MT), besides generating 5.25 lakh job opportunities.

On the issues being faced by the domestic steel sector, Minister of State for Steel Kulaste told PTI, “The challenge is to develop Indian steel sector as more efficient, competitive and (to be) capable of producing quality steel including value-added steel… (as also) enhance per capita steel consumption.”

Further, other focus areas are availability of raw material at competitive price and to be a world leader in energy efficiency and sustainability, he added.

Tata Steel commissions first steel recycling plant in Haryana The steel major has commissioned its new 0.5 MnTPA steel recycling plant at Rohtak, Haryana.

The plant has been set up in collaboration with Aarti Green Tech, as a 'Build, Own, Operate' (BOO) partner. The plant is equipped with modern & mechanised equipment such as shredder, baler, material handler etc. The scrap would be procured from various market segments such as end-of-life vehicles, obsolete households, construction & demolition, industrial etc., through an app called FerroHaat.

The scrap would then be processed through mechanised equipment and the processed

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scrap would be supplied for downstream steel making. The steel produced through the recycled route entails lower carbon emissions, resource consumption & energy utilisation.

mia characterised India’s cement industry as one of ‘many regions and many players. It is equally an industry of many plants – which are seemingly larger and more numerous by the week.

SAIL Plans Next Phase Of Expansion In 2023-24, To Double Its Crude Steel Production Capacity To 50 MT Per Annum

Orient Cement announced an investment of US$215m to increase its Devapur, Telangana, cement plant’s capacity by 53% to 11.5Mt/yr from 7.5Mt/yr. Another Southeast Indian producer, Ramco Cements, plans to invest a total of US$135m in upgrades in the 2022 financial year; it completed US$53.9m (40%) of the planned investments in the first quarter alone.

The Steel Authority of India (SAIL) will undertake expansion plans and accordingly augment its total installed crude steel production capacity by more than two times to 50 million tonne per annum (MTPA) in the coming 15-18 months.

As of now, the government-run entity is rounding up a modernization program worth Rs 70,000 crore that will increase its capacity to 21.4 MTPA. The aforementioned proposed expansion plan will kick off in 2023-24 and the overall capacity will be enhanced by 12-14 MTPA at its units in Rourkela, Bokaro and Burnpur (IISCO) in the first phase.

SAIL seems to be working towards realising the National Steel Policy’s target of building an installed capacity of 300 MTPA by 2030-31.

In fact, the steel production company has already done its land surveys in Rourkela and Bokaro. It also has certain land parcels available in order to carry out a brownfield expansion.

CEMENT India’s ever-expanding cement capacity Dalmia Bharat managing director Puneet Dal-

24 | CCAI Monthly Newsletter August 2021

Nationally, investments in on-going cement plant projects total US$1.81bn. What is remarkable here is the continued drive to expand despite existing overcapacity. Puneet Dalmia estimates that Indian capacity utilisation will be 70% in 2021. Despite this, his company plans to increase its installed capacity by 17% to 36.0Mt/yr in the (current) 2022 financial year and by 57% to 48.5Mt/yr with the realisation of all on-going projects by the 2024 financial year, from 30.8Mt in August 2021.

India Cements posts 121% rise in Q1 net profit, revenue jumps 37% India Cements posted a 121 per cent rise in consolidated net profit for the first quarter of the current financial year (Q1FY22) to Rs 43.05 crore as compared to Rs 19.47 crore during the the corresponding period last year.

The company's consolidated revenue from operations during the period under review also saw a spike of 37 per cent from Rs 763.46 crore last year to Rs 1045.25 crore this fiscal. The company's cement production saw an increase of 41 per cent during the Q1FY22 to 1.88 million tons, as against 1.34 million tonnes during the same period last year. Similarly, the overall volume also increased by 36 per cent from 1.43 million tonnes during Q1 last fiscal to 1.95 lakh tonnes this year. However, sequentially, the vol-

ume was lesser by nearly 35 per cent mainly due to the second wave of the Coronavirus (Covid-19) pandemic.

‘Fly ash ideal for manufacturing cement, concrete, bricks and tiles’ Sustainable utilization of fly ash, a by-product of power generation with coal, is one of the key areas of concern at the Singrauli unit of NTPC in Sonbhadra district. The unit is ensuring sustainable solutions for complete utilization for it.

