CCAI March-20 Issue

March 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

Under guidance of Ministry of Coal, CIL is taking a slew of measures to support the Power Utilities & Industries amidst duress

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Inside: Pandemic with Covid19 and corresponding Impact in Indian Power sector by Sankar Mukhopadhyay

Vol. XLVIII No. 12 Published on : 28.03.2020

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2 | CCAI Monthly Newsletter December 2019 jsplcorporate

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CCAI Monthly Newsletter December 2019

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From the Editor’s Desk

The outbreak of deadly pandem ic coronavirus has wrecked hav oc across the world, virtually bringing several nations to a standstill and pulling the breaks on global econom y. The lethal virus has now spr ead in more than 200 countries and infe cted over 1.3 million people .

Thi s situation has temporarily crushed the energy demand around the wo rld which significantly impacted the req uirement of the fossil fuel.

The lockdown imposed in par ts of United States due to the recent surge in COVID-19 cases may hav e caused the bottom to fall out from an already weak coal industry.

Declining coal use by utilitie s has reduced consumption by almost 40% since 2001. As per analysts, the previous forecast of a 15% to 20% dro p in US coal production this year is now expected to be even higher.

Meanwhile in Europe that has turned into the epicenter of the virus outbreak, coal prices may rem ain at around multi-year low s in March.

According to analysts, Europe an industrial output is set to dro p 5% in 2020 following the present cris is. The current scenario may fur ther erode global demand of coal amidst elevated stockpiling and low gas prices. The Baltic Dry Index was assessed last at 529 points, around 45 % lower than at the start of the year.

India, the second largest coa l producer in the world, has also not been spared by the pandemic outbre ak. Though the national min er Coal India Limited reported record output for March- 84.4 million tons, up by 6.5% from the year earlier, it is mu lling output cuts at some min es. A threeweek nationwide lockdown sta rting March 25 to stop the spr ead of the virus has brought several ind ustries to a halt, slashing elec tric ity demand by a quarter and forcing gen erators, including the nation ’s larg est NTPC Ltd to shut capacity.

Due to the increasing cases of infections in other coal produc ing nations like Australia and Indonesia, India’s coal import has also suff ere d a decline from 19.82 mt last year to 17. 01 mt in February 2020.

In a possible silver lining am id the ongoing predicament , CIL is taking up a slew of consumer friendl y measures to provide respite to the Power Utilities and Industriesacross the board, in the time of dur ess.

4 | CCAI Monthly Newsletter March 2020

Content 06

Vol. XLVIII No. 12 March 2020

Article:

Pandemic with Covid19 and corresponding Impact in Indian Power sector.

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

Sankar Mukhopadhyay

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”

10

Consumers' Page

14

Power

20

Domestic

26

Global

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

30 In Parliament 36 Monthly Summary Of Domestic Coal 38 Monthly Summary Of

Imported Coal &Petcoke

40

Production And Offtake Performance Of Cil And Subsidiary Companies

CCAI Monthly Newsletter March 2020

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PANDEMIC WITH COVID19 AND CORRESPONDING IMPACT IN INDIAN POWER SECTOR In these troubling times of ‘social distancing’ and ‘working from home’, the centrality of electricity in powering our current and future societies is more evident than ever before. However, the power sector also is not immune to the adverse effects of the pandemic. The long-term impact of the current situation would only become apparent with time. Nevertheless, some early impacts of COVID-19 on Indian power sector are already becoming evident. An effort is being made to assess the impacts to create a basis for future discussion. This study may also help to reduce the adverse effects and better preparing the sector to take curative actions if the same situation occurs in future.

T

he second world war is a matter of past where the man made crisis caused a death toll of 8090 million people putting the existence of the world in question, but the recent havocs like the fall of the Berlin Wall or the collapse of Lehman Brothers, the coronavirus pandemic is a world-shattering phenomenon which has started now and we can only imagine today its far-ranging consequences.

The Covid-19 coronavirus was first identified in China’s Hubei province in December 2019 and has since become a global health threat, impacting 209 countries and triggering the World Health Organisation (WHO) to declare it a global pandemic.

The first case of the 2019–20 coronavirus pandemic in India was reported on 30 January 2020, originating from China. As of 9th April 2020, the Ministry of Health and Family Welfare have confirmed a total of 5,865 cases, 478 recoveries and 169 deaths in the country. It can be well assumed that the number of infections could be much higher as India's testing rates are among the lowest in the world. With the insufficient health care support, the only way to prevent the spread of such contagious disease is social distancing which the Prime minister of India had reiterated umpteen times and also declared total lock down of the country for three weeks from 25th March 2020 to prevent spread of the deadly disease. However, depending on the actual situation, he also mentioned of the possibility of the lock down period.

6 | CCAI Monthly Newsletter March 2020

The COVID-19 lockdown has led to shut down of all but essential commercial activities across the country. Approximately 1.35 billion citizens are obliged to remain within the confines of their homes and, in many cases, only allowed to work from home. Consequently, the electricity demand from industrial and, commercial customers has reduced significantly while the residential demand is expected to have increased. According to the Power System Operation Corporation of India (POSOCO), The energy met on March 16th, 2020 – which can be considered as a business-as-usual scenario – was 3494 MU as compared to 3113 MU on March 23rd, 2020 a day of voluntary curfew. It further reduced to a range between 2600-2800 MU between March 25th to March 31st, 2020. This trend is illustrated in Figure 1.

Figure 1: Daily energy met (MU) Figure 1: Daily energy met (MU)

In India, distribution utilities have a lower tariff for domestic and agricultural consumers, sometimes the a In India, distribution utilities have a lower tariff for dois less than the average cost of supply as compared to that for commercial and industrial consumers.

mestic and agricultural consumers, sometimes the

Table 1 provides the electricity tariff rates in Delhi for selected consumer categories to highlight these average tariff is less than the average cost of supply Thus, for several distribution companies, the lower tariff‐paying consumers are cross‐subsidized by com as compared to that for commercial and industrial industrial consumers.

consumers.

Category

Fixed Charge Energy (₹ /KVA/Month) (₹ /KWh)

Industrial

250

7.75

Single point delivery supply for Group Housing Societies 150

4.50

Charge

Table 1 provides the electricity tariff rates in Delhi for selected consumer categories to highlight these differences. Thus, for several distribution companies, the lower tariff-paying consumers are cross-subsidized by commercial and industrial consumers.

Category

Fixed Charge Energy Charge (₹ /KVA/Month) (₹ /KWh)

Industrial

250

7.75

Single point delivery supply for Group Housing Societies

150

4.50

Agriculture

125

1.50

and locational level. Finally, during this period, critical infrastructure such as electricity networks would have to be run with minimum employees this will have a long-term negative impact on operation and maintenance activities and management customer of relationship.

As stated earlier, the trade on the wholesale power market comprises just 4.3 per cent of the total electricity transactions. However, the transactions through the power exchanges have grown over the last decade. The Indian Energy Exchange (IEX) has seen a growth from 2616 MU in FY 2009 to 52,241 in FY 2019.

Table 1: Electricity Tariff Schedule for FY(2019-20) – DERC Electricity tariff in West Bengal for few consumers shows that the Lock Down is heavily impacting their commercial and Industrial sections which are revenue positive

Figure 2: Share of market segments in total electricity generation 2018-19 (Source: CERC)

Figure 2: Share of market segments in total electricity generation 2018‐19 (Source: CERC)

Until now, the trade in the wholesale market is in four market segments 1) Day-Ahead Market 2) Term Ahead Market and 3) Renewable Energy Certificates Until now, the trade in the wholesale market is in four market segments 1) Day‐Ahead Market 2) Term A 4) Energy-saving certificates.

Central and 3) Renewable Energy Certificates 4) Energy‐saving Recently, certificates. the Recently, the Central Electricit Industrial 384 7.20 Electricity Regulatory Commission (CERC) finalized Commission (CERC) finalized the regulations for implementing real‐time markets. This half‐hourly mark intra‐day trade of electricity, allowing adjustment of generation and consumption profile during the da the regulations for implementing real-time markets.

COVID‐19 pandemic, it was announced by CERC that the real‐time market would be operational from A This half-hourly market will enable intra-day trade 7.74/9.28/6.58 Commercial 30 (TOD) However, the starting date has now been delayed, presumably the date will be rescheduled after r of electricity, allowing adjustment of generation and normalcy. Some required trials are also required prior to putting it in practice and hence the date may consumption profile during the day. Before the CODomestic 15 6.64 to get finalised. Delay in the real‐time market implementation is likely to have a serious, adverse impact VID-19 pandemic, it was announced by CERC that power market with the further possibility of renewable integration with price volatility.

Table 2. Brief of Tariff as per WBERC 2017-2018, Av- the real-time market would be operational from April Another impact of the COVID‐19 pandemic on the power markets is in terms of the market dynamics 1st, 2020. However, the starting date has now been erage Cost of Supply if Rs 7.55/Kwh slump in the clearing volume and the market‐clearing price, as an effect of lock down process, the obvio delayed, presumably the date will be rescheduled aftaken by the government as a response to COVID‐19, the uncertainty in price has been impacting the p Thus, firstly, a key risk from the COVID-19 pandemic ter of normalcy. are traded on t traders. Thus, the restoration reduction in demand due to the Some lockdown required is reflected trials in the volumes for the already struggling distribution companies in also required prior to putting it in practice and hence market and the clearing price.

India arises from the loss of revenues due to reduc- the date may take a longer to get finalised. Delay in tion of demand from the commercial and industrial the real-time market implementation is likely to have customers as well as the inability to cover the cross- a serious, adverse impact on the4Indian power market subsidies provided to the lower-tariff paying con- with the further possibility of renewable integration sumer. Secondly, the utilities would also have to ac- with price volatility. count for the expense to comply with any ‘must buy’ commitments that they have with generators with Another impact of the COVID-19 pandemic on the long-term power purchase agreements. The true and power markets is in terms of the market dynamfull extent of this risk would only be known once a ics. Following a slump in the clearing volume and quantitative analysis is conducted when this crises the market-clearing price, as an effect of lock down situation is contained. Thirdly, at an operational level, process, the obvious measures taken by the governdistribution companies would have to account for de- ment as a response to COVID-19, the uncertainty in viation in demand and supply patterns at a temporal price has been impacting the producers and traders.

Category

Fixed Charge Energy Charge (₹ /KVA/Month) (₹ /KWh)

CCAI Monthly Newsletter March 2020

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Thus, the reduction in demand due to the lockdown is reflected in the volumes traded on the electricity market and the clearing price.

ity generation space, with around 90 giga watt (GW) coal-fuelled capacity based on Chinese power generation equipment.

Another point of reference is the price and clearing With supply chains being disrupted, this installed and volume in 2019. On March 22nd, 2020, the day of under-construction capacity has been placed with voluntary lockdown, the clearing volume was 97.05 Chinese manufacturers such as Dongfang Electric, GWh, and the clearing price was 2195.48 ₹ /MWh. In Shanghai Electric and Harbin Power, such Chinese comparison, on the same day in 2019, the clearing equipment and their operation and maintenance, givvolume was 107.98 GWh, and the clearing price was en the strategic importance of such power projects.

