CCAI Newsletter Feb-20 issue

February 2020 Price: 40/W H E R E S E R V I C E A N D D E D I C AT I O N J O I N H A N D S

Inside: Coal quality conformance in India's coal supply chain by Srikanta Kumar Naik.

Vol. XLVIII No. 11 Published on : 28.02.2020

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From the Editor’s Desk

As India’s coal sector braces itself for a new dawn of bett er production, greater investment and smarter tech nologies following the introdu ction of the historic and much anticipated ‘com mercial mining’ in the countr y, the industry has sought easier norms for com mercial coal blocks includin g lesser payment and more lenient requirement of minimum production.

Since the announcement ma de last month, a number of large Indian coalconsuming companies plannin g to enter commercial coal min ing have asked the government to bundle manda tory approvals including env ironmental and forest clearance, before putting up blocks for auction.

With the government plannin g to hold auctions of the first tranche of commercial coal blocks before the end of the current fiscal, the compan ies have requested the Centre to offer large coal bloc ks rather than truncated sma ll ones entailing a number of mining projects. The potential bidders also want upf ront payment to be halved and computed on the basis of extractable reserve s in a block and not on the basis the total reserve s estimate.

Another long term suggestion is to delimit the blocks and intr oduce ‘open acreage system’, as in the oil and gas sector, which will allow the bidd ers to decide on the size and kind of mines they bid for.

Amid the growing discontent against the coal fired genera tions and its adverse impact on climate change acr oss the globe, a number of major companies like ANZ, BNP Paribas, JP Morgan and mining majors like Rio Trino and Glencore are shying away from the sect or.

However in India, coal will rem ain in the mainstay in coming years despite the country’s ambitious renewable energy goals as it still provide s more than half of India’s commercial primary ene rgy. According to experts, thr owing open the coal sector for 100 percent foreign direct investment will provide it a fresh lease of life.

Meanwhile, national miner Coa l India has significantly ramped up its production since the beginning of the new year after suffering a major slum p due to prolonged monsoon earlier and is expecte d to exceed last year production figures of 606.89 million tonnes (MT) in FY 201 8-19, CIL officials said.

Hopeful about ramping up Ind ia’s coal production, Union Coa l Minister Prahlad Joshi claimed that the countr y is expected to stop importi ng thermal coal from the financial year 2023-24 as steps are being taken to achieve CIL’s target of producing 1 billion tonne coa l by that time.

Country’s electricity supply also rose by 3.25 per cent (106.3 6 billion units) during the month of January after five straight months of decline. Nea rly 40, 000 MW of upcoming plants in India are currently under various stag es of construction, and are expected to be commission ed by 2022.

In a bid to keep its pledge taken in the Paris Accord on Climate Change to significantly reduce its carbon emission intensity India has put major thrust on renewables. The government has set a target to install 175 GW of renewable energy capacity in the countr y by the year 2022, which incl udes 100 GW from solar, 60 GW from wind, 10 GW from biomass and 5 GW from small hydro power.

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Content 06

Vol. XLVIII No. 11 February 2020

Article: Coal quality conformance in India's coal supply chain.

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

Srikanta Kumar Naik Coal Supply-Chain Professional

4, India Exchange Place - 7th Floor Kolkata - 700 001 Landline : +91 33 22304488 / 22621516 E-mail : sec.ccai@gmail.com Website : www.ccai.co.in Editor : Subhasri Nandi Annual Subscription Rs. 400/(including postage) MO/DD to be made in favour of “Coal Consumers’ Association of India”

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Consumers' Page

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Power

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Domestic

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Global

CCAI do not necessarily share or support the views expressed in this Publication.

29 Overall Domestic Coal Scenario 30 Monthly Summary Of Domestic Coal 32 Monthly Summary Of Imported Coal &Petcoke

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Production And Offtake Performance Of Cil And Subsidiary Companies

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COAL-QUALITY CONFORMANCE IN INDIA’S COAL SUPPLY CHAIN Srikanta Kumar Naik Coal Supply-Chain Professional Disclaimer: Opinions and recommendations in this article are exclusively of the author and not of any other individual or institution.

Coal is one of the most important sources of energy for the country and a significant contributor to its economic development. Coal production and use in India has the highest backward and forward linkages with mining, power generation, railways, steel, fertiliser, cement, transport and other industries. Coal is the mainstay for commercial energy catering almost 60% of the energy demand which in turn fuel the growth engine of the economy. Around 75% of the entire power generated in the country is coal based. The National Coal Inventory places the hard coal resources at 319.02 Billion Tonnes up to 1200-meter depth in 68 different coalfields as on 01.04.2018.

Indian users mostly use domestically produced coal. Imported coal accounts for only 16% of all purchases by volume (weight).

183 Million Tonnes of non-coking coal (which is 20% of the total demand for non-coking coal) was imported in last fiscal due to high demand supply gap of coal in the

country. The domestic production is dominated by the subsidiaries of Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL). Other producers produce only 6% of the domestic coal by volume. Presently the coal market is dominated by Public Sector CIL and SCCL. More than 50% of total CIL coal production is from two subsidiaries, SECL and MCL. "Coal quality" is the term used to refer to the properties and characteristics of coal that influence its behaviour and use. In a coal-supply value-chain, consumers are concerned on the flow of quality.

In this changed ambiance of competitiveness and efficiency enhancement, quality conformance of the coal assumes utmost significance. The matter is not simply confined to commercial transactions only, but has high direct relevance to the efficiency of end use.

Disputes regarding low grade supply have been an integral part of India’s domestic coal scenario.

Consumers are facing slippages

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in quality from some of the delivery points. It is noteworthy that when the price of coal is based on the grade//quality, the buyer has right to get the grade for which he is paying the price.

The significance of the problem of grade-slippages is very high for consumers in terms of financial losses due to less quantity realization of Annual Contracted Quantity (ACQ) under Fuel Supply Agreement (FSA), non-refund of statutory levies (such as Royalty, DMF & MMDR charges) in creditnotes, poor-utilization of rail/road transportation modes (wagons & trucks), blockage of working-capital due to prolonged delay in issuance of credit-notes.Coal quality from a single mine can vary over time and thus revision related to its gradation have to be made. The variation is more predominant in India on account of its formation and origin.

Under GCV based grading system of CIL which came in to effect from January 2012, the bands are classified in to 17 bands of 300 Kcal/ Kg ranging between 2200 to 7000 Kcal/Kg. To address the concerns of consumers regarding coal quality, third party sampling procedure was put in place. Tripartite agreements were signed between Supplier (coal companies), Purchaser and third party sampling agency for sampling and testing of coal at the loading end. This process is termed as “Third Party Sampling TPS”.Procedure for sampling and analysis of quality of coal is of great significance to power producers. CIL, being the dominant supplier of coal in the market, is required to take into consideration the quality related issue fairly and in a non-discriminatory manner.

“AS-IS”Scenario & Way-Forward in achieving Coal-Quality Conformance: Particulars % Sample collection in Rail-dispatch

Issues/Challenges in “AS-IS” Situation

Samples are collected from 6 wagons (as per FSA), representing only ~ 10% of the dispatch quantity, failing towards sample representativeness % Sample collection in Road-dispatch Samples are being collected from every 8thtruck(as per FSA), representing only ~13% of the dispatch-quantity, failing towards sample-representativeness Use of Random Table in sample colSamples are being collected from lection in Road-mode dispatches every 8thtruck as per FSA Sample Preparation & Storage Manual sample preparation leads to risk of sample contamination, scope for human error, Inadequate sample storage facility Sample Coding & De-coding ModaliManual coding& de-coding process ties leads to potential human error during code allocation Inordinate delay in sending sample for Current cycle time is as high as 6-12 referee analysis & issuance of credit/ months (more than 2 years in some debit notes of the cases)to get the credit/debit notes from the date of dispatch due to huge delay in getting referee analysis reports& subsequent reconciliation between consumer & coal-companies

Way-Forward aligned with Best Practices Samples should be collected from 15 wagons (25%) in a rake as per BIS specifications, IS:436, Part I, Section I, 1964 Sample should be collected from at least 25-30% of the trucks so as to increase sample- representativeness

Sample should be collected from Trucks with the use of random table Mechanical sample preparation & adequate sample storage room under surveillance of CCTV

System-based coding & de-coding for effective masking & better process accuracy Empanelment more number ofNABL accreditedthird party agencies having skilled samplers&Govt. Labs by Apex Committee for referee-analysis to cater the high volume, Interest claim for delay in issuance of credit/debit notes after stipulated timeline of receipt of third-party/referee reports, in order to have timely reconciliation between consumer & coal-companies Standard Operating Procedures (SOP) Inadequate SOP resulting in ineffecComprehensive SOP with clearly tive implementation of third party defined activities, timelines, responsisampling facility bilities, documentations etc.