The fly ash generated at the NTPC is ideal for manufacturing cement, concrete, concrete products, bricks and tiles, claimed the general manager (ash handling) K Gopala Krishna. According to him, in order to promote the use of

fly ash bricks in building construction, NTPC Singrauli has set up five fly ash brick manufacturing plants. Besides, NTPC Singrauli is also supplying 9.75 lakh metric tons (LMT) pond ash for free to National Highway Authority of India (NHAI) National Highway Road Project NH-7 (Rewa-Varanasi). It will also supply free two lakh cubic meters (LCM) pond ash to NHAI road project -bypass to Varanasi’.

Fly ash is being supplied to brick manufacturers at different locations for free of cost in a radius of 100 km. Indian Railways’ sprawling network is leveraged to transport fly ash in an economical and environment-friendly manner.

These initiatives are in line to achieve 100% utilization of fly ash at the power station and therefore by effectively adapting environment friendly power generation methods for sustainable growth, said Krishna.

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GLOBAL Asia's coal importers split between rich north and poorer south Thermal coal's rally to 13-year highs in Asia has done little to dampen overall demand, but the region is increasingly becoming split between those countries willing and able to pay high prices, and those who are cutting now unaffordable imports.

Imports of thermal coal in wealthier north Asian countries, such as Japan, South Korea, China and Taiwan are set to record month-on-month increases in August, with some reaching the most this year, according to vessel-tracking and port data compiled by commodity analysts Kpler.

26 | CCAI Monthly Newsletter August 2021

However, the less-developed nations of south Asia, such as India, Pakistan and Bangladesh are likely to see lower imports of the fuel used to generate electricity.

Prices of thermal coal have surged in Asia since September last year, when demand started to recover after the initial economic lockdowns across the region to try and combat the corona virus pandemic started to lift.

South Korea is expected to have shipped in 7.40 million tonnes in August, and while this is down from July's 8.49 million, it is still the secondhighest month this year, according to Kpler data.

Taiwan's August imports are estimated at 6.33 million tonnes, up from July's 5.12 million and

China coking coal, coke futures extend blistering rally on supply NE Asian coal market rallies amid worries tighter availability Dalian coking coal and coke futures surged to the highest since Kpler started compiling coal data in January 2017.

South Korean coal prices rose this week, thanks to firmer freight rates and tight coal market availability owing to a force majeure declared by a Russian mining firm.

A major thermal coal producer operating in Russia's Sakhalin island declared a force majeure on coal loadings this week amid disruption caused by heavy rainfall across the far east region, sources told Argus.

South Korean independent power producer GSDEP, which procured 120,000t of minimum NAR 5,300 kcal/kg Sakhalin coal on 22 June for loading between the second half of September and the first half of October in two lots, was directly affected by the force majeure and was reportedly looking to increase volumes through existing term tenders.

Argus assessed NAR 5,800 kcal/kg coal prices at $137.79/t fob Newcastle and $156.04/t cfr South Korea this week, up by $4.05/t and $7.61/t on the week, respectively.

South Korea-delivered prices rose more sharply this week, thanks to strong freight rates. The average Capesize freight rate between east Australia and South Korea rose to $20.70/t, up by 44¢/t on the week and $9.92/t on the year.

Restrictions across the South Korean coal fleet remain minimal, with only the 500MW Samcheonpo unit 6 off line for maintenance since 1 October 2019. The unit is scheduled to return on 31 August.

South Korea's coal availability is scheduled to average 36.4GW in August with the commissioning of the 1GW Shin-Seocheon unit 1 in June. The country's coal-fired generation averaged 27.5GW a year earlier.

record highs on Tuesday, extending a red-hot rally fuelled by concerns about the supply of steelmaking ingredients in top steel producer China.

Coking coal's most-traded contract on China's Dalian Commodity Exchange ended morning trade 6% higher at 2,470 yuan ($381.09) a tonne, after earlier hitting an all-time high of 2,571 yuan.

Coke was up 7.2% at 3,171 yuan a tonne, after touching a life high of 3,267.50 yuan.

Prospects of prolonged tightness in metallurgical or coking coal supply in China have underpinned prices, driving the cost of coke - the processed form of coking coal - higher.

Higher coal prices are expected in the second half of the year 2021-08-02 as Beijing's drive to boost domestic mine safety cuts into local output even as booming imports may be reaching their natural limits.