2816.18 ₹ /MWh. From the start of the lockdown, on This comes in the backdrop of India’s domestic March 25nd to April 2020, the average expected to go up with more people Another point of reference is the 1st price and clearing volume in 2019. clearing On March 22nd, power 2020, the demand, day of voluntary lockdown, the clearing volume was 97.05 GWh, and the clearing price was 2195.48 ₹ /MWh. In comparison, on the volume was 104.27 GWh compared to 130.24 GWh staying indoors, given the three-week nationwide same day in 2019, the clearing volume was 107.98 GWh, and the clearing price was 2816.18 ₹ /MWh. From the start in 2019 during the same period. Similarly, the average lockdown in the world’s largest such exercise aimed of the lockdown, on March 25nd to April 1st 2020, the average clearing volume was 104.27 GWh compared to 130.24 market clearing price was 2155.93 ₹ /MWh in 2020 at stemming the spread of coronavirus.

GWh in 2019 during the same period. Similarly, the average market clearing price was 2155.93 ₹ /MWh in 2020 as as compared to 3371.025 ₹ /MWh in 2019 for the compared to 3371.025 ₹ /MWh in 2019 for the same period.

It has been observed that about 62 GW of under-consame period. struction coal fuelled capacity, orders for 30% or 18.6 GW has been placed with Chinese manufacturers.

Apart from competitive prices, the developers were attracted by aggressive financing options, which involved not only low interest rates, but also relaxed covenants.

To be sure, commercial and industrial electricity demand is likely to come down given the expected shift in electricity load patterns that also comes in the backdrop of the onset of summer. Also, given India’ installed power-generation capacity of 368.69 GW, the disruption in supply chain may not have an immediate impact on the Indian power markets.

India’s peak electricity demand came down to 145,495 MW on 23 March from 163,729 MW on 20 March. India’s peak demand in FY19 was 168,745 MW and touched an all-time high of 176,724 MW in April last year.

5

The heat of Covid-19 is visible in coal based conventional power as the immediate effect but the impact will be far more in the target of 175 GW renewable generation in India.

The coronavirus outbreak that started in China may also impact India’s green energy trajectory, with around 3 giga watt (GW) of solar projects, worth According to data collated by the Indian Energy Ex- ₹16,000 crore. The power project developers in India, Cleared Volume (above) and Market Clearing price (below) for IEX between March 17th – April 1st, 2020. changeto data (IEX), theby demand for Exchange electricity has also who has source solar According collated the Indian Energy (IEX), the demand for electricity also came down modules from China, plans to decame down resulting in an average price of Rs1.95 clare force majeure on meeting project completion resulting in an average price of Rs1.95 per unit for electricity traded on 25 March on the exchange market. The all‐ time high for electricity in the spot market was ₹18.2 per unit for 4 October 2018. Of the estimated 1,200 billion units per unit for electricity traded on 25 March on the ex- deadlines because of supply disruptions caused by (BU) of electricity generated in India, the short‐term market comprises 130‐150BU. change market. The all-time high for electricity in the the coronavirus outbreak.

Outbreak Covid‐19, which so far is being considered as an imported disease from China, has now cast doubts over a spot market was ₹18.2 per unit for 4 October 2018. The government later clarified that the disruption part of India’s conventional electricity generation space, with around 90 giga watt (GW) coal‐fuelled capacity based Of the estimated 1,200 billion units (BU) of electricity of the supply chains due to spread of corona virus on Chinese power generation equipment. generated in India, the short-term market comprises China any other country will be covered in the With supply chains being disrupted, this installed and under‐construction capacity has inbeen placed or with Chinese 130-150BU. manufacturers such as Dongfang Electric, Shanghai Electric and Harbin Power, such Chinese equipment and Clause their Force Majeure (FMC).

Cleared Volume (above) and Market Clearing price (below) for IEX between March 17th – April 1st, 2020.

operation and maintenance, given the strategic importance of such power projects.

Outbreak Covid-19, which so far is being considered

Again the renewable energy sector, apart from China, around global supply chains,

as an imported disease from China, has now cast major concerns revolve This comes in the backdrop of India’s domestic power demand, expected to go up with more people staying indoors, given the three‐week in the world’s largest such exercise aimed at stemming the spread of doubts over anationwide part oflockdown India’s conventional electric6

8 | CCAI Monthly Newsletter March 2020

which are considerably slowing down production.

Sectors such as the global wind industry are already seeing logistical delays.

Wind Europe CEO Giles mentioned that Covid-19 would likely to cause delays in the development of new wind farm projects which could cause developers to miss the deployment deadlines in countries’ auction systems and face financial penalties.

A Solar Power spokesperson of Europe stated that the situation has highlighted the need to have local manufacturing facilities along the value chain in Europe to bolster security of supply, especially when taking into account the fact that solar is considered by experts to be the main European long-term power generation source. It may be noted that European countries have started the journey long back whereas, in India, we have just started the journey.

In solar sector, not only India but a major part of the European countries also import solar panels from China. In this connection, a European Renewables Grid Initiative spokesperson stated that as there no solar panel shipments from China, they need to work with a delivery bottleneck and subsequent delay of many projects. In India too, we find the similarities between the current health crisis and the climate crisis.

India can learn from what we are currently going through and the consequences of acting too late.

If that is the case, the current crisis might actually mean a boost for renewables in the medium term.

The International Renewable Energy Agency (IRENA) believes that the pandemic, while threatening global supply chains in the power sector, will not be able to stop the industry from transitioning to net-zero CO2 emissions.

IRENA director-general Francesco La Camera said: “The outbreak of Covid-19 threatens global supply chains in many sectors and is therefore likely to have an impact on renewable energy. The severity and duration of both situations remain to be seen in future.

In India, it may be assumed that the lofty target of implementation of 175 GW RE power by 2022 may not be achieved in full quantum, however even in such case, the thermal sector has well reserve capacity which must be able to compensate the shortfall, if any. India, being a signatory of Paris protocol must not be oblivious towards environment and the possible threat of climate change, therefore the implementation of FGD and clean coal technology must be made mandatory to the extent possible and the efficient generators will only run with a fair price competitive mechanism.

If we shift our vision from the power sector, it may be

observed that the pandemic will strengthen the state and reinforce nationalism. Governments of all types will adopt emergency measures to manage the crisis, and many will be loath to relinquish these new powers when the crisis is over.

In global context, COVID-19 will also accelerate the shift in power and influence from West to East. South Korea and Singapore have responded best, and although the problem started in China, it has reacted well after its early mistakes. The response in Europe and America has been slow and less responsible as represented with huge death toll which tarnishing the aura of the Western brand.

In the economic front, apprehension of global recession is also putting the developing countries like India under a great threat of survival. The forecasting of possible job losses of 20 million workmen and 2025% of job cut in executive strength in India is posing extensive financial crisis in India. Unless, the Government and the world leaders come forward in rescue of the situation, the degree of financial slump will take a long time to recover in countries like India.

In short, COVID-19 will create a world that is less open, less prosperous, and less free. It did not have to be this way, but the combination of a deadly virus, inadequate planning, and incompetent leadership has placed humanity on a new and worrisome path.

It seems highly unlikely in this context that the world will return to the idea of mutually beneficial globalization that defined the early 21st century. And without the incentive to protect the shared gains from global economic integration, the architecture of global economic governance established in the 20th century will quickly atrophy. It will then take enormous selfdiscipline for political leaders to sustain international cooperation and not retreat into overt geopolitical competition.

About the author: Sankar Mukhopadhyay a graduate in Electrical Engg. of Jadavpur University, Kolkata and has 36 years of experience in power sector in GEC, Tata Power and CESC Limited. Since last ten years, he is heading the Asia Institute of Power Management. He has proven expertise in business development related to power and Energy sector.

He is a Chartered Engineer of the European Council, the Chairman of the Institute of Engineers and Technologists (IET) and an Energy Auditor.

He has also worked with Renewable Energy and passionate on sustainability.

CCAI Monthly Newsletter March 2020

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CONSUMERS’ PAGE Present Coal Scenario Coal India has produced 84.36 million tonnes of coal in March 2020, registering a growth of 6.5% over 79.19 million tonnes produced in the same month of last year. Total coal production for the period of April 2019 to March 2020 stood at 602.14 million tonnes which is 0.8% lower than 606.89 million tonnes produced in the corresponding period of the previous year.

Coal offtake in March also registered a decline. The offtake amount stood at 53.45 million tonnes in March, 2020 compared to 59.60 million tonnes in same month of last year, registering a decline in offtake by 10.30% on a month-on-month basis. For the period of April 2019 to March 2020, total coal offtake stood lower by 4.3% at 581.73 million tonnes compared to 608.14 million tonnes in the corresponding period last year.

Consumers’ Concern 1. Request for exemption of advance payment through moratorium for Power sector: Amidst unprecedented nationwide lockdown, partial or complete closure of many industries has further reduced the already subdued power demand. Many power plants are already running at low Plant Load Factor (PLF).

10 | CCAI Monthly Newsletter March 2020

Also, a number of central and state government power houses are facing severe cash crunch due to non-payment by discoms. Private power utilities are also facing the brunt due to the same. This situation may not be temporary and might have a cascading effect on to generating units for a longer period.

To tackle the present situation, Power Sector consumers have requested the Coal Ministry to provide exemption of advance payment against coal supply for secured quantities under vari-

ous E-Auctions for a corresponding period of 3 months through a moratorium

2. Requesting extension of timeline for coal value deposition for both Power and Non-power sector: Due to the nationwide lockdown, it has become difficult for a number of coal consumers to deposit payment within revised timeline and lift material against DO already issued within the existing validity.

Request has been made to CIL to allow extension of timeline for deposition of coal value for both E-auctions and FSA consumers for at least 15 days from the day lock down is lifted

3. Request for Policy formation for Usance LC for both sectors: Consumers have requested for a policy for implementation of Usance Letter of Credit (LC) as an additional mode of payment along with Irrevocable Revolving Letters of Credit (IRLC) for FSAs and Linkage coal by Road Mode as well to remit Coal Value.

4. Further Extension of RDO validity for both Power Sector & NRS: Following appeals by coal consumers across all sectors amid the ongoing crisis situation, CIL’s Subsidiary coal companies have extended the RDOs for a specific time period. However, as the nationwide lockdown has been announced till 14th April and the situation will take more time to get back to normal.

Request has been made for further extension of the validity of DOs (from a minimum of 45 days to the extent possible) so that MSQs of the consumers do not get lapsed.

5. Restarting of E-auctions for Industries and Power Utilities: In spite of the nationwide lockdown in March, many Power Plants and manufacturing units

have continued to operate at their highest possible capacity to ensure uninterrupted supply in the market.

Although they have been receiving coal supplies under Fuel Supply Agreement (FSA) during the lock down period, but the supplies under e-auctions may be completed shortly. Most of our member entities depend on both FSAs and E-auctions for meeting their coal requirement.

Hence, in order to sustain operations, it is requested to kindly consider restarting offer of coal under various e-auctions soon.

6. Inability to accept new rakes as storage capacity at power plants and factories are full Several Power plants and industries are going through complete or partial closure due to the present situation. Many of the consumers are also unable to accept new rakes at this point as their storage capacity at the factory and plant ends are already full.

Further, unloading of coal has become difficult at private sidings and factories without availability of workforce. Therefore, it is requested that coal companies may work in sync with the Railways in taking the decisions so that these plants are not over burdened with the supply.