IT-Application/Automation Manual interventions resulting in Automation in Data Management & scope of errors, poor-visualization & Reporting for Transparency & Reduced accurateness of data Risk of Error, System generated reports, Minimum human interventions Penalty Provision for Supply of UnThere is no provision in current FSA Stricter Penalty Provisions should be graded Coal (Below G-17 Grade/Below for Non-Power (NRS) for issuance of incorporated in FSA for Non-Regulated 2201 EGCV) credit notes for supply of Un-graded Sector viz. Purchaser shall limit the coal payment of cost of coal to @ INR, 1 per tonne along with statutory levies (in parlance with FSA Provisions for Power Consumers in Regulated Sector) Grade-Slippages Continuous & significant grade-slipRevision of Grades of Mines/Siding pages from some of the mines/siding supplying coal with continuous & resulting in lesser quantity realization, significant grade-slippages financial losses due to non-refund of Royalty, DMF & MMDR charges in credit-notes Refund of Royalty, DMF & MMDR Substantial Financial Losses (Rs. Provision should be made for refund charges in credit-notes 20-80 per tonne) due to non-refund of Royalty, DMF & MMDR charges in of Royalty, DMF & MMDR charges credit notes in case of grade slippages in Credit Notes in case of gradeslippages Implementation of GCV (Kcal/Kg) Kept in abeyance, still following GCV(Kcal/Kg) based pricing is worldbased pricing system 17-quality grades, each grade comwide standard practice prise of 300 band-points

CCAI Monthly Newsletter February 2020

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CONSUMERS’ PAGE Present Coal Scenario Coal India has produced 66.26 million tonnes of coal in February 2020 compared to 58.05 million tonnes in the same month of last year, a growth of 14.2%. For the period of April 2019 to February 2020, total coal production stood lower by 1.9% at 517.78 million tonnes compared to 527.69 million tonnes in the corresponding period of previous year.

Coal offtake stood at 54.97 million tonnes in February 2020 compared to 51.46 million tonnes in same month of 2019, a growth of 6.8%. For the period of April 2019 to February 2020, total coal offtake stood lower by 3.7% at 528.27 million tonnes compared to 548.53 million tonnes in the corresponding period of previous year

Consumers’ Concern 1. Coal Stock Position Power Plants are having healthy coal stock position at present. Due to muted demand of coal from thermal power stations, CIL has been able to bring down the accumulated arrear rakes of nonpower sector consumers in the ongoing fiscal.

2. Non-receipt of Referee Analysis Report, reconciliation and credit notes from different CIL Subsidiaries and request for formulation of a suitable policy for all Subsidiaries

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In spite of depositing the required amount to the Referee Laboratory for analysing the samples consumers have challenged, they have not received Referee Analysis Reports since long. Due to non-receipt of these reports entire reconciliation procedure is held up at different Subsidiary

Coal Companies resulting in enormous delay in issuance of credit notes by the Subsidiaries.

CIL has been requested for formulation of a suitable policy so that such situation does not arise in future.

to the Government

6. Request for inter group transfer of coal for CPPs Interplant transfer of coal has been allowed initially for the State Gencos and later on for Independent Power Producers (IPPs).

3. Non refund of Royalty, DMF, NMET and differential GST amount in Credit Consumers in the CPP Sector have requested Notes Consumers are paying on the basis of Debit Notes if the grades of coal are found higher than the billed grades due to differential amount in basic price including Royalty, DMF, NMET and GST. If the analysed grade is found less than the billed grade, Credit Notes are only issued for difference in basic price and other tax components like Royalty, DMF, NMET and Differential GST amounts are not refunded.

Consumers are requesting for a solution of the same since long.

4. Compensation for the large size Stones supplied with Coal There is a provision under FSA (IPPs) signed with Coal Companies to provide compensation against stones (>250mm) supplied with coal through a joint inspection. This compensation should be restricted upto 0.75% of the annual coal supplied as per the Agreement. The FSA condition is also restricted only to the coal supplied through RAIL mode whereas many customers are sourcing coal through Road mode.

Consumers have requested for modification of FSA documents.

5. Delay in Royalty Payment by Subsidiaries to the State Government Coal Companies except MCL are taking almost 3-4 days to make royalty payment to the Government after the receipt of DOs by the consumers.

Hence, actual lifting period is reducing to 41-42 days instead of 45 days.

Therefore, consumers have requested to follow the similar system like MCL where royalty is immediately paid/prepaid through online system

for the same facility to be extended for Captive Power Producers (CPPs) as well in order to reduce the cost of power generation, ensure coal availability round the clock at the plants and to reduce consumption of imported coal.

7. Performance Incentive Invoices issued by SECL for pending rakes Consumers in the CPP sector have stated that they are in receipt of Performance Incentive (PI) invoice from SECL based on assumed quantity to be delivered against pending allotments for the year 2018-19. As per the terms of FSA, PI is to be charged by the coal company on actual delivered quantity.

Therefore, consumers have requested SECL to issue fresh PI Invoices based on actual number of rakes delivered against that Financial Year.

8. Grade Slippage from DBCP siding of ECL The quality analysis reports sent by the consumers show that the amount grade slippage observed in the DBCP siding is in the range of minimum 200 GCV (February’19) to the maximum 1300 GCV (August’19). According to the latest data from one of the consumers, the received coal grade in January, 2020 is lower by around 350 GCV compared to the billed grade.

Therefore, consumers have requested to supply coal as per billed GCV from DBCP siding.

9. Grade slippage from Road sales Points of Lakhanpur Mines and BOCM Siding Consumers in the Non-power Sector are consistently receiving inferior quality of coal mixed with shales from road sales dispatch points of CCAI Monthly Newsletter February 2020

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Lakhanpur mines and BOCM sidings of MCL from last two months. Quality report of received coal by the consumers showed that 41% of the total coal supplied to the consumers are below declared grade (G14) as stated by the consumers.

Therefore, consumers have requested for taking necessary action so that they may receive coal as per billed grade from road sales dispatch points of Lakhanpur mines and BOCM sidings.

10. Inferior quality of coal from Chirimiri, CPHC & Govinda sidings of SECL consumers, procuring coal from SECL, are adversely affected as quality of coal supplies from Chirimiri, CPHC and Govinda sidings is grossly inferior in nature, contaminated with boulders, mud, shale and stones. Most of the consumers were compelled to cancel their indents from Chirimiri siding due to the same.

Under such circumstances, consumers have requested to arrange shifting of their remaining quantities to other secondary source.

11. Request to resume rake despatch from Junadih siding and load adequate rakes from Korba area of SECL Though overall rake materialization has improved recently but there has been no rake despatch from Junadih siding of Korba area of SECL to NRS FSA consumers since July 2019.

Another concern is that the rake materialization from other sidings of SECL Korba area is not sufficient to clear the backlog within the FSA tenure.

Therefore, consumers have requested to resume rake despatch from Junadih siding and load adequate rakes from Korba area of SECL to liquidate backlog rakes of FSA consumers of Non-regulated Sector.

— RAILWAYS — 12. Cancellation of rakes due to non-availability of coal from SECL & WCL and charging of wagon registration fees by Railways

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Number of rakes to the industries (including CPPs) have been cancelled from different Sidings of SECL and WCL as the loading did not commence within stipulated time due to nonavailability of coal. Railways are also charging wagon registration fees from the consumers for cancellation of these rakes.

Consumers have requested for formulating a suitable policy so that the cancelled rakes are revalidated and seniority of such long awaited rakes do not get lapsed. Wagon registration fees should not be charged by the Central Railways as well for no fault at the consumers’ end.

13. Shortage of coal quantity in rakes Consumers both in the power and non-power sectors have witnessed shortage of 2 to 6% coal quantity in the rakes received by them from almost all the CIL Subsidiaries. In a few rakes, shortages have gone up to even higher. Authorities should intervene into the matter in order to resolve it.

Earlier OKSR / NKCR - CPH-BSP-USL-APR-NKJJBP-ET (785 KMS) was not electrified hence the same was not used. Now since the route is electrified and some rakes are routed through this route, the consumers have requested for application of the same for all booking.

14. Recurrence of overloading since July-August 2019 Consumers are facing problem due to overloading in rakes from different sidings since mid of 2019. This is causing serious unloading problem at the plant site since the wagon cannot be clamped in the wagon tippler for unloading due to increased height of coal heaps.

Moreover, such overloading is also causing financial loss to the consumers for no fault on their part. Rakes are being overloaded even in the tune of more than 100 million tonne per rake resulting in huge punitive charges levied by Railways for overloading of wagons.

Consumers have requested for taking necessary action so that such overloading in rakes can be avoided.

CCAI CCAIMonthly MonthlyNewsletter NewsletterNovember February 2019 2020

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POWER India's electricity supply rises 3.25% in Jan after 5 months of decline India's electricity supply rose 3.25 per cent during the month of January after five straight months of decline, provisional government data showed, in a relief for power producers.

Power supply rose to 106.36 billion units in January, up from 103.01 billion units last year, an analysis of daily load despatch data from staterun Power System Operation Corp Ltd (POSOCO) showed.