Benchmark iron ore futures, meanwhile, rebounded, with Dalian prices extending overnight gains as easing worries over the COVID-19 outbreak in China since-july-2021-08-23 helped calm nerves after several days of sell-offs driven by demand concerns.

Seaborne met coal hits all-time high in China amid domestic tightness Seaborne metallurgical coal prices hit an alltime high of $410/mt CFR China for premium hard coking coal Aug. 25. The previous high was reported at $392.50/mt CFR China on Jan. 20, 2011.

Domestic supply tightness, along with healthy steel demand, have contributed to the rally in CCAI Monthly Newsletter August 2021

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the CFR China market, trading sources said.

Domestic Chinese coking coal has been in tight supply as mining activities were restricted by the environmental and safety campaigns imposed by local governments across various provinces in the country.

China’s unofficial import ban on Australian coal in late 2020 has added to the supply tightness, with imports from the US, Canada and Russia being unable to replace the Australian volume and quality. This has been compounded by the closure of the border with Mongolia on Aug. 23.

Australia and Mongolia have been China’s top sources of imported coking coal for many years.

A latest trade was observed at Yuan 3,100/mt DDP Tangshan for an Mongolian No.5, sold to an end-user on Aug. 25. Meanwhile, in the seaborne market, a US low-vol Buchanan offer was heard indicated at $390/mt CFR China, for 100,000 mt, with early-October loading.

China Coal Approvals Seen Adding to Confusion on Climate Action Approvals for major new coal power plants by China’s local authorities show the tension in the nation’s efforts to meet climate goals, even as the overall total of projects given the go-ahead falls, according to campaigners.

Local authorities approved 24 plants with a combined capacity of 5.2 gigawatts, a 79% decline from the same period in 2020, Greenpeace said in a report published Wednesday. Even so, the majority of that capacity will come from three large-scale projects earmarked for potential support from central government.

“There are still mixed signals on coal. That leads to financial and environmental risk,” said.

Li Danqing, a Beijing-based project leader for Greenpeace East Asia. “Provinces are clearly still anticipating financial support on coal.”

China’s policymakers have offered at-times conflicting signals on plans to meet President

28 | CCAI Monthly Newsletter August 2021

Xi Jinping’s goal to zero out greenhouse gas emissions by 2060, and to begin reducing coal consumption from 2026. Immediate steps to cut pollution are being balanced against efforts to secure power supplies and to support a heavy industry-led recovery from the pandemic.

The Communist Party’s Politburo last month called for a more coordinated, orderly approach to carbon neutrality, a move that’s been widely interpreted as a signal to avoid aggressive measures.

Indonesia’s pipeline of coal plants undermines pledge to only build renewable Coal currently makes up nearly 40 per cent of Indonesia’s energy mix. Despite green rhetoric from the government, the situation is not likely to improve soon.

That’s because, of the 41 gigawatts (GW) of new generation capacity expected to come online in the country by 2030, 14-16GW is due to come from coal.

And 3.5GW of that is likely to come from coalfired power plants built immediately next to mines. Such “mine-mouth” plants often use lignite – the lowest quality and least efficient type of coal.

Indonesia has vast reserves of coal. South Sumatra holds 25 per cent of those, or 9.45 billion tonnes. The province’s reserves are mostly lignite and subbituminous coal, according to a report from Indonesian NGO Aksi Ekologi dan Emansipasi Rakyat (AEER), which translates as Ecological Action and People’s Emancipation.

Such low-quality coal leaves a heavy environmental footprint. More is needed to produce the same amount of energy compared with higher calorific coal, requiring more land for mining, and creating more air pollution per unit of energy produced.

South Korean coal imports spike to all-time high South Korean thermal coal imports spiked to an all-time high in July amid surging overall power demand and nuclear outages.

South Korean thermal coal imports rose by 2.3mn t or 25pc on the year to more than 11.6mn t in July, according to customs data released today, narrowly surpassing the previous high recorded in September 2017.

The surge in imports came amid a spike in coalfired generation last month as seasonal power demand surged on hot weather while nuclear outages raised reliance on fossil fuels.

Daily mean temperatures in Seoul averaged 28.4°C last month, making it the hottest July for at least 11 years, with daily peak power demand rising by 18pc on the year to a likely record-high average of 81.2GW. At the same time, nuclear availability fell by 1.7GW on the year to 16.2GW, compounding the country's reliance on fossil fuels to meet electricity demand. The 1.4GW Shin Kori 4 reactor was unavailable for most of the month because of an outage, while four other reactors were off line for the whole month for planned maintenance. .