Consumers have also appealed CIL to refrain from penalising the consumers for not accepting coal rakes/allotted quantity under the FSA during this period

7. Reserve price to be kept same as notified price in the forthcoming auctions for both sectors: Due to increase in stock at CIL Collieries and reduced dispatches in March,2020, the consumers have requested CIL to keep the Reserve Price same as the Notified Price for the forthcoming Spot/ Exclusive/Special Forward auctions without charging any add-on.

CCAI Monthly Newsletter March 2020

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8. Request for conversion of RcR to direct Rail mode during lockdown for power utilities and industries: Presently distantly located customers are facing problems to manage road transportation of coal at mine end.

It is requested that quantity allocated under RcR mode may be converted to direct rail mode for the convenience of long distance customers.

Consumers have appealed for refund of all eligible dues based on coal value, EMDs, Quality based refunds etc. Subsidiaries may consider return of coal value and EMD immediately in case of lapsed quantity as well.

— RAILWAYS —

13. Inability to accept new rakes amid nationwide lockdown as storage ca9. Prayers for acceptance applica- pacity at power plants and factories tions/correspondences online: are full: Under the present circumstances, request has been made to CIL and its Subsidiaries for acceptance of all applications/ correspondences online for supply of coal. Scan copies of deeds/ affidavits may also be considered under the condition of submission of originals after normalisation of situation.

Owing to the ongoing lockdown, many plants have inadvertently opted for partial or complete closure. Therefore, many consumers are not able to accept coal rakes at this point as the storage capacity at their plants and factories are already full. Also, unloading of coal at private sidings and plant ends has become difficult without availability of workforce.

10. Third Party Sampling issue for both Under the current situation, it is requested that the sectors: Railways may work in sync with the CIL SubsidThe consumers have suggested that in case of non-sampling at loading end by TPA (CIMFR), FSA provision of extrapolation of most recent preceding month weighted average results of sampled quantity on non-sampled quantity need to be considered by CIL

iaries in taking the decisions so that these plants are not over burdened with the supply of new rakes.

14. Request for exemption of advance payment for booking of rakes: Under the current situation, Power Utilities and

11. Request to Subsidiaries for imme- Industries are facing major cash crisis due to diate return of BGs to the Utilities and lack of production. The situation might have a Industries: lingering effect on their business in the coming A request has been made to the consumers from both Power and non-power sector to consider immediate return of Bank Guarantees (BGs) which are not required to be retained by the Coal Companies. BGs expiring shortly for FSAs and Linkage schemes may be exempted from further extension.

12. Appeal for refund of all eligible dues of Regulated Sector &NRS Consumers:

12 | CCAI Monthly Newsletter March 2020

few months even after the lockdown is over.

The Railway has been requested to provide an exemption on advance payment for booking of rakes for a period of upto three months.

CCAICCAI Monthly Monthly Newsletter Newsletter November March 2019 2020

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POWER Covid-19 lockdown impact: Pow- A Covid blow to power producers er demand drops as offices stay as discoms stop payments plugged out TCovid-19 is expected to deliver a big blow to India’s electricity demand plummeted this week as factories and offices were forced to close due to the Covid-19 lockdown. Peak demand touched a low of 135 GW against an average of about 155 GW in March last year, pushing spot power prices on the Indian Energy Exchange (IEX) to a near-record low.

The price discovered on the IEX Day Ahead Market for delivery was at ₹1.95 per unit. The spot power price hit a low of ₹1.90 per unit in June 2017 due to excessive rainfall.

Sources said the closure of offices and factories, reduced buying by state distribution utilities and the Indian Railways stopping passenger services resulted in the slump. Demand from the industrial hubs of Maharashtra, Gujarat, Rajasthan and Tamil Nadu besides that from Punjab’s farmers dropped substantially. However, there was some respite for power generators as hot weather conditions in southern and western India led to higher demand

14 | CCAI Monthly Newsletter March 2020

the power sector as distribution companies have stopped payments to power producers as state electricity departments are not taking coercive actions to recover bills from consumers.

This has put a question mark on recovery of payments from the current month by distribution companies and from the month of January (due in March) by electricity generators, industry insiders said.

Also, some states have stopped releasing power subsidies, majority of which are released every year towards closing of the fiscal. “Of course for us or anyone in India, dealing with this unprecedented pandemic is a priority. This was unforeseen and might create temporary inconveniences across power and other sectors,” an official in Rajasthan government told ET. A senior bureaucrat in Uttar Pradesh said the state is focused on providing continuous power supply, specially to districts that are facing lockdown to contain the spread of Covid-19.

Recovery of electricity dues by state discoms takes place in a big way in March. “Recoveries have been significantly impacted due to precautions being taken for Covid-19. State governments are also refraining from taking any coercive measures for recoveries and the situation is not likely to improve in the near future,” said an executive in a power company.

sliding in the world markets since January 2019 – about 40% – but that doesn’t seem to raise the capacity utilisation level of India’s gas-based power plants, most of which are stressed. According to sources, even such a big fall in LNG prices hasn’t made the domestic, gas-based power units viable and attractive for discoms to buy electricity from.

States have been paying monthly bills to power generating companies since August last year when the power ministry mandated maintenance of bank guarantees by discoms in favour of power plants. However, the accumulated dues have not been liquidated and are rising due to penalties.

“Cost of gas, which includes landed cost of LNG imports, regasification and transportation costs, is still high and uncompetitive in relation to coal-based plants,” a source said. Domestic gas production has plummeted over the years. Reliance Industries’ KG DG gas output, which peaked at 69.43 million standard cubic meter per day (mmscmd) in March 2010 is now stagnating at abysmally low levels, with the asset at “late life stage”.

India's coal-based power plants to run at average 56.5 per cent PLF next fiscal: Minister Coal-based power plants in India are likely to run at an average 56.5 per cent Plant Load Factor (PLF), an indicator of efficiency, in financial year 2021-22, power minister R K Singh has said.

He was responding to a question asked in Parliament on whether only 48 per cent of the capacity of thermal power plants in the country is expected to be tapped by 2022. "As per the extant of National Electricity Plan, the installed capacity of thermal power plants of the country is likely to be 243,037 megawatt (MW) in 202122 out of a total projected installed capacity of 479,419 MW. The PLF of coal based capacity in 2021-22 is likely to be 56.5 per cent," he said.

He also said power generators supplying under power purchase agreements will not suffer financial loss due to under-utilization of their capacity as they are entitled to full recovery of fixed charges from the beneficiaries subject to achieving the normative availability.

As much as 24,900 mega-watt of gas-based power stations continue to operate at very low utilisation levels (see chart); in fact their plant load factor has declined in recent months.

Though touted as one of the cleanest source of reliable power, the share of electricity from gasbased power plants remain less than 4%. Union power minister RK Singh told FE that the government is considering a scheme for gas-based power plants, but said it would necessitate all stakeholders to make some sacrifices. “For example, the states such as Gujarat and Andhra Pradesh where LNG lands and where they are regasified, they have to reduce their sales tax so that gas-based power can be purchased by discoms at tariffs that are viable ,” Singh said

How coal-power policy has unplugged independent producers

Power ministry wants levies on LNG value chain to be removed

Over the last decade, India’s coal-based power generation capacity increased by nearly 2.5 times to 198 giga-watts (GW), courtesy an investment rush by the private sector, which now controls 47 per cent of the total coal-power capacity. The share was less than nine per cent in 2009.

Price of liquefied natural gas (LNG) has been

Higher stakes should ensure more favourable CCAI Monthly Newsletter March 2020

| 15

terms for the private sector. But the reverse happened.

According to the Association of Power Producers (APP), Independent power producers (IPPs) are facing a double-whammy in the form of competitive bidding both for fuel purchase and long-term electricity sales to distribution utilities (DISCOMs).

In contrast, the public sector, led by NTPC, gets fuel at the price notified by Coal India (CIL) and sells electricity on a “cost-plus” basis to DISCOMs. In a petition before the Delhi High Court, on February 4, the APP said that such discrimination is not merely against the original policy promises, but also against the November 2018 recommendations of a High-Level Empowered Committee, headed by the cabinet secretary.

The petition was filed challenging the constitutional validity of recently held linkage auction under the Scheme for Harnessing and Allocating Koyla (coal) transparently in India (SHAKTI) for utilities that did not have a PPA. Failure to secure a PPA within a stipulated time will cost IPPs the bank guarantee.

Muted demand brings spot power rates to low levels Lower power demand induced by coronavirus has driven down spot electricity prices with ‘day ahead market’ rates for March 25 delivery falling down to Rs 1.95/unit. The spot power rate was Rs 3.3/unit in the same day last year. The volume of spot power contracted for March 25 through the Indian Energy Exchange (IEX) is 77.5 million units (MU), 43% lower than last year’s amount.

The average clearing price at the Indian Energy Exchange (IEX) for the last 4 days is Rs 2.15/ unit. Due to dearth of demand, the volume of power offered for selling in the exchange was 2.5 times more than the bids to buy electricity.

“This situation presents a compelling opportu-

16 | CCAI Monthly Newsletter March 2020

nity for distribution utilities to optimise costs, thereby reducing their financial stress,” Rohit Bajaj, business development head at IEX said.

The daily power demand in the country has fallen by 10.7% since March 16 with most parts of the country going under shutdown due to the outbreak of the coronavirus. Electricity requirement on March 24 was 3,133 million units (MU), sharply down from the 3,507 MU supplied on March 16.

Power generators decline to take fuel supplies from Coal India subsidiary, stops payment Almost all power plants buying fuel from Coal India subsidiary, Central Coalfields, are refusing to accept supplies and have stopped making payments, it said in a statement issued.

According to the statement, most of its power sector consumers have started regulating coal receipt by filing lesser or no rail movement programs at all.

Following increased production and supplies from the subsidiary, fuel stocks at most these plants are adequate for 35-40 days, one of the highest ever, prompting them to regulate receipt of the dry fuel.

This has resulted in, stocks at Central Coalfields, which came down to lowest level of 3.1 million tonnes in October last year, to rise to more than 10 million tonnes at present, one of the highest.

In order to ease stocks at its pits, the subsidiary is making efforts to maximize dispatch.

India's electricity supply rises 7.1% in February on strong demand India's electricity supply rose 7.1 per cent during February, provisional government data showed, marking the second straight month of growth after five straight months of decline.

Power supply rose to an average of 3.62 billion

units per day in February, up from 3.38 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.

Higher electricity supply could mean a rise in power demand, as electricity deficit in India is marginal. Electricity demand is seen by economists as an important indicator of industrial output.

Annual consumption of electricity by industry accounts for more than two-fifths of India's annual electricity consumption, according to government data, with residences accounting for nearly a quarter, and commercial establishments another 8.5 per cent..

Maharashtra, Punjab Cabinets to soon decide on tariff revision for Tata Power’s Mundra unit The Maharashtra and Punjab governments are understood to be taking up a proposal with their respective Cabinets to provide relief to Tata Power’s troubled Mundra generation plant. The proposal is related to revision in tariffs for the 4,150 MW unit.

Gujarat had approved tariff hikes for electricity procured from the plant to compensate for abnormal rise in coal prices in Indonesia from where the company sources the fuel. According to sources, Rajasthan and Haryana — the two other states having power supply contacts with the plant — are still deliberating on raising tariffs.

The estimated revised rate – seen to be around Rs 3/unit, up from Rs 2.7/unit – is significantly lower than the average tariff range of Rs 3.5-4/ unit at which these states buy thermal power.