India's Central Electricity Authority (CEA), an arm of the federal power ministry, is expected to release official data on power demand later this month. POSOCO releases provisional load despatch data every day.

Higher electricity supply could mean a rise in power demand, as electricity deficit in India is marginal. Electricity demand is seen by econo-

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mists as an important indicator of industrial output and a deceleration could point to a further slowdown.

However, the potential rise would be from a low base, as electricity demand grew at the slowest pace in January 2019 in nearly two years, CEA data showed.

India's annual electricity demand in 2019 grew at its slowest pace in six years. Electricity supply fell 0.4 per cent in December, 4.2 per cent in November and 12.8 per cent in October, according to the CEA.

‘Award of fresh coal linkages positive for the power sector’ The Centre’s efforts to award coal linkages under its Shakti policy to independent power projects having long-term PPAs on an auction basis will have a positive impact on coal-based power plants, rating agency ICRA has said.

Sabyasachi Majumdar, Group Head and Senior Vice-President, ICRA, said: “On the positive side, the availability of coal linkage would enable the plants to declare normative availability, allowing recovery of fixed charges and improve merit order position. The winning bidders can offset the discount offered in tariff to some extent through efficiency gains in station heat rate and auxiliary consumption. Further, the higher discount in tariff would be positive for the distribution utilities.”

“On the flip side, the increase in base discount is a negative for coal-based power projects, given that most of the coal-based assets without fuel linkages are financially stressed. They are also likely to be facing under-recoveries in fixed charges under their PPAs because of significant increase in project capital cost and fine tariffs quoted under the competitive bidding for securing long-term PPAs.”

Power industry hails proposal for smart prepaid metering across the country The proposal for smart prepaid metering across the country in three years, announced in the Union Budget last week, has been hailed by the power industry. But the initiative is not new. The power ministry has been planning it for the past two years, but with limited success.

In her Budget speech on February 1, Nirmala Sitharaman said, “The ministry intends to promote smart metering. I urge all states and Union territories to replace conventional energy meters with prepaid smart meters in the next three years,” Responding to the announcement in the Budget, the Indian Electrical and Electronics Manufacturers Association (IEEMA) said this is a positive step and the industry will fully cooperate with the government in meeting the target.

“Installing smart prepaid meters will improve the cash flows and revenue of discoms. smart prepaid meters come data and cybersecurity risks.

Hence, indigenous products should be given priority,” said Sunil Mishra, director general, IEEMA.

Paris pact: 29 power plants to shut by 2022 to meet international environmental commitments As many as 29 power plants in the country with a combined capacity of about 12,000 mega watt (MW) will require to be shut down by early 2022 in order to ensure that New Delhi meets its international environmental commitments. A bulk of these power plants of close to 25 years of age are run by state governments, while a few are operated by Central government-owned Damodar Valley Corporation and private companies namely CESC, Torrent Power, Ind Barath and Gupta Energy.

Union finance minister Nirmala Sitharaman said that since there are old thermal power plants with high carbon emission levels, “utilities running them would be advised to close them, if their emission is above the pre-set norms”.

Shutting down these units is not expected to have any major power supply disruptions as the current installed generation capacity is nearly double the demand level.

On top of that, nearly 40,000 MW of upcoming plants are currently under various stages of construction, and are expected to be commissioned by 2022.

In an earlier estimate by the power ministry, 33 power plants with a capacity of 16,789 MW were seen to be shutting down due to scarcity of space. This list also included units from four major plants run by NTPC. However, some units from this list with more than 5,000 MW capacity have decided to instal pollution reducing equipment which will fit inside the plants with newer technologies.

Currently, as much as 1,61,402 MW of generation capacities are installing FGDs and another 64,525 MW are in setting up ESPs in a phased manner.

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Govt invites Germany’s state-run KfW to fund transmission projects Indian government representatives on Wednesday met representatives of Germany’s state-run bank KfW to discuss the financing of new transmission projects being built across the country for upcoming renewable energy projects.

KfW has already promised to loan 500 million euros towards the ‘Green Energy Corridor’ project, and till September, 2019, it had already disbursed 206 million euros to that end. The development bank has also disbursed 475 million euros to state-run transmission company Power Grid Corporation of India for the additional 3,200 circuit kilometer (ckt-km) Gujarat-Rajasthan-Panjab and Tamilnadu-Andhra Pradesh transmission corridors.

“Anand Kumar, the secretary of the ministry of new and renewable energy (MNRE), held discussions with the delegation from KfW for financing Green Energy Corridor to project for establishing new transmission systems in Uttar Pradesh, Himachal Pradesh and Ladakh,” MNRE’s official handle said on Twitter on Wednesday evening.

Coal stocks at power plants increase 77% to 34.25 MT: Pralhad Joshi Coal stocks at power plants peaked to 34.25 million tonnes on January 26, equivalent to 19 days’ consumption, and up by 77% as against 19.36 million tonnes, equivalent to 12 days’ consumption at the same time last year.

Thrust has been also given to augment coal supplies to non-power sector by holding regular auction for coal linkages where the consumers have been given the flexibility to choose nearest mine, quality including grade and size. To facilitate easy availability of coal to all the sectors, coal companies are also offering increased coal under spot and exclusive e-auction.” Coal minister Pralhad Joshi said.

Power houses in close vicinity of the coalfields

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were offered coal for enhanced lifting through captive mode like belt piped conveyor, merrygoRound (MGR) and road modes. For augmenting supplies, power houses were advised to move coal through goods sheds by road-cumrail mode.

Efforts were made to enhance supplies through captive modes of transport like MGR, conveyor belts and ropeways. Supplies of coal to power houses through all modes were prioritized.

Tata Power to set up 700 EV charging stations by 2021: 300 stations to be ready by March 2020 Tata Power is planning to increase its network of electric vehicle charging stations to 700 by next year, a top company official said. The company has already installed 100 fast-charging stations in various cities, including Delhi, Mumbai, Bengaluru, Pune and Hyderabad, which it plans to take to 300 by March 2020.

The government's decision to lower the GST rate on EVs to five per cent from 12 per cent is expected to make EVs affordable for consumers with additional income-tax deduction. Company CEO and MD Praveer Sinha said the company is not just focusing on public spaces but will also provide home EV charging stations.

The company is already in talks with metro rail authorities and municipal corporations for setting up EV charging stations. Besides, it will set up charging stations at Tata Group-owned outlets such as Croma, WestSide, Titan watch showroom, and Indian Hotels, among others.

Tata Power has also signed MoUs for setting up commercial EV charging stations at HPCL, IOCL, and IGL retail outlets.

Renewable Energy capacity of 7,592 MW commissioned in the year 2019-20

Renewable Energy capacity of 7,591.99 MW has been commissioned in the year 2019-20 till December 2019, said Minister of New and Renewable Energy R. K. Singh. another 34,160 MW of RE capacity is under implementation, Singh said. Most of the renewable energy projects connected through grids are being implemented by private sector companies.

Singh did not disclose the exact investment by the private companies but gave an estimate of Rs. 36,729.49 crore, based on the capital costs per MW of RE generation.

The same figure for 2018-19 comes in nearly 10% higher at Rs. 40,459.99 crore.

Through short-term securitised loans to distribution companies (DISCOMs), the Indian Renewable Energy Development Agency (IREDA) has disbursed Rs. 1,200 crore to Andhra Pradesh, Rs. 900 crore to Telangana, and Rs. 450 crore to Tamil Nadu at preferential rates.

Non-payment of dues to DISCOMs has been the renewable sector’s biggest worry. The government launched the UDAY scheme in hopes to improve the financial and operational efficiencies of DISCOMs.

Renewables to contribute 21 per cent of electricity demand in India in 2021-22: RK Singh Renewable energy sources are expected to account for around 21 per cent of electricity demand in 2021-22, Power Minister R K Singh said.

The major steps being taken by the government to meet the targets of renewable energy in the country include permitting Foreign Direct Investment (FDI) up to 100 per cent under the automatic route, strengthening of Power Purchase Agreements(PPAs) and mandating requirement of Letter of Credit(LC) as payment security mechanism by distribution licensees for ensuring timely payments to renewable energy generators.

The government has set a target to install 175 GW of renewable energy capacity in the country by the year 2022. This includes 100 GW from solar, 60 GW from wind, 10 GW from biomass and 5 GW from small hydro power.

Ceiling tariff in wind energy tenders to go In a move that could revive participation in wind bidding in a big way, the ministry of new and renewable energy (MNRE) plans to stop imposing ceiling tariffs on wind tenders, according to sources close to the development.

Recent wind and solar auctions conducted by the Solar Energy Corporation of India (SECI), an arm of MNRE, have all set ‘ceiling tariffs’ above which bids are not accepted.

Removal of these ceilings has been a long standing demand of the industry. Developers have been protesting against them, maintaining that they are too low and are thereby restricting auction participation, and in turn the growth of renewable energy in the country.

"This will definitely encourage participation. The ceiling tariffs in tenders have been unviable so far, they will at least become viable," a leading developer said, requesting anonymity.