How Australia will ensure sufficient electricity while closing some coal-fired power plants A new report by AEMO released on Tuesday found that by 2025 there would be periods when all customer demand across the national electricity market could be met by renewable generation.

The annual reliability outlook, known as the Electricity Statement of Opportunities, said the transition to cleaner energy was being driven by residential solar installation, grid-scale wind and solar projects and thermal generation retirements.

“No reliability gaps are forecast for the next five years, primarily due to more than 4.4 gigawatts of new generation and storage capacity, as well as transmission investment and reduced peak demand forecasts,” Westerman said.

“Significant renewable energy investments, and well-progressed dispatchable generation projects, including gas plants, pumped hydro and battery storage, will all help replace retiring coal and gas plant.”

As well, investment in new and upgraded transmission infrastructure, including Project EnergyConnect linking South Australia and NSW, will reduce consumer costs while improving the resilience and security of the system. .

Demand for NSW coal exports continues despite pandemic The NSWMC research also analysed the potential economic benefits of all major mining projects in the NSW planning system, from initial EIS submission stage to approved projects still seeking related conditional approvals before mining can begin.

It found there were 32 mining projects at various stages in the NSW planning system including rare earths, silver and cobalt.

Demand for NSW coal has remained strong despite the global pandemic, including with NSW's top three traditional markets Japan, Korea, and Taiwan, as well as important emerging markets such as India, Vietnam and the Philippines.

"This demand is expected to remain strong for at least the next two decades and we've also seen a significant surge in the coal price over recent months," the NSWMC said.

"This is also driving opportunities, with a range of NSW coal projects under assessment. Most are for extensions of existing operations, with a few new ones and a further $5.5 billion of investment opportunity for our regions, and thousands more jobs created or protected across the state."

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The number of coal projects has decreased from 21 in 2020 to 19 projects in 2021 due to one project starting, the withdrawal or discontinuance of some projects, and the NSW Independent Planning Commission's refusal of the Dendrobium project. .

Australian thermal coal dilemma deepens Australian high-grade thermal coal prices are at highs only briefly seen in the mid-2008 spike, yet the medium-term outlook is poor given the increasing push to carbon neutrality. In this environment, UK-Australian mining firm BHP has put a negative value on its thermal coal assets and all but admitted that it may have missed the boat to get out of its 20mn t/yr Mt Arthur mine and associated infrastructure in the Hunter Valley region. At the same time strong cash margins are incentivising firms with existing operations to push up output. It is a balance to capitalise on record-high prices without overcapitalising on assets that could become a liability.

There are several different approaches to managing this risk. The first is to get out of thermal coal, as BHP is trying to do.

Glencore argues that it will run these operations well and close them properly, rather than simply selling out and allowing others to take responsibility for the carbon emitted. It will be interesting to see if it is prepared to acquire assets it does not already have a stake in, particularly if asset values continue to decline and coal prices are sustained.

The final option is growth regardless of asset prices. This is the approach taken by India's Adani, which is continuing to develop its 10mn t/yr Carmichael coal mine in the Galilee basin in Queensland through its Bravus subsidiary.

The mine is expected to cost around $4bn plus infrastructure, which is considerably more than the firm would have to pay to buy the significantly higher-grade 20mn t/yr Mt Arthur mine from BHP.

30 | CCAI Monthly Newsletter August 2021

.Australia’s

largest mining event reschedules to January 2022

Due to ongoing travel and gathering restrictions, and the rise of COVID-19 infections around Australia, Beacon Events, the organisers of the International Mining and Resources Conference (IMARC) have announced their decision to reschedule the 2021 edition.

IMARC 2021 will move to the new dates of 31 January – 2 February 2022, with the hybrid event taking place in-person at the Melbourne Showgrounds, and online for those that cannot attend in-person.

IMARC Managing Director, Anita Richards, said that while it is disappointing that this important industry event has had to be postponed from 2021, this is the responsible action to take under the circumstances as the health and safety of IMARC’s participants is a number one priority.

Austmine CEO Christine Gibbs Stewart said “considering the health and safety of our members, delegates and staff members, we support postponing IMARC 2021 until January 2022.

We know how important this event is to our members who are exhibiting and attending, as well as the METS sector overall, and we encourage everyone to consider this as an opportunity to refocus your efforts and support the event in 2022.”