The Mundra unit had been losing Rs 0.32 for ev-

ery unit of electricity produced during Q3FY20, and reported a loss of Rs 160 crore for the quarter.

In a recent meeting with the buying states and Tata Power, the additional solicitor general is said to have suggested that the PPAs could be modified with each state separately. Rajasthan and Haryana will have the option of either buying power at the revised rates, or allow the plant to sell their share of electricity to Gujarat and Maharashtra. If the latter happens, Rajasthan and Haryana will receive 20% of fixed charges as penalty.

India to add 25,750 MW of solar power capacity under PM-KUSUM scheme by 2022 The government is aiming at 25,750 megawatt (MW) of new power generation capacity from solar plants under the ambitious Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme by 2022.

"Under the scheme, a total of 25,750 MW of renewable power capacity would be created by 2022 with a total central financial assistance of Rs 34,422 crore including the service charges to the implementing agencies," power and renewable energy minister R K Singh said in a written reply in Parliament.

He also said the installation of this solar capacity and savings in diesel consumption due to installation of 17.5 lakh standalone solar pumps under the PM-KUSUM scheme are likely to save emission of 27 million tonnes of carbon dioxide (CO2).

The ministry of new and renewable energy had launched the scheme last year with three components -- installation of 10,000 MW capacity through small renewable energy-based power plants of capacity up to 2 MW each on barren or fallow land of farmers; installation of 17.5 lakh standalone off-grid solar water pumps; and solarisation of 10 lakh existing grid-connected agriculture pumps.

CCAI Monthly Newsletter March 2020

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A total of 8,004.64 MW of renewable energy capacity has been installed during the April-January period of 2019-20 as compared to 5,978.47 MW installed during the same period of the previous year.

Solar tariffs increase in Gujarat auction Solar tariffs increased to Rs 2.61 per unit compared with Rs 2.50 per unit in the last auction conducted in February.

Vena Energy, Juniper Energy and Tata Power won 40MW, 190MW and 120MW at tariffs of Rs 2.61, Rs 2.63 and Rs 2.64 per unit, respectively in an auction conducted by Gujarat's main distribution company, Gujarat Urja Vikas Limited (GUVNL) for 350MW of solar capacity.

A GUVNL executive told ET last week that although the size of the tender is 500MW, only 430MW of bids were received, forcing the discom to scale down allotment. "We were expecting to get at least 700-800MW, but somehow people have not participated," said the executive, who spoke on the condition of anonymity.

In a solar auction conducted by the renewable energy ministry’s nodal agency Solar Energy Corporation of India (SECI) last month, the lowest winning tariff was Rs 2.50 per unit.

The ceiling tariff for this auction was set at Rs 2.65 per unit. Industry executives told ET that it is too competitive, especially given that the practice of setting a ceiling tariff is being done away with.

Coronavirus pandemic dims India’s solar prospects The global coronavirus outbreak that erupted in China, the world’s biggest supplier of solar equipment, has India’s project developers staring at delays and losses that could seriously compromise the government’s targets of adding renewable power capacity in the country.

Shipment delays and production losses have disrupted the supply chain that would likely

18 | CCAI Monthly Newsletter March 2020

splinter tight installation schedules in India at a time when slowing growth in the solar sector was already causing concern.

Nearly 3 GW of solar projects in India, worth some INR 160 billion (USD 2.12 billion), could be at risk of penalties for missing their scheduled commercial operation date if the impact of coronavirus on trade with China is prolonged, according to an analysis by Crisil, the India arm of rating agency Standard and Poor’s.

“These projects are now in the process of either placing orders or receiving delivery of modules,” Manish Gupta, senior director at Crisil Ratings, said in a statement. “Hence, any delay at this stage can prove costly.”

Increased costs The stoppage is likely to harden cost of projects, besides impacting completion schedules, according to industry associations. “Solar prices are expected to rise with the cost of PV (photovoltaic) modules increasing, as a result of the virus outbreak,” the Confederation of Indian Industry, a lobby group, is reported to have said in a presentation. “This is due to a shortage in module glass and wafers needed to create these systems.”

To cushion the immediate shock of disruption, India’s finance ministry has notified that solar projects will be given relief through extension of completion deadlines under Force Majeure provisions, which invokes extraordinary events or circumstance beyond human control.

India has set a target of installing 175 GW of renewable energy by 2022. The success of the renewable energy market is crucial to India’s achieving its Paris Climate Agreement targets.

The South Asian nation has committed to reducing greenhouse gas emissions intensity of its gross domestic product (GDP) by 33-35% below 2005 levels by 2030, and to reaching 40% of installed electric power capacity from nonfossil sources by the same year. Disruptions due to the coronavirus epidemic might compromise the government’s targets.

With Best Compliments From:

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

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CCAI Monthly Newsletter March 2020

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DOMESTIC India's coal stocks breach 100 mt as demand weakens in coronavirus crisis

peaked to a new high of 3.17 mt on 20 March 2020 - the highest ever single day production so far - overtaking the 3.14 mt production recorded on 25 March 2020.

India's coal stocks breached 100 million tonne (mt) as power demand weakened, leading to lower coal sales since the outbreak of the novel coronavirus.

Before the Covid-19 outbreak in the country, around 4.5 mt of stocks was getting added every month on the average, however, in March 2020, the net stock addition is expected to be around 11-12 mt.

Coal India officials said the company continues to produce around 2.5 mt of coal daily, but less than 2 mt was dispatched to the power sector in the past 15 days which led stocks to pile up drastically in its pitheads.

While the coal stocks in the Maharatna company peaked to around 60 mt, coal stocks in power plants rose to 41.41 mt – the highest ever inventory level in the country till date.

Despite the overstock situation, coal output had

20 | CCAI Monthly Newsletter March 2020

In fact, during the first 15 days of this month, when the scare around Covid-19 surfaced, electricity consumption stood at 51 billion units (BU) which is 3.6 per cent lower than the demand in the same period in 2019.

According to data from Central Electricity Authority, the coal stock is enough for plants to produce power for 24 days without any supply from Coal India.

Coal India postpones year-end coal stock measurement amid COVID-19 spread Coal India has postponed its annual stock measurement from April 1 to April 15, following advisory issued by the government and cancellation of train movement due to threat posed by outbreak of pandemic COVID-19.

Every year, the company engages an external agency to take stock of inventory at some 360odd mines operated by its seven coal producing subsidiaries. The exercise is related to ascertaining annual accounts of the company.

This time, following spread of Coronavirus, the exercise will be completed on April 27. According to a notice issued by the company, physical stock measurement is to be completed within seven days, by April 22.

Reports will have to be submitted to subsidiaries by April 25 and final report has to be submitted to Coal India by April 27.

Coal India is also working on the possibility of using drone to measure its inventory to accumulate data faster. The project was postponed as an initiative to stop leakages and strengthen the company’s balance-sheet. Over-reporting in production has an inflationary effect on the company’s earnings.

Centre Moves To Exempt Coal, Mining & Packaging Units & Their Transport Amid Lockdown The home ministry issued fresh guidelines covering additional people and services which will be exempted from the 21-day lockdown.

In the new guidelines, those people handling coal mining activities, inter-state movement of goods/cargo, cross-land border movement of essential goods including petroleum products, LPG and medical supplies are exempted. Along with these and customs clearance at ports, airports and land borders are also exempted.

Earlier, in line with Prime Minister Narendra Mo-

di's assurance to provide essential services and commodities amid lockdown, Union Minister Dharmendra Pradhan took stock of the supplies of liquefied petroleum gas (LPG), petrol and diesel to ensure their uninterrupted service.

The Petroleum Minister's assurance is crucial amid the coronavirus outbreak as petrol and diesel are crucial for the transportation of essential goods and services across the country, while more importantly, LPG is extremely essential for cooking purpose.

The lockdown was announced by the prime minister in a bid to combat the coronavirus pandemic. As of date, India has reported over 650 confirmed positive cases of COVID-19.

Meanwhile, twelve people have died so far due to the deadly virus.

Govt is asking states to stop thermal coal imports: Pralhad Joshi Asking states to stop thermal coal imports, the government in Rajya Sabha said that a lobby was active in some states that was behind dryfuel imports despite sufficient domestic stock.

Replying to a query in the Upper House during Question Hour, Coal Minister Pralhad Joshi said India houses the fourth largest resources in the world yet thermal coals were being imported which should be stopped.

"There is no hesitation in saying that in many states some import lobby is also working.

Though in last three-four months we have enough stock some of the Gencos are importing. This is the major problem," Joshi said.

Making it clear that he was not politicising the issue, the minister said many states are importing thermal coal which is substitutable.

"I have written to all chief ministers including of Madhya Pradesh, Uttar Pradesh, Chattisgarh, Punjab, Rajasthan, Maharashtra, West Bengal, Telangana, Jharkhand and Tamil Nadu requesting them to direct all Gencos to maximise the coal lifting and stop coal imports," he said.

The minister said he has also asked Power Minister R K Singh to ask NTPC to totally stop the CCAI Monthly Newsletter March 2020

| 21

imports.

All thermal power plants have a stock of 23 days which is the highest ever in recent history, he added.

The minister cautioned states to utilise domestic coal on a priority basis as the present stock has a maximum life of 30 years.

Parliament passes law to open coal sector for commercial mining Parliament passed a bill that will remove enduse restrictions for participating in coal mine auctions and open up the coal sector fully for commercial mining for all domestic and global companies.

The Mineral laws (Amendment) Bill was passed in Rajya Sabha with 83 MPs voting in its favour and 12 against. The Lok Sabha has passed the bill.

Replying after a brief discussion on the bill, Coal Minister Pralhad Joshi said the legislation will help in bring more FDI in the coal and mining sector, and boost economy.

The minister said the bill was important as India should be using its own natural reserves, instead of importing coal worth Rs 2.7 lakh crore.

"We have to produce coal and reduce imports," he said adding more domestic output would lead to more electricity generation and also cut oil import bill.

The minister also assured the MPs that the government will strengthen the state-owned Coal India Limited. "CIL will be strengthened. I have already given it a target to produce 1 billion tonne by 2023-24...There will be no problem in CIL,", Joshi said.

According to the minister, the legislation will bring a "sea change" in the sector. Joshi said the stress should be on exploiting reserves without harming the environment.

22 | CCAI Monthly Newsletter March 2020

India lockdown: Ports declare force majeure, ship operations go awry India's three-week nationwide lockdown to contain the deadly coronavirus pandemic will delay both imports and exports of commodities such as crude, coal, iron ore, vegetable oils and refined energy products as several ports have declared force majeure, while shipping operations across its sprawling coastline are going awry.

India was amid a two-week quarantine on all ships when the lockdown was imposed, and it comes at a time when the country was stepping up import of cheaper crude oil, whose prices are at multi-year lows, as well as coal and vegetable oil, in addition to exports of gasoil and jet fuel.

Close to half a dozen ports inlcuding Krishnapatnam, Dhamra, Mundra, Tuna, Gopalpur, Karaikal and Gangavaram have declared force majeure, according to letters issued by the respective port authorities, copies of which were seen by S&P Global Platts.

While India's federal government has issued an order declaring the transportation of goods by water -- including loading and unloading -- an essential service, it has also permitted port authorities to declare force majeure. As a result, operations at several ports are badly hit, according to shipping sources.