"There is a plan to stop setting ceiling tariffs starting from SECI's 10th tranche of wind auctions," said a source close to the development.

SECI's most recent wind tender (tranche 9) has been postponed five times because of tepid participation. The ceiling tariff for it was Rs 2.93 per unit.

BHEL commissions two hydro power generating units in Arunachal Pradesh State-owned BHEL said it has commissioned two units of Kameng Hydroelectric Project (HEP) in Arunachal Pradesh. Kameng HEP is

CCAI Monthly Newsletter February 2020

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a run-of-the river scheme which will utilise the flow from Bichom and Tenga rivers.

"Bharat Heavy Electricals Ltd (BHEL) has successfully commissioned two units of 4x150 mw Kameng Hydroelectric Project in Arunachal Pradesh," the state-owned company said, adding that "this is the largest unit rating (150 mw) for hydro power generating sets in the state of Arunachal Pradesh."

Being developed by North Eastern Electric Power Corporation Ltd (NEEPCO), the greenfield hydro project is located in West Kameng district of Arunachal Pradesh.

BHEL's scope in the project comprises design, manufacture, supply, installation and commissioning of four 150 mw vertical francis turbines and matching synchronous generators, transformers, control and monitoring (SCADA) system along with associated auxiliaries.

No customs duty on imported solar cells and modules, says ministry The Ministry of New and Renewable Energy (MNRE) clarified that the basic customs duty (BCD) on imported solar cells and modules would remain nil in the current financial year.

In this year's Union Budget, two new item heads were inducted in the customs duty bracket which pertained to solar cells and modules. The Budget proposed a 20 per cent BCD on solar equipment. However, these items will continue at ‘nil’ BCD,” according to the budget speech.

MNRE in its notice issued on Thursday said solar will not attract any BCD. “Though the tariff rate on the new tariff items has been increased from nil to 20 per cent, the BCD on (solar cells, not assembled) and (solar cells, assembled in modules or made into panels), remains nil,” said the notice.

There is already a safeguard duty of 15 per cent levied on imported solar cells and modules, especially those coming from China.

16 | CCAI Monthly Newsletter February 2020

Sector executives said if BCD is imposed, the cost of imported solar equipment will go up in the range of 35-40 per cent. This likely could lead to solar tariff going up by to Rs 3 per unit, said an executive. Solar modules constitute 80 per cent of the cost of a solar power project.

India’s solar power generation capacity: 31,397 megawatt, India’s solar cells manufacturing capacity: 3,164 megawatt/annually, India’s solar module manufacturing capacity: 8,000 megawatt/annually, Solar cells import to India (201920 till yet) by value: $1.4 million.

Centre to install 11,000-cr renewable power transmission project in Ladakh Centre is planning to install a 900-km power transmission link to supply the energy produced by the large solar and wind energy projects in Ladakh, said Anand Kumar, Secretary in the Union Ministry of New and Renewable Energy, in a press release.

The power link will initially transfer around 2,500 megawatts (MW) and will be developed in the third phase of the green energy corridors to help tap Ladakh’s solar energy potential of 40 gigawatts (GW). The move is a part of India’s strategy to tap the unrealized potential of the two newly formed Union territories – Jammu and Kashmir, and Ladakh.

The Rs. 11,000-crore project seeks to resolve grid connectivity problems faced by the region.

This is also expected to attract investments for setting up green energy projects in the cold desert region. Through the project, the Government aims to fill the power deficit in the region, especially during winters. The surplus will be supplied to different parts of the country.

According to a study conducted by the stateowned Power Grid Corporation, Ladakh, Thar, Rann of Kutch, Lahaul, and Spiti have the potential to generate 315.7 gigawatts (GW) of solar and wind power and will require investments of ₹43.7 trillion over the next 30 years to 2050.

With Best Compliments From:

Sharda Ma

( )

COAL MERCHANTS, IMPORTERS & HANDLING AGENTS INDIA SOUTH AFRICA INDONESIA SINGAPORE HONG KONG NIGERIA

UGF 1& 2, Kanchenjunga Building, 18 Barakhamba Road, New Delhi-110001, India P : +91 11 23354046/47 F : +91-11-23354047 E : corporate@shardamaa.com W : www.shardamaa.com

DOMESTIC Coal India planning to tap nonpower sectors for incremental coal Mining major Coal India Ltd is keen to tap nonpower consumers to feed its incremental production post the monsoon period, a senior company official has said.

The miner is looking to ramp up production to meet its targets for the current fiscal at a time when the economic slowdown is impacting demand for the dry fuel by power plants.

Coal despatch to the power sector in the first nine months of the current fiscal was down by 8.1 per cent at 334.27 million tonnes as against the figure in the corresponding period a year ago.

In December 2019 alone, the decline was close to 2 per cent, officials said.

18 | CCAI Monthly Newsletter February 2020

Coal alloted for spot e-auction, however, was 5.07 million tonnes in December, nearly a 50per cent jump over the same month a year ago.

The miner is banking on sectors like cement and sponge iron for incremental coal.

Coal India had set a production target of 660 million tonnes for 2019-20, but company officials said the figure is likely to be in the range of 625-635 million tonnes.

Coal India Exploration arm ties up with IIT-KGP for coal analysis Central Mine Planning & Design Institute Limited (CMPDIL) has roped in Indian Institute of Technology, Kharagpur (IIT-KGP) for carrying out analysis of coal samples from different exploration camps.

On Saturday, CMPDIL & IIT-KGP signed a mem-

orandum of understanding for a period of two years wherein CMPDI will entrust IIT-KGP with 3000 m of coal-cores annually to carry out different analytical tests to determine the quality of coal samples for incorporating in geological reports.

ray Energy Corporation (MEC), America’s largest underground coal mining company, has filed for bankruptcy.Partha Bhattacharyya, former chairman, Coal India, said large miners are facing pressure to quit coal and be more environmentfriendly.

Additionally, the center will pay CMPDIL Rs 1,240 crore between 2019 and 2021 for expediting exploration on blocks that would be auctioned to commercial coal miners.

A senior Coal India executive said the company is finding it difficult to find bankers to assess foreign assets as they are shying away from the sector. “Early last year when Coal India invited global tenders, merchant bankers like Goldman Sachs and Merrill Lynch had already exited the dry fuel segment.”

This year CMPDIL Is expected to add 16 billion tonnes of proven reserves to the national resource base this year by March 2020.

Proven resources of coal in India have increased from 21 billion tonne in 1976 to 156 billion tonnes in 2019 which is mainly due the efforts of CMPDI. Six billion tonnes of coal were added to the proven category through preparation of 12 geological reports till December, 2019 and it is estimated that another 10 billion tonnes of coal will be added to this category covering an area of about 350 square kilometers during 2019-20.

Foreign companies likely to skip commercial coal block auctions Commercial coal block auctions are likely to receive a lukewarm response from foreign players as big companies are losing interest in a sector which has been widely seen as polluting and avoided by top banks and financial investors, experts said.

The Centre is in the process of inviting global players for commercial mining, following 100% foreign direct investment in the sector.

Mining major Rio Tinto sold off its last coal assets in Queensland, Australia in 2018, while BHP recently said it would exit coal if presented with opportunities. The company operates mines in Australia and Colombia.

Anglo American, a large British mining company, has decided to reduce coal production over the next two years. Australia’s largest miner Glencore said in a statement that it aims to limit coal output capacity broadly to current levels. Mur-

Players like ANZ, BNP Paribas, JP Morgan joined this list later during the year,” the executive said

India plans to raise coal imports from US, move to deepen bilateral energy partnership In what could deepen Indo-US bilateral energy partnership, New Delhi is planning to increase import of coal from the US. India has a shortage of coking coal, used for steel production.

“We are having business and policy-level interactions for long-term engagement with the US for sourcing coking coal,” steel and petroleum minister Dharmendra Pradhan said.

Given India’s plan to raise domestic steel output from the current level of 140 million tonne (MT) to 300 MT by 2030, the requirement of coking coal is seen to rise 190% to 175 MT. Pradhan asserted that though the country is gradually moving towards increasing the share of gas and renewables in the energy basket, it will continue to use coal due to its affordability.

In the first nine months of this fiscal year, the country imported 52.5 MT (11.2% of total requirement) of thermal coal for producing electricity.

Australia is the country’s largest coking coal supplier, with supplies of $7.4 billion — 72% of India’s coking coal import by value — of the metallurgical fuel in FY19. In FY19, India imported 4.1 MT of coking coal from the US, worth $850 million.

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Open acreage coal mining will create level-playing field for investors Opening the coal sector to private and foreign participation, a landmark reform initiated by the Narendra Modi government, marked the end of coal nationalisation and dubious captive mining era.

In future, blocks will be awarded without any end-use restrictions.

However, this may not trigger a rush for investments in the coal sector.

This is partly because, India was too late in opening the sector and, thereby, missed the era of coal rush that ended last decade.