BHP, MMG, Newcrest, Mitsui, OceanaGold and Kirkland Lake Gold have all confirmed their continued support for IMARC in January 2022, with their executive leadership teams confirmed to speak within the conference program.

In addition to the Federal Minister for Resources, the Hon Keith Pitt, major sponsors METS Ignited, Caterpillar, ABB, and the World Gold Council have also confirmed their support and participation.

IMARC 2021’s new dates are aligned with the expected easing of restrictions from all states across Australia, allowing for strong domestic representation.

S.African coal miner Exxaro says rail snags will hit 2021 exports South Africa’s biggest coal miner, said its exports would remain subdued in 2021 due to a range of rail logistics woes including a lack of locomotives, derailments, infrastructure sabotage and cable theft.

The company, which exports high-quality coal to countries such as India, had been well placed to take advantage of strong demand from China this year after the Asian giant cut off imports from Australia over quality concerns.

This opportunity arose at a time when coal prices in the first half of 2020 were almost 50% higher than the same period a year before.

However, Exxaro failed to fully benefit because its rail problems hit its export capability, the company said.

“Due to poor rail performance, Exxaro could not participate and realise the price hike fully,” Nombasa Tsengwa, managing director of minerals, said during a conference on Thursday.

The company has already lost 2 million tonnes of export demand in the first half and another million tonne could be at risk, she added. Its shares were down 2.01% at 1110 GMT, underperforming the broader market index which was down 0.44%.

Exxaro and other commodity exporters depend heavily on the rail infrastructure of state-owned monopoly Transnet.

68% of U.S. coal fleet retirements since 2011 were plants fueled by bituminous coal In 2011, the United States had 317.6 gigawatts (GW) of coal-fired electric generation capacity.

About 88.7 GW of that capacity was retired in the decade that followed. Units fired by bitumi-

32 | CCAI Monthly Newsletter August 2021

nous coal accounted for the largest share of retired capacity, at 68%.

Coal is classified into different types, or ranks.

The two coal types most commonly used in U.S. coal-fired power plants are bituminous and subbituminous coal.

Generating units that burn bituminous coal were generally older and smaller, leading to more of them retiring than units fueled by subbituminous coal, particularly from 2011 to 2015.

The lower delivered price for subbituminous coal (because of more cost-effective mining practices) also makes coal plants that use it more economically competitive than bituminous coal-fired plants. In 2019, the delivered price of subbituminous coal was $1.86 per million British thermal units (MMBtu), compared with $2.26/MMBtu for bituminous coal.

Another important factor in coal capacity retirements is the degree of competition from other electricity generation sources in the regions where the plants operate.

Interior keeps slashing royalty rates for coal companies in the US For the third time in recent months, the Interior Department has lowered a coal company’s royalty fees to encourage it to continue mining publicly owned coal.

Interior’s recent flurry of royalty rate reductions comes in spite of the Biden administration’s effort to take a “whole-of-government approach” to combating human-caused climate change.

In May, the Bureau of Land Management granted royalty relief to Arch Resources Inc. for two of its coal mines on federal land in Colorado and Wyoming (Greenwire, July 28).

The bureau did the same for Deseret Power Electric Cooperative’s Deserado mine in Range-

ly, Colo., last month, according to records on BLM’s minerals reporting system.

Underground mines like Deserado typically pay a royalty of 8 percent of the gross value of coal produced on federal land. BLM approved a 2 percent rate request for the Deserado mine, which has received several royalty reductions in the past, on July 28.

The decision by the climate-focused Biden administration confounded environmental activists, who say that Interior’s encouraging more coal production runs counter to efforts to combat human-caused global warming.

Strong tailwinds for US coking coal While Chinese mills have consistently indicated that US offers are coming above their expectations, the recent willingness to accept these offers, which have risen by as much as $10-20/t each time from the last done deal, indicates that these buyers have little alternative.

Border restrictions on truck deliveries from Mongolia may ease if Covid-19 infection rates fall further from the highs of June this year, but Chinese buyers are already bracing themselves for tighter restrictions again in the winter should there be a resurgence in infections. Rail wagon shortages and weather-related rail disruptions in Russia have limited spot availability of coking coal and PCI since June as well, and despite some recovery in rail capacity, supplier confidence has remained strong, with Russian offers racing ahead of index levels.