RAILWAYS

Indian Railways set for big change! Cost of carrying freight to come down with Dedicated Freight Corridors Dedicated Freight Corridors Project boon for Indian Railways! The cost of carrying freight is likely to come down with the implementation of two Dedicated Freight Corridors! Recently, Railway Minister Piyush Goyal in a written reply

told the parliament that the Railway Ministry is implementing two Dedicated Freight Corridor (DFC) projects – 1,856 Km long Eastern Dedicated Freight Corridor (EDFC) from Ludhiana to Dankuni and 1,504 km long Western Dedicated Freight Corridor (WDFC) from Dadri to Jawaharlal Nehru Port Trust. Both the DFCs are targeted to be completed in phases by December 2021.

Goyal said the overall physical, as well as the financial progress of these two corridor projects at present, is 70 per cent and 68 per cent, respectively, according to a PTI report.

On February 28, 2014, a concession agreement was signed between the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) and Railway Ministry, stipulating the modalities to operate the freight trains of Indian Railways on DFC network.

According to the Railway Minister, the DFCs have been designed to run freight trains up to a maximum speed of 100 Km per hour with an axle load of 25 tonnes.

STEEL

Coronavirus: Steel ministry asks PSUs not to cut production The steel ministry held a meeting with management of PSUs under its control to take stock of the situation amid the coronavirus outbreak, and asked them not to reduce production.

Steel Secretary Binoy Kumar chaired the meeting, via video-conferencing, in which senior officials of SAIL, RINL, NMDC, MOIL and KIOCL, among others, participated, sources said.

"They were asked about their preparedness at their plants and units in the wake of outbreak of coronavirus. They (PSUs) have been asked to produce as usual and not reduce production," one of the sources said.

SAIL has implemented various preventive mea-

sures across its plants, units and offices to contain spread of the virus. Quarantine facilities and isolation wards have been prepared at SAIL hospitals.

The company has restricted travel of its employees and the majority of the meetings are being conducted through video-conferencing.

At RINL, biometric attendance has been suspended. An isolation ward has been arranged with a quarantine facility at the Vizag plant.

NMDC has asked its staff to work from home and the company's offices and buildings across the country are being sanitised.

Besides special arrangements are also being made at its healthcare centres to deal with the virus. Large gatherings have been prohibited, entry of non-company staff is being scanned using thermal scanners.

Steel ministry wants states to ensure free movement of the alloy, inputs Even as the Centre and states battle Covid-19 with lockdowns and other steps to ensure social distancing, the Union steel ministry has urged state governments to issue suitable instructions to allow un-restricted inter-state movement of trucks carrying raw materials and finished steel in order to maintain an efficient supply chain.

Steel secretary Binoy Kumar wrote to state chief secretaries arguing against imposition of any restrictions on the operation of steel plants, entry-exit of workers engaged in these plants, movement of raw materials like iron ore, coal, limestone, dolomite, ferro-alloys, scrap, sponge iron, and intermediate or finished products to and from such plants.

The steel industry is facing difficulties in terms of shortage of labour and raw material supply owing to social distancing norms being enforced in view of the Covid-19 epidemic.

Industry sources said around 20 people are required both for loading and unloading a truck.

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Steel companies might face tough competition as China raises steel export rebate to 13% Indian steel mills are likely to face more competition from rivals across the border in China after Beijing sought to raise export incentives on the primary infrastructure alloy by a third to help cushion the impact of demand destruction at home and overseas. The Chinese move to raise export rebates to 13% from 10% for a large number of steel products might also prompt some Indian steelmakers to seek higher border tariffs if imports were to surge now.

“Increase the export tax rebate rate of 1,084 products to 13%…includes steel products such as hot-rolled coil, wire rod, cold-rolled strip, hot-dipped galvanized strip and stainless steel strip,” showed an official letter from China’s ministry of finance and state administration of taxation, dated March 17. The extent of competition and impact on pricing depends on the inventory pile-up in China, while the import percentage of steel from China has been reducing, said Indian Steel Association’s assistant general secretary, Arnab Kumar Hazra. “Thus, we need to wait and see if the imports surge,” he said.

Indian companies are more worried about Chinese prices getting even more competitive, affecting India’s exports.

“This move by the Chinese government will not just impact imports into India, but will have more impact on the international markets that Indians target, Many countries where we export might find China’s price cheaper. We need to focus on that,” said a spokesperson from ArcelorMittal Nippon Steel.

Govt spending pushes cement demand in Q4; manufacturers likely to earn this much on price hike The demand for cement – a major product used in infrastructure building – is expected to increase in the ongoing quarter. There has been

24 | CCAI Monthly Newsletter March 2020

an improvement in demand conditions from November 2019 in most parts of India.

“Cement stockists believe that demand improvement has been led by improved government spending after a decline in the first half of the current fiscal,” said a report by Emkay.

As per core industries data, cement production grew by 5 per cent on-year in January 2020 and we expect the same production growth in February, too, the report added. However, a high base of the last year and some impact on construction activities due to Covid-19 may restrict March 20 volume growth, which may lead to a 4-5 per cent on-year decline in the month, it further added.

The Rs 100 lakh crore spending to give infrastructure push has also played an important role to provide cushion to the weak cement consumption. Finance Minister Nirmala Sitharaman had unveiled Rs 102 lakh crore of infrastructure projects that will be implemented in the next five years as part of the government’s spending push in the infrastructure sector.

The increase in demand has also brought an uptick in cement prices. It is expected that average trade prices pan India are set to improve 1.5 percent on-quarter in Q4. Meanwhile, the demand for cement in India had been benign in recent months due to weak economic activity. Also, the industry is producing far less than its installed capacity. In the last fiscal the overall cement production was 337 million tonnes, compared to the full capacity installation of 537 million tonnes, according to the data provided

by Commerce Minister Piyush Goyal, in reply to a question in Lok Sabha.

CEMENT

Cement makers’ profitability to remain healthy next fiscal at 20%: Crisil Cement companies are set to report healthy operating profitability of about 20 per cent in

next fiscal on an expected recovery in demand driven by infrastructure and affordable housing, stable realisations, and benign input prices.

This fiscal, operating profitability is expected to touch a 7-year high of about 21 per cent, which translates to a 350-400 basis points (bps) onyear surge, according to a Crisil report.

Hetal Gandhi, Director, Crisil Research said: “Next fiscal, we anticipate volume growth recovering to 5-6 per cent from 0.5-1 per cent estimated for this fiscal. Demand growth in the infrastructure and affordable housing sectors on a lower base should support volume growth”.

“These two sectors together contribute almost 35-40 per cent of cement demand in India,” Gandhi added.

Cement prices are expected to remain stable in fiscal 2021 after high volatility seen this fiscal. The expected recovery in demand and high utilisation of clinker capacities at 78 per cent — because new capacity additions are skewed towards split grinding units – would restrict any steep decline in cement realisations, it said.

Crisil foresees input prices also remaining range-bound over the medium term, amid stable coal prices and downward pressure on crude oil and petcoke prices, though there could be short-term volatility.

The high profitability this fiscal has been driven by an estimated 5 per cent growth in cement prices and softer input prices (lower petcoke and coal prices resulted in a 6-7 per cent decline in power and fuel costs.

weakness in demand due to the spread of the coronavirus is likely to reduce the power and fuel bill of cement manufacturers dependent on imported coal.

The majority of Indian cement companies including Ultratech Cement, ACC, Ambuja Cement, Sree Cement and Prism Cement source around 70% of their coal requirement from abroad, while close to 30% is met from domestic coal.

As there are two components to usage of coal in cement manufacturing — power and fuel — industry experts and company officials are of the view that the drop in coal prices by 13% since mid-February and around 20% from its peak of $85 per tonne in May 2019 to $65 per tonne as of now will bring down the cost of electricity for cement companies dependent on coal-fired captive power plants, as well as the fuel cost for companies dependent on imported coal. This will positively impact the profitability of the firms as well.

Ravi Soda, senior vice-president at Elara Capital, told FE, “Those cement companies that are 100% dependent on captive power plants fired with thermal coal for their power requirements, are likely to see their electricity cost drop by Rs43 per tonne in Q4FY20, while the fuel cost for companies dependent on imported coal, is expected to drop by Rs’95 per tonne of cement sold.”

This has largely offset adverse movements and fluctuations in the prices of other inputs). This was despite slower demand growth during the fiscal, owing to lower spending by government departments and overall economic slowdown.

Power, fuel bill of cement companies to fall 13% as coal prices decline The over 13% drop in coal prices in the last one month over worries stemming from an overall CCAI Monthly Newsletter March 2020

| 25

GLOBAL Global coal plant development fell for fourth year running in 2019: research Global coal power plant development declined for the fourth year running in 2019, while a total of 13 gigawatts (GW) of capacity construction has been delayed so far this year due to the coronavirus, research by environmental organizations shows.

The annual survey of the global coal plant pipeline

by Global Energy Monitor, Greenpeace International, the Sierra Club and the Centre for Research on Energy and Clean Air showed a 16% drop last year in capacity under construction and development. This year, 15 plants with a total capacity of 13 GW have so far been delayed by workforce or supply chain issues related to the coronavirus outbreak. However, China’s approval of permits for coal plants has increased in an effort to stimulate its economy.

From March 1 to 18 this year, China approved more coal-fired capacity for construction (6.6 GW) than during all of 2019 (6.3 GW). Even with the overall fall

26 | CCAI Monthly Newsletter March 2020

in coal plant development in 2019, the world is not on track for the steep reductions in coal power necessary to meet goals to limit global warming, the report said.Scientists have said coal use needs to fall 80% by 2030 to keep global warming below 1.5 degrees Celsius.

Demand destruction to further depress coal prices in March European coal prices will remain at around multi-year lows in March on concerns the deadly coronavirus will further erode global demand and amid still low gas prices and ample supply.The API 2 front-month contract has dropped 4% since the end of January to USD 46.20/t – the lowest on a rolling basis since May 2016 – on Ice Futures.

The Cal 21 had fallen 5% to USD 56.75/t, only marginally higher than contract low of USD 56.20/t. “The fundamentals aren’t positive and could get weaker depending on coronavirus impact on demand,” said independent coal analyst Plamen Natzkoff, also pointing to the bearish influence of weak freight rates.

The Baltic Dry Index – which tracks global dry freight rates – was assessed last at 529 points, around 45% lower than at the start of the year, with already relatively weak global commodity demand and surplus tonnage exacerbated by the spread of the deadly coronavirus – known officially as Covid-19.

“I think coronavirus will be the main driver [of API 2 prices in March] simply because it is beginning to affect everything else,” said an analyst with a European coal trading firm. “While weather will of course play a role, as the cases of the virus spread across Europe, we could see it start to affect demand as control measures are implemented,” he added.

China’s benchmark power coal price drops slightly China’s benchmark power coal price dropped slightly during the past week. The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of coal prices in northern China’s major ports, stood at 551 yuan (about 77.8 U.S. dollars) per tonne, a drop of four yuan week on week, according to Qinhuangdao Ocean Shipping Coal Trading Market Co. Ltd. Released by the Qinhuangdao Ocean Shipping Coal Trading Market Co. Ltd. every, the BSPI is a leading indicator of China’s coal prices

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.

Will China build hundreds of new coal plants in the 2020s?