During that period, ground conditions for mining became more challenging in India, due to environmental and land acquisition-related concerns, impacting the potential return on investment.

To add to the problems, the government is in the mood to auction the same blocks that were once created for captive use. This might help speed up the process.

But on the flip side, these blocks are too small to attract global miners which have access to modern technology. A better option would be to delimit the blocks and introduce open acreage system, as in the oil and gas sector, allowing bidders to decide on the size and kind of mines.

For long-term gains, the government should insist on introducing modern practices, which are clearly lacking in the coal sector.

India aims to stop thermal coal imports from FY 2023-24 India will stop importing thermal coal from the financial year 2023-24 as part of a perspective plan for the coal sector, union minister of coal and mines Prahlad Joshi stated at a brainstorming session at Kevadia in Gujarat.

The minister said that various ways and means were discussed with key stakeholders to achieve

20 | CCAI Monthly Newsletter February 2020

1 billion tonne coal production target by Coal India Limited (CIL) by the 2023-24 financial year.

The ministry of coal will coordinate with Indian Railways and the ministry of shipping and enable CIL, captive and commercial miners evacuate more coal by 2030.

Stressing on the need for diversification of the coal sector, the minister said that ideas have also been mooted that CIL could think of coming up with the state of the art pithead thermal power plants to transform it into an integrated energy company. It was also proposed that CIL could generate 5 GW of solar power by FY202324 and could diversify into coal gasification with a target of 50 million tonnes by 2030, enabling a sustainable energy mix for the country.

All these ideas will be deliberated, studied and examined for their feasibility in detail and based on that, they could be implemented.

Prospective coal block bidders seek bundled approvals Large Indian coal-consuming companies planning to enter commercial coal mining have asked the government to bundle mandatory approvals before putting up blocks for auction.

The companies made a presentation at a recent meeting where government sought input from various stakeholders on best practices to be adopted and auction rules to ensure the highest participation from domestic and foreign investors.

The meeting was attended by large Indian coalconsuming companies and prospective investors in coal mining, like steel producers Tata Steel, JSW, Jindal Steel and Power, as well as thermal power producers Adani Power and GMR Power.

The stakeholders made a case for the government to bundle prior approvals along with coal blocks that would be put up for bidding, including environmental and forest clearances.

With the government planning to hold auctions of the first tranche of coal blocks before the end of the current financial year on March 31, 2020, the stakeholders have also requested that gov-

ernment offer large contiguous coal blocks rather than truncated small ones entailing a number of mining projects. The companies pointed out that development of fragmented coal blocks would not enable investors to achieve economies of scale and would require a larger gestation period in putting up a number of small mining projects.

Cargo volume at 12 major ports up marginally in April-January

The government has earmarked 74 coal blocks to be put up for bidding and aimed to identify a total of 200 blocks to be offered to private miners over the coming years, the officials said.

The ports had handled 579.10 MT of cargo during the corresponding period of the last fiscal.

Coal India will exceed last year’s production figures: Official Despite coal production being hampered at Dipka mines due to prolonged rains, Coal India Ltd will exceed last year’s production figures, a top coal ministry official said here on Tuesday.

In 2018-19, Coal India produced 606.89 million tonnes (MT),while dispatch was at 608.14 MT. “Coal India’s production was nearly minus 8 per cent till October. So in the last few months the coal production has caught up. Now it has just minus 3.5 percent. And it will go on to be plus at the end of the year. It is going to be healthy percentage over last year’s (figures),” Secretary of Coal Ministry, Anil Kumar Jain told PTI on the sidelines of Energise 2020 a biennial conclave.

CIL, which accounts for over 80 per cent of the domestic production, saw its output decline by six per cent to 241 MT in April-September on account of monsoon.

“In fact it would be the highest ever in the country,” Jain added. Replying to a query on the spinning of Coal India Ltd subsidiaries into five entities, Jain said though there were some discussions held earlier in that direction, there is no fresh development. “At the moment that is the decision (Coal India remains as it is),” he said.

On the overall coal scenario in the country, the official said the production this year will exceed that of last year, though there was some impact due to rains, by the end of the current fiscal it will be covered up.

The country’s 12 major ports recorded a marginal 1.14 per cent growth in cargo volumes at 585.72 million tonnes (MT) during the AprilJanuary period of the current fiscal, according to the Indian Ports Association (IPA).

India has 12 major ports -- Deendayal (erstwhile Kandla), Mumbai, JNPT, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (earlier Ennore), V.O. Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia).

While the handling of iron ore saw 39.02 per cent jump to 45.05 MT during the period, thermal coal shipments declined 14.98 per cent to 74.60 MT, the IPA data showed.

According to the figures, Deendayal port handled the highest traffic volume at 101.96 MT during April-January 2019-20, followed by Paradip at 93.38 MT, Visakhapatnam at 60.73 MT, JNPT at 56.64 MT, Kolkata (including Haldia) at 53 MT, and Mumbai at 51.34 MT. Chennai port handled 39.80 MT of cargo, while New Mangalore handled 30.91 MT. The volume of seaborne cargo is mostly like derived demand and is mainly shaped by the levels and changes in both global and domestic activity.

STEEL

Green steel: Tata Steel develops climate-friendly method of production Tata Steel has piloted a new process for production of steel, one it says “results in enormous efficiency gains” and reduces energy use and carbon dioxide emissions by a fifth of that in the conventional blast furnace route.

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The company has tested this “completely new technology for producing steel” in five pilot plants in Europe; the next step is to bring a commercial scale plant to India.

The process, called HIsarna, is a combination of Isarna and Hismelt, the Celtic words for iron and melting vessel, respectively. The company has spent $75 million in developing the technology at its steel plant in Ijmuiden, The Netherlands.

“The technology removes a number of pre-processing steps and requires less stringent conditions on the quality of the raw materials used,” says a Tata Steel note on the technology.

A spokesperson of Tata Steel, said that the company is “currently in the process of upscaling the design towards commercial scale”.

He said the company intends to have the first scaled-up plant in India, and subsequently build a commercial plant in Ijmuiden.

The steel industry is among the largest emitters of carbon dioxide, the prime culprit in global warming. A recent report by The Energy and Resources Institute (TERI), one of India’s leading research bodies, noted that the Indian steel sector would likely triple its carbon footprint by 2020, given the need to produce more steel.

Steel Minister seeks Japanese investment in fast-growing Indian steel market Union Steel Minister Dharmendra Pradhan on Monday urged Japanese investors to invest in India's steel sector, saying the country offers a fast-growing market and steel consumption will more than double in the coming years. Pradhan also assured investors that India will provide necessary support to facilitate them in setting up businesses.

He was speaking at a 'Workshop on Enabling Procedures for Increase of Steel Usage for the Growth of Economy' event organised by jointly ministry of steel, industry body CII and Ministry of Economy, Trade and Industry, Japan.

"We are here to discuss topics such as increase of steel usage in India, market in India, econom-

22 | CCAI Monthly Newsletter February 2020

ic growth. ... we (India) aim to become a USD 5 trillion economy by 2024-25. India would spend about Rs 100 lakh crore on infrastructure. All this will result in increased use of steel," he said while addressing the participants Indian steel sector is a fast-growing steel market, he said adding that besides setting up 300 steel making capacity by 2030, the country is also aiming to increase its per capita steel consumption to 160 kg from about 70 kg at present.

By 2022, he said, government's ambitious housing scheme Pradhan Mantri Awas Yojana will be completed. Steel in huge quantity will be required to build the houses under the scheme.

Ind-Ra revises outlook on steel sector to ‘stable-to-negative’ Ratings agency India Ratings and Research (Ind-Ra) has revised its outlook on the steel sector to ‘stable-to-negative’ for the remainder of the ongoing fiscal due to sluggish steel demand growth expectations. Ind-Ra has revised downwards its FY2019-20 steel demand growth expectations to around 4 per cent from the previous forecast of 7 per cent. “Ind-Ra has revised its outlook on the steel sector to stable-to-negative from stable for the remainder of FY20 given sluggish steel demand growth expectations owing to mix of structural and cyclical concerns in end-user sectors, primarily auto and real estate construction. Hence, Ind-Ra has (also) revised downwards its FY20 steel demand growth expectations to around 4 per cent from the previous forecast of 7 per cent…,” it said in a statement. The outlook, Ind-Ra said, also factors in increased import risks especially from Free Trade Agreement (FTA) countries such as Japan and South Korea due to adverse impact of the slowing global growth and continuing trade frictions. Furthermore, raw material availability and price risks may escalate in the fourth quarter if the uncertainty over iron ore mine auctions prolongs. Ind-Ra also expects overall steel sales volumes and margins to weaken further in the second quarter of FY20 after industry witnessed margin correction in the fourth quarter of FY19 and the first quarter of FY20.

Steel prices have been continuously softening, while raw material cost have only seen partial declines, thereby squeezing the gross spreads for steel producers, it said. “However, Ind-Ra expects steel demand to recover in H2FY20, supported by pickup in government investments, fiscal stimulus measures, improvement in market sentiment and H2FY19’s lower base,” it said.