The Chinese premium domestic coking coal price is assessed at the equivalent of $446.53/t today, up by $114.99/t from just a month earlier, with top graded Anze low-sulphur coking coal pegged at about 3200 yuan/t ($492/t).

Despite the current highs, market participants have their eye on transaction levels for premium low-vol coals reaching $400/t cfr China this year. Freight is around $61-62/t for Panamax and $55/t for Cape. The Argus-assessed daily

China cfr for premium low-vol hard coking coal has been hitting new record highs daily, since the assessment was launched 10 years ago, reaching $367/t today. The premium low-vol China cfr price has increased to $59/tin the last month, the steepest price hike since October 2016, when weather disruptions to port loadings in Australia caused a spike.

German court annuls permit for newest coal plant A German court upheld a challenge to the planning permit of the country’s newest coal plant on Thursday, reinforcing the prospect of an early closure of Datteln 4 after just one year of operation.

The challenge was brought against the city of Datteln by private parties, the neighbouring city of Waltrop and Bund, the German chapter of environmental group Friends of the Earth.

They argued a second permit for the power plant, issued in 2014, continued to violate state planning laws after the administrative court in Muenster voided an original permit in 2009.

Accusations centred on the site’s ongoing inappropriate proximity to residential areas as well as contested estimates of the plant’s pollution levels and their likely impact on the surrounding region.

The court ruled the choice of location for the power plant did not meet relevant legal requirements. The defendants can appeal to a federal court.

Uniper’s Datteln 4 is likely to be the last coal plant Germany builds. It began operating in May 2020. Litigation delayed its launch by around nine years.

Uniper has flagged a willingness to close the plant early in return for compensation if Germany were to bring forward its coal phaseout to 2030. Some have suggested this will be necessary to comply with requirements under the Paris agreement goal to limit global warming to 1.5C. CCAI Monthly Newsletter August 2021

| 33

MONTHLY SUMMARY OF IMPORTED COAL & PETCOKE Indicative Imported Coal Price COAL South Africa South Africa Australia Indonesia Indonesia

(kcal/kg) 6000 NAR 5500 NAR 5500 NAR 5000 GAR 4200 GAR

Monthly Price - FOB USD 137.81 USD 110.75 USD 95.92 USD 102.97 USD 73.45

Monthly Price- FOB INR 10217 INR 8210 INR 7111 INR 7634 INR 5445

Monthly Change (USD) 15.46 12.41 8.79 10.09 6.46

Indicative Pet Coke Price PET COKE

Sulphur

Price

India-RIL(Ex-Ref.) Saudi Arabia (CIF)

-5% + 8.5%

INR 13914 INR 11751 ($159)

Monthly Change ($) INR 1131.00 16.50

USA (CIF)

- 6.5%

INR 12678 ($171)

7.00

Exchange Rate

Change (Monthly)

INR 74.14

-0.46

Indicative Coking Coal Price Current Month Monthly Change (USD)

Premium Low Vol FOB CFR China 226.34 366.00 18.79

54.50

HCC 64 MID Vol Semi Soft Low Vol PCI Mid Tier PCI MET COKE 62% CSR FOB Aus CFR China FOB Aus FOB Aus FOB Aus CFR India FOB N China 198.69 327.38 161.75 166.56 165.19 421.75 491.25 19.19

55.15

South African Coal News: *Mineral Resources and Energy Minister Gwede Mantashe has noted that coal is still an important part of South Africa’s energy mix. Mantashe said coal is currently one of the best-performing commodities in South African mining, and rail and ports are its obstacles.

Therefore the country is not going to be in the process of aborting the coal economy, because it is not desired in the future. *Eskom is not definitively turning its back on fossil fuels. But the South African state-owned company intends to close several of its coalfired power stations operating in the country.

The objective for the current decade is to reduce its coal-fired power generation capacity from 8000 to 12000 MW. This represents 30% of its current installed capacity. The company

34 | CCAI Monthly Newsletter August 2021

18.47

16.76

16.44

26.25

48.45

has an installed capacity of 42,000 MW. * The prospects for South African coal production remain strong for the coming decades. Strong international coal prices of around US$130/t have raised the sellers' expectations over exports, with most of South Africa’s export coal going to Pakistan in recent months while China is also opening up opportunities for imports from South Africa following its trade wrangling with Australia back in 2020. *South Africa, which is reliant on coal for nearly 80% of its power generation, is turning towards gas based power in order to cut its emission norms. Plants in the country are to use natural gas to produce at least a quarter of almost 12,000MW of additional power by 2030 while recent efforts to develop new coal projects in South Africa have been thwarted by court challenges or a lack of financing.