China’s 14th five-year plan (FYP), setting out its national goals for 2021-2025, will arguably be one of the world’s most important documents for global efforts to tackle climate change. The overarching plan for economic and social development in the world’s largest emitter is to be finalised and approved in early 2021, followed by more detailed sectoral targets over the next year.

A power sector plan can be expected around winter 2021-22. Ahead of the FYP’s publication, powerful stakeholders, such as the network operator State Grid and industry body the China Electricity Council, are lobbying for targets that would allow hundreds of new coal-fired power stations to be built. And a recent update to the “traffic light system” for new coal-power construction signaled further relaxation of permitting.

This is all despite significant overcapacity in the sector, with more than half of coal-power firms already loss-making and with typical plants running at less than 50% of their capacity.

The push for more coal power also appears at odds with China’s climate goals, including a target to peak its CO2 emissions no later than 2030. To reach this goal, low-carbon sources will need to cover any increases in energy demand, meaning less need for additional electricity generation from coal.

US coal exports dipped by 30% in 2019: EIA U.S. coal exports dropped 20% in 2019 from the previous year, hurt by the downturn in global coal demand, says the U.S. Department of Energy and its Energy Information Administration. In 2019, U.S. coal exports declined to 93 million short tons with both metallurgical coal and steam coal dropping, the EIA said in a report.

That is down from nearly 120 million short tons in 2018, it said. U.S. steam coal exports slipped by 30% in 2019 from 2018, while metallurgical coal declined CCAI Monthly Newsletter March 2020

| 27

by 12%, it reported. Steam coal is used for electricity generation with most U.S. steam coal coming from the Powder River Basin of Wyoming and Montana.

Metallurgical coal is used to produce coke for steelmaking. Most metallurgical coal comes from Appalachia. The top destinations for U.S. coal exports in 2019 were India, Japan, the Netherlands, Brazil and South Korea, the EIA said.

Together they accounted for 53% of U.S. coal exports.

India last year imported about 12.8 million short tons of coal from the U.S., it said. About 75% of India’s electric power is generated by burning coal, 85% of which was covered by domestic production and the rest was imported, it reported.

In 2019, India got 8.1 MMst of steam coal from the U.S., making it the No. 1 destination for U.S. shipments for the third year in a row, the EIA said. Japan’s imports of U.S. coal remained steady at 2018 levels, despite its steel production slipping by nearly 5%, it said.

Coal suppliers fear uncertainty over Indonesia's new shipping rules could hurt export demand Indonesian thermal coal suppliers and shipping companies are growing increasingly concerned as the May 1 implementation of a requirement to use local ships for exports draws closer, as the government has yet to define what it means by Indonesian-controlled ship, market sources said. Just 8.8% or 63 of the 717 coal ships plying the region are Indonesian flagged, according to Platts trade-flow software cFlow.

The country's Ministry of Trade announced the requirement to use Indonesian insurance and ships for exports in 2017 and subsequently delayed the implementation to May 1, 2020, to enable details of the plan to be ironed out..

The association said its members were concerned that coal exports could be disrupted given the increasingly limited time and lack of technical guidelines provided to facilitate the implementation. ICMA said its members were worried that overseas buyers may turn to suppliers in other regions instead amid a global oversupply of coal.

A source close to the matter said the Ministry of Trade had met with Indonesian coal miners to explain the May 1 changes "without providing definitions for Indonesian-controlled ships.' Without a clear definition of what classifies a ship as Indonesian controlled, market sources expected the most practical

28 | CCAI Monthly Newsletter March 2020

solution for ship owners would be to register their ships under Indonesian companies. The ICMA said it was continuing to appeal for a deferment of the May 1 implementation.

‘Unbridled exploitation’: Mining amendments a boon for Indonesia’s coal industry The coal industry in Indonesia, one of the world’s top exporters of the fossil fuel, has laid waste to large swaths of forest, polluted waterways, and disenfranchised local communities, observers say. Under a new deregulation bill being deliberated in parliament, things could get even worse, they warn.

The bill, one of two so-called omnibus bills containing more than 1,000 proposed amendments to at least 79 laws, calls for a loosening of several restrictions on mining companies to boost industry growth. This lifting of oversight shows the deregulation initiative is meant to maximize natural resource exploitation instead of ensuring sustainable extraction, said Satrio Swandiko, a climate and energy campaigner at Greenpeace Indonesia.

“The interests of the coal industry clearly play a huge role [in the bill] and have been accommodated by the government in the drafting of the bill,” he said. Among the key changes: Coal miners will be exempt from having to rehabilitate their concessions, as that requirement only applies to mining companies whose permits have expired. Many companies already shirk this obligation to rehabilitate mining sites, and the change could make the problem worse, said Muhammad Iqbal Damanik, a researcher at the environmental NGO Auriga Nusantara.

“We’ve investigated some mining sites with abandoned pits and there are many concessions that are no longer active but still have coal deposits,” he said, adding some had been abandoned for up to 10 years.

“In the end, they avoid their responsibility to rehabilitate [the concession]. Imagine if this was to be legalized under the omnibus law,” Iqbal said.

Coronavirus in China affects Africa construction industry The coronavirus has been slow to take root in SubSaharan Africa (SSA), but the number of cases is now beginning to grow and the construction industry is facing disruption stemming from the China shutdown. From imposing travel bans to barring mass gatherings and shutting down schools, governments

across Africa are increasingly implementing comprehensive measures in a bid to control the spread of the new coronavirus.

The emergency moves come amid a worrying rise in the number of infections registered in recent days across the continent after weeks of relatively few reported cases.

As of 19 March, 33 African countries combined had reported more than 600 cases and 17 deaths due to the virus, 150 cases alone were reported in South Africa.

Amid the worsening situation with regards to the coronavirus outbreak, GlobalData has cut its forecast for SSA’s construction output growth to 5.4% in 2020, from 6.0% previously.

Although the direct impact from the coronavirus has been limited to date, many countries in Africa are exposed to the knock on effects from the construction shutdowns in China. In recent years, China has emerged not only as SSA’s largest trading partner but as a large and fast-growing source of aid and the largest source of construction financing; these contributions have supported many of Africa’s most ambitious infrastructure developments in recent years.

As part of their increasing activity in overseas markets, Chinese companies have significantly boosted their engagement in Africa, covering a wide range of sectors. Africa is part of China’s ‘One Belt, One Road’ (BRI) initiative and with significant focus on coal and large hydropower projects.

South Africa’s high court first rejected the CTF’s legal challenge in March 2019. The CTF was then refused leave to appeal in the High Court in June of that year, and has now been denied leave to appeal in the Supreme Court of Appeal.

Ntombifuthi Ntuli, CEO of the South African Wind Energy Association (SAWEA), said the window for the CTF to appeal in the country’s Constitutional Court had also now closed.

“The CTF legal challenge was launched on the basis of arguments which had no legal basis and which demonstrated little appreciation of government’s clear commitment to achieving a more diverse energy mix that would build national energy security while also addressing national climate objectives and achieving local economic development," Ntuli said.

Australia set to retain its mantle as top met coal exporter The federal government's March Resources and Energy Quarterly stated the value of Australia's metallurgical coal exports reached a record high for a second consecutive year in 2018-19.

Export earnings increased to $44 billion in real terms, driven by high prices and, to a lesser extent, growing export volumes.

Metallurgical coal export earnings are projected to decline in real terms to $35 billion in 2021-22, as prices ease, before recovering to $38 billion in 2024-25.

South Africa dismisses coal lobby legal challenge

Export volumes are projected to grow solidly over the next five years, increasing from 184 million tonnes in 2018-19 to 205 million tonnes in 2024-25.

The Coal Transporters Forum (CTF) argued that Eskom had concluded the PPAs for the 27 wind and solar projects without following due process, and added that South Africa’s renewables procurement plan (REIPP) would harm the utility’s finances.

Higher export volumes will be driven by the ramp up of production at a number of mines, the largest of which is Qcoal's 10 million tonne per annum Byerwen mine in the Bowen Basin in Queensland.

But a Supreme Court judge dismissed the coal truckers’ application and confirmed the National Energy Regulator of South Africa (Nersa), the Department of Energy and Eskom all followed the correct procedures. The decision ends a long legal battle over the contracts signed in April 2018.

Developers won allocations in a tender in April 2015, but Eskom delayed signing the power deals — citing overcapacity and slump in energy demand — for three years.

The closure of a number of mines due to resource depletion is expected to weigh on export volumes towards the end of the next five years.

"The collapse of a roof at Anglo American's Moranbah North mine in Queensland in late January 2020 will weigh on production in the short term," the report states.

"Anglo American has revised down its metallurgical coal production guidance to 19-21 million tonnes for 2020 as a result of the accident, after producing 23 million tonnes last year."

CCAI Monthly Newsletter March 2020

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IN PARLIAMENT GOVT. OF INDIA MINISTRY OF COAL LOK SABHA Q. No. 468. PERCENTAGE OF ENERGY PRODUCED FROM COAL 05.02.2020 SHRI JAYANT SINHA: Will the Minister of COAL be pleased to state: ((a) the projected nation-wide percentage consumption of energy produced from coal with respect of other renewable energy sources in the next five years; (b) whether the Government is importing low-ash coal for energy production and if so, the details thereof and the reasons therefor; and (c) the steps taken to promote coal production in the country to meet the growing energy demand?

30 | CCAI Monthly Newsletter March 2020

ANSWER (a): According to the National Electricity Plan notified in 2018, the All India installed capacity is likely to be 479,419 MW in 2021-22 which inter alia consists of 217,302 MW of coal based capacity and 175,000 MW of RE based capacity. The installed capacity is likely to be 619,066 MW in 2026-27 which inter alia consists of238,150 MW of coal based capacity and 275,000 MW of RE based capacity. (b):As per the current import policy, coal is kept under Open General License (OGL) and consumers are free to import coal from the source of their choice as per their contractual prices on payment of applicable duty. Coal imported by power plants designed on i mported coal and high grade coal required for blending purposes are imported in the country as this cannot be fully substituted by

domestic coal. However, with enhanced domestic availability of coal, coal imports by power plants have fallen from 91.3 MT in 2014 15 to 61.66 MT in 2018 19 (c):Steps taken up for growth in coal sector which are expected to result in enhanced coal production.

1. Methodology for allowing allocatees of coal mines for specified end use or own consumption to sell upto 25% of actual production in open market (RoM basis) with payment of additional premium on such sale has been approved by CCEA on 19.02.2019 and order has been issued on 07.03.2019. Under this methodology, 10 mines have been allocated in the year 2019.

2. Miner al Laws (Amendment) Ordinance, 2020, has enabled the allocation of coal blocks for composite prospecting license cum mining lease (PL cum ML) which will help in increasing of the inventory of coal/ lignite blocks for allocation.

• With the With the promulgation of Mineral Laws (Amendment) Ordinpromulgation of Mineral Laws (Amendment) Ordinance, 2020, ance, 2020, the repetitive the repetitive and redundant provision requiring previous apand redundant provision requiring previous approval of proval of Central GovernmentCentral Government even in cases where the allocation or reservaeven in cases where the allocation or reservation of tion of coal/ lignite blockcoal/ lignite block has been made by the Central Governhas been made by the Central Government itselment itself has f has been done away with.been done away with.This would significantly reduce the time takenThis would significantly reduce the time taken for for operationalisation of operationalisation of coal/ lignite mines.coal/ lignite mines.