CEMENT

Govt's budgetary push for infra to boost cement industry: CMA Cement manufacturers association (CMA) on Monday said the government's budgetary push for infrastructure, logistics and warehousing will boost the industry. Finance minister Nirmala Sitharaman in her over two-hour long speech announced the plans to set up five new smart cities on PPP model and 100 more airports to be set up by 2024 to support UDAN scheme and allocated Rs 1.7 lakh crore to transportation.

"The emphasis on highways and roads development is well placed. This captures the priorities of economic development and an aspirational India. We would hope that rural demand gets revived and it assists in job creation," CMA President Mahendra Singhi said.

He further said the emphasis on infrastructure development, new 100 airports and focus on roads will go a long way to revive cement demand.

The association has also welcomed the strong push in the budget for doubling farmers' income by 2022, saying strong rural sector will boost the cement sector.

According to CMA, the decision on abolishing the dividend distribution tax (DDT) will also benefit corporate India and will give a big boost to investment.

The cement industry is committed towards playing a strong role in the government's aspirational agenda for transformative economic growth," CMA Vice President and CEO and MD of ACC Neeraj Akhoury said.

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GLOBAL World needs to break its addiction to coal to fight climate change, U.N. chief says We must break the addiction to coal," U.N. Secretary General Antonio Guterres said at U.N. Headquarters in New York on Monday, on the day that two lawmakers in Sweden nominated teen climate activist Greta Thunberg for the 2020 Nobel Peace Prize.

The U.N. chief has called for a reduction of coal before, but it was clearer than ever that the top world diplomat is sharpening his message and calling for action, several diplomats at the meeting told CBS News. Guterres spoke to a coalition of nations called the U.N. Group of Friends on Climate and Security, initiated by Germany along with the Pacific state of Nauru in Micronesia, which formed the group in 2018 to move the climate agenda forward. Monday's meeting was co-chaired by France and Morocco. France,

24 | CCAI Monthly Newsletter February 2020

the driver behind 2015 Paris climate agreement — from which the Trump administration began its withdrawal process — will also host a world conservation congress in June. At the event on Monday, France's U.N. Ambassador Nicolas de Riviere said: "In 2019, we witnessed the ravages of climate inaction: tropical cyclones, wildfires, cities asphyxiating under clouds of smoke and heat waves and we know that what 2019 is only the weakest version of what is yet to come if we do not choose to act now. Guterres said 70 nations have committed to becoming carbon neutral by 2050, including the European Union, but he noted that these countries represent less than one-fourth of global emissions.

US coal stocks continue sharp decline into 2020 After losing more than half of their value in 2019, U.S. coal companies in the SNL Coal Index continued the downward plunge in the first month

of 2020. The value of the SNL Coal Index has declined 22.9% year-to-date as of Feb. 3, compounding on a 53.5% year-to-date drop heading into the last full day of trading of 2019. Weakening export markets, an ongoing secular decline in domestic coal demand and investors increasingly turning away from the coal sector are all likely factors driving the downward fall in coal equity values. The losses are spread across the industry. Consol Energy Inc., primarily a thermal coal producer, has seen its stock lose 44.0% of its value year-to-date, and shares of increasingly metallurgical-focused coal producer Contura Energy Inc. are down 36.2% year-to-date. The stock prices of other large producers such as Peabody Energy Corp., Arch Coal Inc. and Alliance Resource Partners LP have lost a fifth of their value or more since the beginning of the year.Pure-play metallurgical coal players such as Ramaco Resources Inc. and Warrior Met Coal Inc. fared better early in the year, but are still down 14.9% and 8.9%, respectively.

EIA expects 2020 US coal output to fall 13.7% on year: STEO US coal production is forecast to be about 596 million st in 2020, down 13.7% from the estimated 2019 output of 690 million st, data from the Energy Information Administration's ShortTerm Energy Outlook showed Tuesday. The EIA projects output of about 587 million st for 2021, the lowest level since the early 1970s. Coal exports in 2020 are expected to total 86 million st compared with estimated exports of 92.4 million st in 2019. Exports in 2021 are projected to be 85 million st. The February export forecast increased from the January forecast by 3.5 percentage points and 2.1 percentage points for 2020 and 2021, respectively. Coal consumption by the power sector is expected to total about 465 million st in 2020, down 14.6% from 2019, and about 469 million st in 2021. While the February projection dropped 15.3 million st in its 2020 forecast, the 2021 projection rose 4.8 million st from the January STEO. Total US coal consumption is forecast to be about 516 million st in 2020, down 13.3% from the 2019 estimate and 15 million st lower than the January projection. The EIA's 2021 forecast is at about

519 million st. Compared with US coal-powered estimated generation share of 24% in 2019, the February EIA report projects coal generation share of 21% in 2020 and 12% in 2021. The natural gas generation share for 2020 is projected to be 38%, up 1 percentage point from the forecasts for both 2019 and 2021.

Chinese coking coal imports rise by 15.3pc in 2019 China imported 74.6mn t of coking coal last year, up by 15.3pc from 64.7mn t in 2018, according to Chinese customs data. But imports in December stood at an all-time low of 1.7mn t, down by 72.43pc from November, and down by 45.7pc from December 2018. Total Chinese imports from Australia stood at 30.9mn t in 2019, higher by 9.69pc from 2018. Australian exports to China fell by 95.7pc, to a low of 111,263t, in December from November. This is 74.3pc lower than the 432,992t of Australian coking coal imported by China in December 2018. Stricter import policies towards the end of the year meant that a significant amount of coking coal was denied customs clearance, with clearance of many cargoes delayed to January 2020.

This delay has occurred for the past two years.

Imports from Mongolia also fell by 43.1pc to 1.57mn t in December, down by 37.9pc from December 2018. China imported 33.8mn t of coking coal from Mongolia in 2019, higher by 22pc from 2018. This is in line with the market's view that China should continue to step up coking coal imports from Mongolia to make up for the shortfall from Australian imports because of strict import policies on Australian coal. China imported 17,289t of coking coal from Russia in December, down by 96.8pc from November and down by 85.9pc from December 2018.

Russia Looks to Double Coal Exports To China Russia has been historically associated with oil and gas exports, yet the news somewhat underreports its coal market presence. Although neither the world’s largest coal producer nor exporter, Russia seems to continue with its strategic aim to ramp up coal exports, all the while CCAI Monthly Newsletter February 2020

| 25

domestic carbon demand is about to plummet.

Step by step, first by getting its spare production capacity ready, now by ensuring appropriate infrastructure solutions are there to transport all the goods, Moscow is laying the groundwork for a large-scale expansion that is about to take place in the mid-2020s. Another story that juggles on the border of the political and economical, East Asian markets and nations take central stage in Russia’s export policy, once again. At first glance, 2019 was not the ideal year for the Russian coal industry. Bumping down from last year’s all-time high, coal production decreased 0.2 percent year-on-year to 439 million tons.

Prices both in Europe and Asia have reached multi-year lows this summer, especially the former has seen quotations plummeting amid robust coal-to-gas switch dynamics and market oversupply – both have recovered somewhat in the autumn months, yet Europe witnessed another steep drop this Januarys. Domestic Russian demand for coal was stagnating, too, as coal usage in thermal stations, especially in Southern Siberia where it is predominantly mined, decreased by 3 percent year-on-year all the while coking coal demand remained stagnant. This might seem as a harbinger of future stagnation, yet the industry remains upbeat on Asian demand. In fact, the deeper one digs into Russia’s export plans vis-à-vis East Asia the more interesting it gets.

Indonesia Increases Benchmark Coal Reference Price for February Indonesia has slightly increased its coal reference price known as coal benchmark reference price for February amid the lower supplies and rising demands. The Indonesian Energy and Mineral Resources Ministry set the coal reference price for the month at USD 66.89 per tonne, up 1.45 percent from the price for January. Ministry spokesman Mr Agung Pribadi said “The lower supply of coal in China after the country celebrated the Spring Festival and bushfires in Australia dragged outputs of the commodity.

However, demands for coal increase during winter in China, Japan and South Korea.”

26 | CCAI Monthly Newsletter February 2020

The coal price has weakened since September 2018 and for 2019, the Indonesia's coal reference price only averaged at USD 77.89 per tonne. The Indonesian reference price for thermal coal is the basis for setting up the prices of the country's 77 coal products and measuring the royalty producers have to pay for each tonne of coal sold.

Japan to build up to 22 new coal power plants despite climate emergency Just beyond the windows of Satsuki Kanno’s apartment overlooking Tokyo Bay, a behemoth from a bygone era will soon rise: a coal-burning power plant, part of a buildup of coal power that is unheard of in an advanced economy. It is one unintended consequence of the Fukushima nuclear disaster almost a decade ago, which forced Japan to all but close its nuclear power program. Japan now plans to build as many as 22 new coal-burning power plants - one of the dirtiest sources of electricity - at 17 different sites in the next five years, just at a time when the world needs to slash carbon dioxide emissions to fight global warming. Together the 22 power plants would emit almost as much carbon dioxide annually as all the passenger cars sold each year in the United States. The construction stands in contrast with Japan’s effort to portray this summer’s Olympic Games in Tokyo as one of the greenest ever. The Yokosuka project has prompted unusual pushback in Japan, where environmental groups more typically focus their objections on nuclear power.