Australian Coal News:

*Record-high thermal coal prices and recordlow asset values are creating a complex conundrum for Australian coal producers, as they try to navigate how best to sustain their operations. Australian high-grade thermal coal prices are high which has been briefly seen during the mid-2008 spike, yet the mediumterm outlook is poor, given the increasing push to carbon neutrality. The situation has caused UK-Australian mining firm BHP to put a negative value on its thermal coal assets this year. *Four major Australian banks, The Commonwealth Bank, ANZ, Westpac, and National Australia Bank (NAB) are closing their books on fossil fuel financing. In response to shareholder pressure, they are increasing their commitments to sustainable lending and reducing their exposure to climate risk.

They have set various timelines to exit direct financing of thermal coal mining. *Prices have improved for Australian coking coal exports, as trade flows have adjusted to Beijing's restrictions on imports of Australian coal. The price distortion seen earlier this year has been resolved mostly. Based on the recovery, miners like US-Australian mining firm Coronado Coal expects to turn to a profit in July-December on strong sales to India from its Australian operations as a global recovery from the Covid-19 pandemic gains pace. * Australia has placed the key coal-producing regions of Newcastle and Hunter under a snap one-week lockdown to contain a Covid-19 outbreak, raising the prospect of disruptions to worker movements and coal supplies should the restrictions drag on. The heightened restriction of movement will eventually result in manpower shortages and have an impact on the coal output, which is already tight.

Indonesian

Coal

News:

*Indonesia has reversed coal export bans for three companies after they complied with domestic market obligations. After Indonesia suspended coal exports from 34 coal mining companies earlier this month after it said the companies failed to sell an obligatory 25 per

cent of their production to the domestic market as of now. Three companies, including PT Arutmin, a subsidiary of the country's top coal producer PT Bumi Resources, have been given their coal export licenses back. *Indonesian coal mining services and heavy equipment company United Tractors (UNTR) is planning to diversify into the downstream coal and other sectors through its subsidiary Pama. The company is looking at the possibility of expanding into the coal downstream and carbon capture technology sectors to protect its businesses against growing pressure against coal use, it said. *Indonesia has suspended coal exports from 34 coal mining companies it said failed to meet domestic market obligations between January and July this year. The energy ministry said that sanctions had been issued on some companies for violating market rules. Of the 34 companies listed in the document seen by CNBC Indonesia, four were members of the Indonesia Coal Miners Association (ICMA). *Indonesia set its coal benchmark price at the highest in at least a decade in August as demand from China, Japan and South Korea grew. Indonesia set its August coal benchmark price at $130.99 per tonne, 13.6% higher than July. This is the highest price since at least April 2010. The rise in global coal prices is largely attributed to stronger demand by countries like China, Japan and South Korea as they begin to recover from the coronavirus pandemic.

US Coal News:

*U.S coal shipments to China leaped more than 30-fold in the second quarter, as miners took further advantage of the Asian powerhouse’s prolonged trade dispute with Australia. Deliveries surpassed 2.4 million tonnes compared to just 75,000 tonnes a year earlier. The surge fueled a 53% jump to 20.6 million tonnes in U.S. coal exports, along with rebounds in India, Japan, Brazil and most other major markets following 2020 pandemic slowdowns. *As US coking coal prices continue to surge upwards, tight supply fundamentals and high Chinese domestic coking coal prices point to further upside despite weakness in the steel CCAI Monthly Newsletter August 2021

| 35

and iron ore markets. While Chinese mills have consistently indicated that US offers are coming above their expectations, the recent willingness to accept these offers, which have risen by as much as $10-20/t each time from the last done deal, indicates that these buyers have little alternative. *For the past four weeks, prices per short tonne of US coal have remained steady, as power companies reignite coal-fired plants and manufacturing sectors have ramped up leading to gains for three of largest coal producing companies in the US- Arch Resources, Peabody Energy and Natural Resource Partners. *US coal exports reached a two-year high in June, helped by a surge in shipments to China, India and Japan. A total 7.1mn metric tonnes of coal left US ports during the month, US Census data released today show. The last time exports were higher was in June 2019. Exports for the first half of 2021 also were at a two-year high of 42.8mn st. Thermal coal shipments for January-June stood at 20.8mn st, which was 46pc above first-half 2020 levels.