• Earlier, Earlier, thethe mines in Schedule II and III of Cmines in Schedule II and III of Coal Mines Special Provisionoal Mines Special Provision (CMSP) Act could only be auctioned to co(CMSP) Act could only be auctioned to companies mpanies that are engaged inthat are engaged in specified end use.

With the promulgation ofspecified end use. With the promulgation of Minerals Laws (Amendment) Minerals Laws (Amendment) Ordinance, 2020 has provided flexibility toOrdinance, 2020 has provided flexibility to the Central Government in the Central Government in deciding the end use of Schedule

II and III coaldeciding the end use of Schedule II and III coal mines under the CMSP mines under the CMSP Act.Act.This would allow widerThis would allow wider participation in aucparticipation in auction of Schedule II and IIItion of Schedule II and III coal mines, for a variety of purposes such as ocoal mines, for a variety of purposes such as own consumption, sale or wn consumption, sale or forfor any other purpose, as may be specified by the Central Government.any other purpose, as may be specified by the Central Government.

• Sections 4(2)Sections 4(2) and 5(1) of the CMSP Act and Section 11Aand 5(1) of the CMSP Act and Section 11A of the Mineof the Mines and s and Minerals Minerals (Development and Regulation) Act have b(Development and Regulation) Act have been amended een amended nownow clarifying clarifying that any company selected throthat any company selected through auction/ allotment ugh auction/ allotment can can carry on coal mining operation for own consumptcarry on coal mining operation for own consumption, sale or for any ion, sale or for any other other purposes, as may be specified by the Centralpurposes, as may be specified by the Central Government allowing Government allowing wider partiwider participation and competition incipation and competition in auction.

Thus, the companies auction. Thus, the companies which do not powhich do not possess any prior coal miningssess any prior coal mining experience in Indiaexperience in India can now can now participate in auction of coal blocks.participate in auction of coal blocks.

3. CIL has started the process of:CIL has started the process of: • Opening of 55 gOpening of 55 greenfieldreenfield projects having capacity of 92 MTPA and projects having capacity of 92 MTPA and expansion of 193 brownfield expansion of 193 brownfield projects having capacity of about 310 MTPA projects having capacity of about 310 MTPA in the next five years.in the next five years.

• Portal based monitoring of Portal based monitoring of onon--going projects to ensure timely completion going projects to ensure timely completion of projects.of projects.

• Introduction of Introduction of statestate--ofof-thethe--art technology to improve its work effart technology to improve its work efficiency iciency CCAI Monthly Newsletter March 2020

| 31

with high capacity with high capacity Heavy Earth Moving Machinery (HEMM), like 42Heavy Earth Moving Machinery (HEMM), like 42 cum cum Shovel and 240 T Rear Shovel and 240 T Rear Dumpers in Gevra Expansion, DipkaDumpers in Gevra Expansion, Dipka && Kusmunda open cast mines.Kusmunda open cast mines.

• Introduction of Introduction of Surface Miners Surface Miners in opencast mines in opencast mines to improve operationato improve operational l efficiency & to cater to environmental needs.efficiency & to cater to environmental needs. During 2018During 2018--19, aroun19, around 50% d 50% of the opencast coal of the opencast coal production in CIL was through Surface miners.production in CIL was through Surface miners.

• Introduction of IT enabled Introduction of IT enabled Operator Independent Truck Dispatch SysOperator Independent Truck Dispatch System tem (OITDS) in 11(OITDS) in 11 mines ofmines of CIL. CIL. • IntrIntroduction of Mass Productionoduction of Mass Production Technology in underground coal mines, Technology in underground coal mines, 2 mi2 mines are worked with Powerednes are worked with Powered Support Longwall technology and 9 Support Longwall technology and 9 mines are wmines are worked with Continuous Minerorked with Continuous Miner technology. technology.

• For rapid coal evacuation, 19r rapid coal evacuation, 19 nos. Coal Handling Plants with sinos. Coal Handling Plants with silos and los and rrapid loading system having apid loading system having existing capacity of 152.5 million tonnes are existing capacity of 152.5 million tonnes are in operation. in operation.

Q. No. 488. COAL MINING

05.02.2020 SHRI UNMESH BHAIYYASAHEB PATIL:: Will the Minister of COAL be pleased to state: (a) whether the Government has conducted cost benefit analysis of removing end user restrictions

32 | CCAI Monthly Newsletter March 2020

on coal mining in the country and if so, the details thereof; (b) whether the Government has estimates on the benefits likely to accrue from such a move and if so, the details thereof; (c) the details of the extent to which India’s reliance on imported coal can be reduced; and (d) whether mechanism has been devised to consider the environmental impact of removing end user restrictions on coal mining and if so, the details thereof?

ANSWER MINISTER OF PARLIAMENTARY AFFAIRS, COAL AND MINES (SHRI PRALHAD JOSHI) (a) to (c): The High Power Expert Committee (HPEC) constituted to examine efficacy and challenges in the current bidding system and suggest changes for conducting auction of coal mines in future, recommended gradual shifting from allocation of coal blocks for own consumption to allocation of blocks for sale of coal. With the promulgation of Mineral Laws (Amendment) Ordinance, 2020 on 10.01.2020, sub-section (3) of Section 4 of CMSP Act has been omitted. This would allow wider participation in auction of Schedule II and III coal mines, for a variety of purposes such as own consumption, sale or for any other purpose, as may be specified by the Central Govt. and would enhance competition in auction. Coal is under Open General License and can be imported by consumers from the source of their choice as per their contractual prices on payment of applicable duty. The entire demand of coking coal is not met due to limited domestic availability of high quality coking coal. To substitute import of coking coal with domestic coking coal, allocation of coking coal blocks has been done as well the tenure of coking coal linkage has been increased to 15 years. There may be some import of non-coking coal by power plants designed on imported coal and for blending purposes. As reduction in import of coal in the country is a priority area of the Government, production plan has been made to substitute the replaceable non-coking coal import. (d): Use of coal at various end user plants is governed by environment clearances granted to the specific plant and is not related to grant of environmental clearance for coal mining. As such, removal of the end use restrictions on coal mining will have no additional environmental impact.

RAJYA SABHA Q. No. -7. PROPOSED EASING OF NORMS IN THE COAL MINING SECTOR 03.02.2020 SHRI MD. NADIMUL HAQUE: Will the Minister of COAL be pleased to state: (a) the details of the proposed easing of end-use and prior experience restrictions in coal auctioning; (b) the details of sectoral problems that move will address; and (c) the expected benefits from this move?

ANSWER MINISTER OF PARLIAMENTARY AFFAIRS, COAL AND MINES (SHRI PRALHAD JOSHI) ((a) to (c): An Ordinance has been promulgated entitled 'Mineral Laws (Amendment) Ordinance, 2020' on 10.01.2020 for amendment in the Mines and Minerals (Development and Regulation) Act, 1957 [MMDR Act] and the Coal Mines (Special Provisions) Act, 2015 [CMSP Act].

Till now, the Schedule II and III coal mines under CMSP Act could only be auctioned to companies that are engaged in specified end use. Now, the omission of sub-section (3) of Section 4 of CMSP Act has provided flexibility to the Central Govt. in deciding the end use of Schedule II and III coal mines. This would allow wider participation in auction, for a variety of purposes such as own consumption, sale or for any other purpose, as may be specified by the Central Govt.

There was lack of clarity earlier in the language of the provisions in the Acts leading to restrictive interpretation of the eligibility conditions in the auction. Sections 4(2) and 5(1) of the CMSP Act and Section 11A of the MMDR Act have been amended now clarifying that any company selected through auction/ allotment can carry on coal mining op-

eration for own consumption, sale or for any other purposes, as may be specified by the Central Govt. allowing wider participation and competition in auction. Thus, the companies which do not possess any prior coal mining experience in India can now participate in auction of coal blocks.

Q. No. -11. HIGH DOMESTIC PRICE OF COAL 03.02.2020 SHRI T.G. VENKATESH: Will the Minister of COAL be pleased to state: (a) whether coal prices in the country which are very high compared with global prices, are due to inefficient mining technology or any other reason; (b) if so, the details thereof; and (c) whether Government is considering to provide any subsidies and sops to the domestic coal producers to compete with the international coal producers as regards the prices?

ANSWER MINISTER OF PARLIAMENTARY AFFAIRS, COAL AND MINES (SHRI PRALHAD JOSHI) (a) to (c): A Statement is laid on the Table of the House.

Statement referred to in reply to Rajya Sabha Starred Question No. 11 for 03.02.2020

(a) & (b) The pricing of coal has been decontrolled vide Government Notification through New Colliery Control Order, 2000 dated 01.01.2000. Consequently, coal companies are empowered to take decisions regarding pricing of coal. The Government does not play any role in it.

Out of the total coal produced for sale of coal CCAI Monthly Newsletter March 2020

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around 90% of coal is produced by Coal India Limited (CIL) during FY 2018-19 and hence information was collected from CIL. As per information received from CIL the price of non-coking coal, produced by CIL and its subsidiary coal companies are compared with global prices on the basis of Gross Calorific Value (GCV) parameter and are much cheaper as compared with global prices of coal. A comparative chart of domestic and international prices of coal is given below for reference.

Present Notified price of coal produced by CIL (Rs./ tonne) GCV range

6401-6700 (Kcal/kg)

5501-5800 (Kcal/kg)

4901-5200 (Kcal/kg)

4001-4300 (Kcal/kg)

3101-3400 (Kcal/kg)

Regulated sector

3144

2317

1465

955

748

Non-regulated sector

3144

2524

1757

1145

897

Indonesian coal indices assessed by Argus & PT coalindo (FOB Kalimantan) (Rs./tonne) GCV=5800 Kcal GCV=5000 Kcal GCV=4200 Kcal GCV=6500 (on GAR (on GAR (on GAR Kcal (on GAR basis), basis), basis), basis), ICI 1 ICI 2 ICI 3 ICI 4 4973 November 2019 (Data available only upto Nov. 2019)

4261

3523

GCV=3400 Kcal (on GAR basis), ICI 5

2440

1554

Argus Mcloskey coal price Index (Rs./tonne) FOB API2*

API4*

API5*

API6*

API8*

4007

5420

3638

4626

4542

*API2: CIF ARA (N-W Europe) API 6:FOB(Newcastle, Australia) *API4: FOB(RB) (South Africa) API8: CFR (South China)(5500 Kcal/kg) *API5: FOB(Newcastle, Australia) (5500 Kcal/kg) *GCV 6000 kcal/kg, TM 13%, Ash 8-16% for API indices 2,4 & 6

In India, out of total coal imported, more than 50% of coal is imported from Indonesia. At existing Notified/Free on Board (FOB) prices, CIL coal is cheaper to Indonesian coal on an average by 37%61% and the question of high price of coal in the country due to inefficient mining technology does not arise.

Regarding coking coal, it contributes only 8.5 % of the total production of CIL and is not comparable by any standard parameter viz. coking properties etc. with the international coking coal as was done in case of non-coking coal on the basis of GCV parameter. (c) Does not arise in view of replies to parts (a) and (b) above.

34 | CCAI Monthly Newsletter March 2020

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 * India's coal stocks breached 100 million tonne (mt) as power demand weakened, leading to lower coal sales since the outbreak of the novel coronavirus. Coal India officials said the company continues to produce around 2.5 mt of coal daily, but less than 2 mt was dispatched to the power sector in the past 15 days which led stocks to pile up drastically in its pitheads.