But some local residents are suing the government over its approval of the new coal-burning plant in what supporters hope will jump-start opposition to coal in Japan. The Japanese government, the plaintiffs say, rubber-stamped the project without a proper environmental assessment. The complaint is noteworthy because it argues that the plant will not only degrade local air quality, but will also endanger communities by contributing to climate change.

Australian coal generation displaced by increasing solar output

The Australian Energy Market Operator (AEMO) has released its Quarterly Energy Dynamics (QED) – Q4 2019 report, which tracks the market impacts of extreme heat, generator and transmission line outages, as well as the shifting supply mix in the country. Australia experienced its hottest and driest year on record in 2019, and also saw their second-lowest annual hydro generation output in a decade. The market impacts of prolonged and extreme heat and dry conditions experienced across the country, together with the tragic bushfire emergency, are also reflected in this final quarter report.

Key report findings: Black coal-fired generation decreased by 1,061 MW on average compared to Q4 2018, reaching its lowest quarterly level since Q4 2016.

The decline was due to a combination of coal supply issues (notably at Mt Piper which fell an average 552 MW), unit outages, and displacement by solar output. Total variable renewable energy (VRE) output across the National Electricity Market (NEM) continued to rise this quarter. During Q4 2019, average grid-scale VRE generation reached 2,868 MW, representing a 39 percent increase from last year. VRE generation accounted for 14 percent of the NEM supply mix in Q4 2019 compared to 10 percent in Q4 2018. Market revenue for grid-scale batteries also trended upwards this quarter, driven by increased returns from Frequency Control Ancillary Services (FCAS) markets. Total Q4 2019 battery revenue of $20m represents the highest quarter on record, 70 percent higher than the previous record.

SA mining industry not ready to survive without coal The mining industry in South Africa is a long way from being ready to survive without coalgenerated electricity, the Minerals Council SA (MCSA) has said. South Africa’s electricity crisis, the impact of the climate crisis and the necessity for sustainable, environmentally friendly mining practices were the main talking points at the Investing in African Mining Indaba, which was held in Cape Town this week. In his open-

ing address at the indaba, Mineral Resources and Energy Minister Gwede Mantashe said that South Africa’s Integrated Resource Plan looks at coal playing a smaller role in South Africa’s energy mix, and that it would comprise 60% or less of the mix by 2030. The MCSA, which represents the leading mining companies in the country, emphasised during a press conference that the move away from coal would have to be gradual because coal-fired power stations remain necessary for baseload power provision. At present, renewable energy, such as solar and wind power, cannot provide the kind of certainty energy-intensive users in the mining industry require.

Roger Baxter, the CEO of the MCSA, said the organisation was in favour of a “just transition” from coal to cleaner, more environmentally friendly energy.

Anglo American to decide fate of South African thermal coal assets this year Global miner Anglo American will decide this year whether to sell its South African thermal coal business, Chief Executive Mark Cutifani told Reuters on Monday. Anglo American and other mining companies have come under growing pressure to reduce their exposure to coal because of concern over climate change.

South32 has agreed to sell its South African thermal coal operation to Seriti Resources, subject to regulatory approval. “I expect we will take a view this year. But we will consult with our key stakeholders before we do that,” Cutifani said in an interview on the sidelines of the African Mining Indaba industry conference in Cape Town.

Cutifani said Anglo American would consult with government, communities and employees before a decision is announced. It has already received interest from potential buyers both inside and outside of South Africa, he said. The diversified miner had no plans to exit its coking coal business but was rather looking at ways to reduce its carbon impact, he said.

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OVERALL DOMESTIC COAL SCENARIO Coal Production (in MT) Company

January, 2020

January, 2019

% Growth

April - January, 2020

April - January 2019

% Growth

CIL

63.11

57.21

10.3%

451.52

469.65

-3.9%

SCCL

5.72

6.29

-9.1%

52.47

51.7

1.5%

% Growth

April - January, 2020

April - January, 2019

% Growth

Overall Offtake (in MT) Company

January, 2020

January 2019

CIL

56.05

52.44

6.9%

473.31

497.07

-4.8%

SCCL

5.64

6.32

-10.7%

52.01

55.43

-6.2%

Coal Despatch to Power (Coal and Coal Products) (in MT) Company

January, 2020

January, 2019

% Growth

April - January, 2020

April - January, 2019

% Growth

CIL

43.20

42.00

2.9%

377.86

405.61

-6.8%

SCCL

4.69

5.22

-10.0%

44.03

45.22

-2.6%

Company

Coal Qty. Allocated January, 2020

Coal Qty. Allocated January, 2019

Increase over notified price

Coal Qty. Allocated April - January, 2020

Coal Qty. Allocated April - January, 2019

Increase over notified price

CIL

3.62

4.83

51%

24.87

27.09

64%

Spot E-auction of Coal (in MT)

Special Forward E-auction for Power (in MT) Company

Coal Qty. Allocated January, 2020

Coal Qty. Allocated January, 2019

Increase over notified price

Coal Qty. Allocated April - January, 2020

Coal Qty. Allocated April - January, 2019

Increase over notified price

CIL

2.39

3.73

19%

19.84

25.63

31%

Exclusive E-auction for Non- Power (in MT) Company

Coal Qty. Allocated January, 2020

Coal Qty. Allocated January, 2019

Increase over notified price

Coal Qty. Allocated April -January, 2020

Coal Qty. Allocated April - January, 2019

Increase over notified price

CIL

-

1.50

-

6.84

9.43

34%

Company

Coal Qty. Allocated January, 2020

Coal Qty. Allocated January, 2019

Increase Over notified price

Coal Qty. Allocated April - January, 2020

Coal Qty. Allocated April - January, 2019

Increase Over notified price

CIL

0.30

-

32%

0.96

2.00

31%

Special Spot E-auction (in MT)

CCAI Monthly Newsletter February 2020

| 29

MONTHLY SUMMARY OF DOMESTIC COAL Comparative Price of Domestic Coal: Power/Non-power. *The price shown in the Chart below is without: (a) Surface Transportation Charges. (b) State specific taxes. (c) Coal company or area wise charges if any. (d) Evacuation Facility Charges INR 50 per tonne w.e.f. 00:00 of 20.12.2017 GCV (Kcal/kg) (Mid-value)

G3-6400-6700

G5-5800-6100

G7-5200-5500

G10-4300-4600

G11-4000-4300

G12-3700-4000

Basic ROM price (Rs./te)

3144/ 3144

2737/2737

1926/2311

1024/1228

955/1145

886/1063

Tentative Ex-Mine Price*

4447/4447

3941/3941

2932/3411

1809/2063

1724/1959

1638/1858

COAL * Coal Industry has sought easier norms for commercial coal blocks, including lesser payment and more lenient requirement of minimum production. Potential bidders want upfront payment to be halved and computed on the basis of extractable reserves in a block and not on the total reserves estimate. The draft rules provide for minimum 70% production on an average over a three-year period, while yearly minimum production has to be 50%. Potential miners want this changed to 60% average production in a five-year period and no yearly production stipulations. *Coal India will increase spot e-auction offerings in the current quarter to 15 percent of the year’s production. In the three quarters till end-December 2019, the company had offered about 12 percent of its production for auctions.

Spot auction offers accounted for almost 46 percent of the quantity offered for auctions till December.

RAILWAYS * The Indian Railways is reworking its strategy on freight loading as the transportation of coal, which comprises half of its freight, is on

30 | CCAI Monthly Newsletter February 2020

a decline because of the Centre’s thrust on clean energy. “Freight loading by the Railways in 2019-20 (FY20) is 1,223 million tonnes (mt), of which 50 percent is coal and the rest other commodities,” Vinod Kumar Yadav, chairman of Railway Board, said here in a post-Budget conference. The share of coal in railway freight is expected to come down to 40 percent in the FY21, target for which is 1,265 mt. Besides reduction in thermal production that is leading to a decline in coal transportation, overall transit cost for coal is being rationalised by the power companies, which would also bear an impact on freight

POWER * India's electricity supply rose 3.25 percent during the month of January after five straight months of decline, provisional government data showed, in a relief for power producers. Power supply rose to 106.36 billion units in January, up from 103.01 billion units last year, an analysis of daily load despatch data from state-run Power System Operation Corp Ltd (POSOCO) showed.

India's Central Electricity Authority (CEA), an arm of the federal power ministry, is expected to release official data on power demand later this month. POSOCO releases provisional load despatch data every day.