Pet Coke News: *Demand of petcoke in the Mediterranean region has gone up to a nearly six-year high in the week though long-standing issues kept spot demand low. The high price of US Gulf Coast petcoke – the main supplier to the Mediterranean region has caused the demand to be affected as the buyers had earlier been making the switch to more competitively priced thermal coal. *Export volume of US based fuel grade petcoke dropped to four months low as per data available till June '21. Meanwhile, calcined petcoke exports also at a four-month low.

China remained the top export market for US fuel-grade petcoke, totaling 3.25 million mt through June, with Mexico and Japan acquiring second and third place. * Petcoke users in India have not imported petcoke in the last few months even as the price of the alternative fuel rose, sources said. They continued to prefer US-origin high-CV coal as

36 | CCAI Monthly Newsletter August 2021

FOB prices continued to rise and freight prices also remained on the higher side. Prices offered

by Indian petcoke producers including Reliance Industries, Indian Oil have increased recently.

Shipping Update: *The amount of coal shipped from U.S. shores rose during the second quarter, buoyed by robust demand from international markets, particularly in Asia. Exports of U.S. coal jumped 52.5% year over year to 20.6 million tonnes in the June quarter from 13.5 million tonnes. Coal shipments from New Orleans, which exports a significant amount of Illinois Basin coal, surged in the second quarter to 2.8 million tonnes, 398.5% more than in the same quarter in 2020. *The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, jumped to its highest level in over a decade this week, powered by strong demand across vessel segments. The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, jumped about 3% or 93 points at 3,503, the highest level since mid-2010 while The capesize index rose 224 points, or 5.1%, to 4,608, a fresh record since May 12. *Australia’s largest coal export facility at Newcastle is positioned for a strong August, with the Newcastle Coal Infrastructure (NCIG) terminal returning to normal operations and the Port Waratah Coal Services (PWCS) terminals ramping up to full capacity. The NCIG shiploader, which has been out of operation since November, has resumed operations and potentially adding 1.25mn t/month in export capacity at the port. The PWCS terminals ramped up exports to 10.57mn t in July from 9.26mn t in June and from 6.86mn t in July 2020. *To support the shipping industry’s decarbonisation drive, the Baltic Exchange has calculated a set of indicative CO2 emissions figures and Energy Efficiency Operating Indicator (EEOI) reference values. Initially these cover the standard Baltic vessels trading on the various dry bulk routes for which we provide spot freight assessments.

PRODUCTION AND OFFTAKE PERFORMANCE OF CIL AND SUBSIDIARY COMPANIES COAL PRODUCTION (Figs in Mill Te) AUG'21

SUB CO.

APR'20 - AUG'21

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

2.10

2.70

-20.40

12.20

15.20

-20.00

BCCL

2.20

1.70

33.20

10.20

8.10

26.80

% ACTUAL GROWTH THIS YEAR

CCL

4.30

3.80

13.40

21.30

15.40

37.80

NCL

9.10

9.30

-1.70

43.90

44.30

-0.90

WCL

2.80

1.60

77.90

15.90

14.00

14.00

SECL

9.40

8.40

12.30

47.10

45.20

4.22

MCL

12.60

9.80

28.70

58.50

53.30

9.80

0.00

0.00

209.20

195.50

NEC CIL

0.00 42.60

37.20

14.60

7.00

OFFTAKE (Figs in Mill Te) AUG'21

SUB CO. ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

APR'20 - AUG'21 % ACTUAL GROWTH THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

2.40

3.00

-19.90

16.00

16.30

-1.40

BCCL

2.80

2.30

21.20

13.00

8.00

63.30

CCL

5.00

5.00

0.60

28.60

21.10

35.70

NCL

9.20

9.20

-0.10

47.60

40.70

16.90

WCL

4.30

3.00

46.20

24.60

15.30

60.90

SECL

10.80

10.40

3.60

62.30

51.30

21.40

MCL

14.10

11.50

22.40

67.20

55.80

20.40

0.00

0.10

48.60

44.40

9.50

259.30

208.50

NEC CIL

0.00

24.40

CCAI Monthly Newsletter August 2021

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Note

38 | CCAI Monthly Newsletter August 2021

CCAI Monthly Newsletter August 2021

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