While the coal stocks in the Maharatna company peaked to around 60 mt, coal stocks in power plants rose to 41.41 mt – the highest ever inventory level in the country till date. * Coal India receivables from power companies crossed Rs 13,800 crore in February, increasing almost 71% since April 2019. A set of stategovernment owned power plants from Uttar Pradesh, West Bengal, Andhra Pradesh, Tamil Nadu and Rajasthan are not paying dues regularly on time which has inflated the overall receivables. All this has bloated the total receivables by Rs 5,700 crore this year. * India's coal imports registered a decline of 14.1 per cent to 17.01 million tonnes (MT) in February in the wake of the coronavirus outbreak, as per industry data. The country's coal imports in

36 | CCAI Monthly Newsletter March 2020

February last year stood at 19.82 MT. * Coal India is likely to produce 600-610 million tonnes and sell 590-600 million tonnes this year, about the same as last year. The company needs to raise output by 400 million tonnes to meet its target of 1 billion tonnes by 2024.

This requires its compounded annual growth rate to accelerate to 14% from the much slower 3.1% it achieved in the past four years

RAILWAYS * Indian Railways all set for a big boost! Soon, passenger train operations, freight train operations and many other railway areas will get a major uplift. Prime Minister Narendra Modi chaired Union Cabinet recently approved a Memorandum of Understanding (MoU) signed between Piyush Goyal-led Railway Ministry with Germany’s DB Engineering and Consulting GMBH for technological cooperation in the railway sector. According to a Cabinet release, the MoU was signed in the month of February 2020. The Railway Ministry further stated that the MoU for technological cooperation in Railway Sector will enable cooperation in many areas.

POWER * India’s electricity demand plummeted this week as factories and offices were forced to close due to the Covid-19 lockdown. Peak demand touched a low of 135 GW against an average of about 155 GW in March last year, pushing spot power prices on the Indian Energy Exchange (IEX) to a near-record low. * Lower power demand induced by coronavirus has driven down spot electricity prices with ‘day ahead market’ rates for March 25 delivery falling down to Rs 1.95/unit. The spot power rate was Rs 3.3/unit in the same day last year. The volume of spot power contracted for March 25 through the Indian Energy Exchange (IEX) is 77.5 million units (MU), 43% lower than last year’s amount. *Renewable energy projects have attracted investments of about Rs 1.34 lakh crore between April 2017 and January 2020. most of the grid connected renewable energy projects are being implemented by private sector developers selected through transparent competitive bidding process. India has set an ambitious target of having 175GW of clean energy by 2022 which includes 100GW of solar and 60GW of wind energy.

CEMENT * Several cement producers have responded to the coronavirus pandemic with plant closures.

Reuters has reported that India Cements has temporarily closed all of its plants. JK Lakshmi Cement has suspended cement production at its 4.2Mt/yr integrated plant in Jaykaypuram, Rajasthan and at three grinding plants. JK Lakshmi subsidiary Udaipur Cement Works has shut its 1.6Mt/yr integrated Udaipur plant, also in Rajasthan. * The domestic cement industry’s capacity utilisation is likely to moderate in FY20 to sub-

70% levels, says ICRA Ratings. The demand revival trend witnessed in recent months is likely to continue in the fourth quarter of FY20. This growth along with expected higher capacity additions at 20-22 million tonnes per annum (MTPA) in FY20/FY21 (17 MTPA in FY19) is likely to result in moderation of industry’s capacity utilisation in the current fiscal.

STEEL

* Indian steel mills are likely to face more competition from rivals across the border in China after Beijing sought to raise export incentives on the primary infrastructure alloy by a third to help cushion the impact of demand destruction at home and overseas.

The Chinese move to raise export rebates to 13% from 10% for a large number of steel products might also prompt some Indian steelmakers to seek higher border tariffs if imports were to surge now. * India's finished steel exports plunged 8% in February from a year earlier, their first decline in eight months, government data showed, as demand from traditional buyers in Europe and South East Asia contracted due to coronavirus outbreak. India, the world's second-biggest steel producer, shipped 570,000 tonnes of finished steel in February, as against 619,000 tonnes a year ago.

* The primary focus of National Steel Policy 2017 is installing a crude steel capacity of 300 MT in the country by 2030-31. The current installed capacity in crude steel stands at 147 MT and working capacity 3/13/2020 www.ccai.co.in Page 8 of 15 at 142 MT. Thus, the projection is to add around 158 MT steel in the next 12 years at a compound annual growth rate of 6.4%.

CCAI Monthly Newsletter March 2020

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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 66.33

INR 4943

-17.58

South Africa

5500 NAR

USD 51.28

INR 3822

-12.22

Australia

5500 NAR

USD 54.86

INR 4089

-3.65

Indonesia

5000 GAR

USD 47.30

INR 3525

- 4.74

Indonesia

4200 GAR

USD 32.44

INR 2418

-3.62

USA

6900 NAR

USD 52.07

INR 3881

-2.20

PET COKE

Sulphur

Price

India-RIL(Ex-Ref.)

-5%

INR 6790

Saudi Arabia (CIF)

+ 8.5%

INR 5608 ($75)

USA (CIF)

- 6.5%

INR 5757 ($77)

Exchange Rate

Change (Monthly)

USD/INR 74.53

2.80

Coking Coal Price: Premium Low Vol

FOB Aus CFR China 159.69

170.06

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

145.45

154.72

82.72

99.51

96.51

275.75

267.00

South Africa: *Mines in South Africa have been ordered to limit activities to care and maintenance procedures designed to avoid damage to underground working areas and other infrastructure and facilities required for continuous operations. *South African coal prices have fallen to around six-month lows as a lack of demand and bearish global sentiment weigh heavily on the market.

Broker Global coal’s Richards Bay index has plunged 20% over past week to USD 59.50/t – with more than 10 shaved off the value since Friday’s assessment. *As global coal majors get ready to exit S Africa, lack of funding leaves junior minors stuck. Coal

38 | CCAI Monthly Newsletter March 2020

majors Anglo American and South32 have sold or are in the process of selling their thermal coal operations to Mike Teke's local company Seriti Group, which with one other miner, Exxaro, is set to provide the vast majority -- about 80% to the country's largest electric public utility company Eskom.

Australian Coal News:

*Canada’s Brookfield Asset Management has put the US$2-billion sale or potential listing of its coal export terminal in Australia on hold due to travel restrictions amid the spread of coronavirus. The decision makes the Dalrymple Bay Coal Terminal (DBCT) the largest and most

high profile corporate transaction in Australia to fall victim to the volatile financial market conditions sparked by the epidemic. *Australia's highest court dismissed an appeal

by BHP Group against a tax ruling, the latest loss for the global miner over the treatment of profits from commodities sold out of its Singapore marketing hub.BHP said in a statement the decision offered clarity on the interpretation of a technical area of Australian tax rules, and it would pay $87 million in additional taxes for income generated over 2006-2018.

Indonesian Coal News:

* Indonesia’s government will revoke rules requiring exporters of coal and palm oil to use national shipping companies for the shipments, Luhut Pandjaitan, Coordinating Minister for Maritime and Investment Affairs said. Indonesia, the world’s biggest thermal coal exporter, in 2018 issued regulations requiring its coal and palm oil exporters to use domestic shipping companies starting in May. * The Indonesian government set its coal benchmark price (HBA) for March at $67.08 per tonne, higher than $66.89 in February. The benchmark price rose slightly as coal mine operations in China were affected by the corona virus epidemic, energy ministry spokesman, Agung Pribadi, said.

US Coal News:

* U.S. coal exports dropped 20% in 2019 from the previous year, hurt by the downturn in global coal demand, says the U.S. Department of Energy and its Energy Information Administration. In 2019, U.S. coal exports declined to 93 million short tons with both metallurgical coal and steam coal dropping, the EIA said in a report. *US coal use plunged more than 13% in 2019, the most in 65 years, as power plants shut down across the country. Total consumption slumped to 596-million tons in 2019 from 688-million tons in the prior year, according to the US Energy Information Administration (EIA). This year, the figure is expected to slip again, to 517-million tons.

Pet Coke News: * US petcoke prices dropped across the board with subdueddemand driven by the ongoing coronavirus pandemic, sources said this week. “[India] shut down,” a US-based source said. “More than many other countries. They’re shutting their ports, which is startling. More than surprising.” * Singapore—Mixed sentiment were reported in the Indian petroleum coke market with buyers and suppliers mostly awaiting on the sidelines to digest the impact of plummeting oil prices on the 6.5%high-sulfur imported material, sources said. Seaborne petroleum coke traders were wary that the 20%plummet in oil markers earlier this week could soften freight rates and weigh on the price of imported petcoke in India.

Shipping Update: * India's three-week nationwide lockdown to contain the deadly coronavirus pandemic will delay both imports and exports of commodities such as crude, coal, iron ore, vegetable oils and refined energy products as several ports have declared force majeure, while shipping operations across its sprawling coastline are going awry. India was amid a two-week quarantine on all ships when the lockdown was imposed, and it comes at a time when the country was stepping up import of cheaper crude oil, whose prices are at multi-year lows, as well as coal and vegetable oil, in addition to exports of gasoil and jet fuel. * The coronavirus epidemic is upending the carefully calibrated logistics of global shipping, as plunging exports from China disrupt the trade of American goods, especially farm products such as fruit and meat destined for Asia.

Commercial vessels have stopped arriving, with port calls falling by an estimated 30 per cent in February, and container throughput estimated to decline by between 20 and 30 per cent, according to Clarksons, a shipping research company.

CCAI Monthly Newsletter March 2020

| 39

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

MAR'20

APR'19 - MAR'20

ACTUAL ACTUAL THIS SAME % YEAR PERIOD GROWTH LAST YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

6.50

6.80

-4.4

50.41

50.16

0.5

BCCL

3.40

3.73

-8.8

27.73

31.04

-10.7

CCL

11.44

13.21

-13.4

66.89

68.72

-2.7

NCL

10.02

9.29

7.8

108.05

101.50

6.5

WCL

10.58

9.06

16.8

57.64

53.18

8.4

SECL

23.03

18.91

21.8

150.55

157.35

-4.3

MCL

19.25

18.06

6.6

140.36

144.15

-2.6

NEC

0.14

0.15

-6.6

0.52

0.78

-34.0

CIL

84.36

79.19

6.5

602.14

606.89

-0.8

OFFTAKE (Figs in Mill Te) SUB CO.

MAR'20

APR'19 - MAR'20

ACTUAL ACTUAL THIS SAME % YEAR PERIOD GROWTH LAST YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

5.07

5.80

-12.7

49.28

50.41

-2.2

BCCL

2.65

3.16

-16.0

28.75

33.07

-13.1

CCL

5.45

7.23

-24.6

67.16

68.45

-1.9

NCL

8.38

8.82

-5.0

107.42

101.57

5.8

WCL

5.19

5.54

-6.2

52.58

55.55

-5.4

SECL

13.25

14.77

-10.3

141.97

156.03

-9.0

MCL

13.36

14.19

-5.8

134.01

142.31

-5.8

NEC

0.10

0.10

0.5

0.56

0.75

-25.4

CIL

53.45

59.60

-10.3

581.73

608.14

-4.3

40 | CCAI Monthly Newsletter March 2020

CCAI Monthly Newsletter March 2020

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