* Renewable energy sources are expected to account for around 21 percent of electricity demand in 2021-22, Power Minister R K Singh said on Thursday. "As per Central Electricity Authority's National Electricity Plan, contribution of renewable energy sources is estimated to be around 21 percent of the total electricity demand of the country in the year 2021-22 and 24 percent by 2026-27," Singh was quoted as saying in a statement issued by the power ministry.

CEMENT * Cement manufacturers association (CMA) said the government's budgetary push for infrastructure, logistics and warehousing will boost the industry. Finance minister Nirmala Sitharaman in her over two-hour long speech announced the plans to set up five new smart cities on PPP model and 100 more airports to be set up by 2024 to support UDAN scheme and allocated Rs 1.7 lakh crore to transportation. *Shree Cement has surpassed ACC Ltd to operationalise the world’s largest cement kiln at Ras Al Khaimah in the UAE. According to sources, Shree Cement has come up with a kiln capacity of 14,500 tonne per day (tpd) in its

plant in the UAE which is 2,000 tpd higher than ACC’s Wadi II Plant in Karnataka.

STEEL * The domestic steel industry is hopeful that the government focus on infrastructure sector, which is steel-intensive, will boost capex and kick start the economy. Commenting on it, T V Narendran, CEO, Tata Steel said. Initiatives like expansion of national gas grid and piped water supply to households will boost steel demand."

Anil Kumar Chaudhary, Chairman, Steel Authority of India Ltd also felt the government’s plan of massive investment on infrastructure projects will definitely work to boost steel consumption in the country and give momentum to the economy and help to generate job opportunities. * The Indian government is planning to leverage the Corona virus effect on China's economy as it asked domestic steelmakers on Monday to step up production to target a larger global market share. At present, India is the secondlargest steel producer with an annual output of over 106 million tonne (MT) but lags way behind China that accounted for 928.3 MT of the alloy in 2018.

CCAI Monthly Newsletter February 2020

| 31

MONTHLY SUMMARY OF IMPORTED COAL & PETCOKE Coal Price Index COAL

(kcal/kg)

Monthly Price - FOB

Monthly Price - FOB

Monthly Change (USD)

South Africa

6000 NAR

USD 83.90

INR 6018

-1.08

South Africa

5500 NAR

USD 63.50

INR 4555

-1.16

Australia

5500 NAR

USD 58.51

INR 4196

2.99

Indonesia

5000 GAR

USD 52.03

INR 3732

1.79

Indonesia

4200 GAR

USD 36.06

INR 2586

1.13

USA

6900 NAR

USD 54.26

INR 3892

1.45

PET COKE

Sulphur

Price

India-RIL(Ex-Ref.)

-5%

INR 6572

Saudi Arabia (CIF)

+ 8.5%

INR 5075 ($70.75)

USA (CIF)

- 6.5%

INR 5245 ($73.13)

Exchange Rate

Change (Monthly)

USD/INR 71.73

0.34

Coking Coal Price: Premium Low Vol

FOB Aus CFR China 155.85

166.41

HCC 64 MID Vol

Semi Soft

key

MET COKE 62% CSR

CFR China

FOB Aus

FOB Aus

FOB Aus

CFR India

FOB N China

141.20

151.66

83.82

95.73

92.48

275.63

284.38

* The Minerals Council South Africa said coal would remain a central part of the country’s energy generation for the foreseeable future, alongside the transition towards more renewable and cleaner sources of power.

Council president Roger Baxter said coal remained a necessity as the base load source of power, even with the expansion of renewables.

Council of Geosciences CEO, said there were more than 200 billion tons of coal in South Africa and that coal should be developed in a responsible manner.

With

Mid Tier PCI

FOB Aus

South Africa:

*

Low Vol PCI

coal

supplier

Glencore’s

32 | CCAI Monthly Newsletter February 2020

announcement to exit the SA coal market, All of the major coal giants have now left, or are leaving the country. Just two domestic miners, which are under pressure to cut their funding for coal projects, now stand to dominate coal supply. IEEFA reported that only 30% of South Africa’s thermal coal was exported last year.

Australian Coal News:

*Black coal-fired generation in Australian decreased by 1,061 MW on average compared to Q4 2018, reaching its lowest quarterly level since Q4 2016. The decline was due to a combination of coal supply issues (notably at Mt Piper which fell an average 552 MW), unit

outages, and displacement by solar output. *Australia is about to get its first coal-tohydrogen plant. In one of coal’s traditional heartlands, Victoria’s Latrobe Valley, a plant that will produce hydrogen directly from the brown coal in the region is being assembled. Energy technology firm CO2CRC and Melbourne construction firm GLP Group built and delivered the plant to AGL’s Loy Yang facility over the summer.

Indonesian Coal News:

* Indonesia's Ministry of Energy and Mineral Resources set its February thermal coal reference price -- also known as Harga Batubara Acuan, or HBA -- at $66.89/mt, up 1.5% from January and down 27% year on year. * Indonesia coal exports are being disrupted because the government has not issued technical guidance on the implementation of new shipping rules, an industry group said.

Most coal sales from Indonesia are under freeon-board contracts, so overseas buyers are still waiting for the trade ministry to issue technical guidance for Shipping requirement which will be implemented from May-2020.

US Coal News:

* US coal production is forecast to be about 596 million st in 2020, down 13.7% from the estimated 2019 output of 690 million st, data from the Energy Information Administration’s Short-Term Energy Outlook showed. The EIA projects output of about 587 million st for 2021, the lowest level since the early 1970s. * U.S. coal mining employment hit a new low in the fourth quarter of 2019 as export demand withered away, leaving miners to return to a domestic market locked in an ongoing secular

decline. The total U.S. average coal mining employment figures fell 4.2% quarter over quarter to 50,361 in the most recent period.

Pet Coke News: * Trading activity in the seaborne petcoke market were few and far between this week albeit small pockets of Indian cement demand lent support to import prices, market sources said. The Supramax freight rate from US Gulf Coast to east coast India was assessed at $37.50/mt, down $1.25/mt on the week and steady on the day, according to S&P Global Platts data. A west India-based trader estimated the Supramax freight rate on the above route to be $37/mt east coast India and $35/mt west coast India basis.

Shipping Update: * India’s 12 major government-owned ports handled around 74.60 million mt of thermal coal during the first 10 months (April-January) of fiscal 2019-2020, down 15% from the same period a year ago, according to data released Wednesday by the Indian Ports Association.

Coking coal shipments, however, inched up 1% to 47.08 million mt compared with the same period last year, the data showed. Paradip port on the east coast handled the highest volume of thermal coal shipments over April 2019-January 2020 at 21.88 million mt, down 18% from the corresponding period last year. * The Baltic Exchange’s main sea freight index rose for a fifth straight session, ending higher for a second straight week, as vessel rates rose despite concerns over the impact of corona virus on global growth. The Baltic index, which tracks rates for capesize, panamax and supramax vessels that ferry dry bulk commodities, rose 17 points, or 3.5%, to 497. The index posted gains for a second straight week. The capesize index, which tracks vessels that typically transport 170,000 to 180,000 tonne cargoes including iron ore and coal, rose 6 points but still remained at -226.

CCAI Monthly Newsletter February 2020

| 33

PRODUCTION AND OFFTAKE PERFORMANCE OF CIL AND SUBSIDIARY COMPANIES COAL PRODUCTION (Figs in Mill Te) SUB CO.

FEB'20

APR'19 - FEB'20

ACTUAL ACTUAL THIS SAME % YEAR PERIOD GROWTH LAST YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

5.4

5.27

2.4

43.91

43.36

1.3

BCCL

2.95

2.85

3.2

24.33

27.31

-10.9

CCL

8.42

7.01

20

55.45

55.52

-0.1

NCL

8.93

8.34

7

98.03

92.21

6.3

WCL

7.46

5.88

26.7

47.06

44.12

6.7

SECL

16.82

14.12

19.2

127.52

138.44

-7.9

MCL

16.2

14.48

11.9

121.11

126.09

-4

NEC

0.09

0.09

5.7

0.38

0.64

-40.3

CIL

66.26

58.05

14.2

517.78

527.69

-1.9

OFFTAKE (Figs in Mill Te) SUB CO.

FEB'20

APR'19 - FEB'20

ACTUAL ACTUAL THIS SAME % YEAR PERIOD GROWTH LAST YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

4.86

4.82

0.7

44.21

44.61

-0.9

BCCL

2.8

2.57

9.3

26.1

29.91

-12.7

CCL

6.32

6.07

4.2

61.72

61.22

0.8

NCL

9.22

8.04

14.7

99.04

92.75

6.8

WCL

5.24

5.13

2.2

47.38

50.01

-5.3

SECL

13.47

13.06

3.1

128.72

141.26

-8.9

MCL

12.96

11.67

11

120.65

128.12

-5.8

NEC

0.09

0.11

-13.7

0.46

0.65

-29.5

CIL

54.97

51.46

6.8

528.27

548.53

-3.7

34 | CCAI Monthly Newsletter February 2020

CCAI Monthly Newsletter December 2019

| 35

REGISTERED

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