Segment: Coal

Major Player: Coal India Limited

Market Share: 80 per cent
Other Players: Singareni Collieries Company, Reliance Natural Resources
India is the 3rd largest producer of coal. Coal production in India stood at 688.8
million tonnes in FY18. It stood at 576.00 million tonnes from Apr 2018 to Jan 2019
India’s coal production grew at a CAGR of 4.19 per cent between FY08 and FY18 to
reach 688.78 million tonnes. Coal production during Apr 2018-Jan 2019 stood at
576.00 million tonnes

Demand Outlook and Demand Drivers:

1. Power Generation:
 The power sector accounts for a large share of the consumption of coal in the
country followed by the iron and steel and cement segments. Power and cement
industries are aiding to growth in the metals and mining sector.
  In FY18, power generation in India was 1,206.31 TWh. Power generation in
India expanded at a CAGR of 5.53 per cent during FY08–18. It reached
1050.29 TWh between April 2018-January 2019 (provisional).
 Coal based power generation is forecasted to grow at a CAGR of 6.5 per cent
during FY18-FY23. This increase is expected to boost noncoking coal
consumption at a CAGR of 5.4 per cent to 1,076 million tonnes in FY23 from 826
million tonnes in FY18.
 Around 85.97 per cent of total power generation was done through thermal power
plants, while hydro and nuclear plants contributed 3.18 per cent and 10.46 per cent
respectively in FY18.
 There is also significant scope for new mining capacities in iron ore.

2. Policy support:
 In the coming years, coal production in the country is likely to receive a boost as
the government plans to replace the country’s captive mining policy in coal and
iron ore with an open bidding one
 100 percent FDI allowed in the mining sector and exploration of metal and non-
metal ores under the Automatic Route.
  During FY2017-18, 45.18 million tonnes of coal linkages have been auctioned for
the non-regulated sector.
3. Technological Advancements:
 Coal India Ltd is focusing on making best use of technology. It has ambitious
plans of using GPS/GPRS based vehicle tracking system to enhance productivity.
It also has services such as E-Auction, EProcurement of goods and services
 Mining Industry of India has been dominated by surface mining. However, due to
various challenges presented by surface mining, the move towards underground
mining is considered inevitable. This presents an opportunity for players to enter
the market with underground mining technology.\

Taxation on Coal (Impact of GST):

 Under the Central Excise Act and VAT under the state laws, coal is charged an
excise duty. There are a lot of hidden costs involved in the transportation of coal
within a state or interstate.
 An average VAT rate of 5-6% is charged on coal and other products generated
from the manufacturing of coal.
 Excise duty is levied on coal currently at an average rate of 6.8% after abatement.
Stowing excise duty is charged on coal and would not be subsumed under GST.
 Clean environment cess is also charged on coal at the rate of Rs 400 per ton.
 This has now been replaced with the GST Compensation Cess, at the same rate.
 Environment and development or forest and terminal tax charged by certain
states like Chattisgarh and Madhya Pradesh would continue and would not be
subsumed under GST.
 An average total tax of around 12% is charged on coal.
 The Indian government has reduced the tax burden on coal producers by placing
coal under the 5% tax bracket under the GST law.
 Transportation of coal from the coal mines to the factory or construction sites is
an expensive affair due to the service tax charged at the rate of 15% on the
transportation services. Under GST, the tax rate on transportation services
through rail has been charged at the rate of 5%.
 Existing coal-fired thermal power plants are likely to experience reduced variable
costs by almost 2 per cent under the GST
 Prices and Imports
 Crisil expects domestic coal prices to increase 10-12 per cent by FY19, led
by hike in prices of non-coking coal for both power and non-power sectors
by CIL from January 9 by 12-15 per cent across grades.
 The domestic supply is also expected to clock a CAGR of 7 per cent to 931
MT in FY23, from 664 MT in FY18, ratings agency Crisil said in its report.
 The share of imports in non-coking coal consumption is forecast to fall to
13.4 per cent in FY23, from 19.6 per cent in FY18.
 In absolute terms, coking coal imports are expected to increase to 58 MT in
FY23, from 47 MT in FY18.
Coal Washeries
1. Current Scenario:
 So far, 25 coking coal Washeries have been installed and commissioned in
India out of which only 19 are in operation at present with a total washing
capacity of 33.17 MTY
 Out of these Washeries, 15 are operating in Public Sector.
 At present, CIL has taken up installation of 15 coal washeries, with a total
capacity of 36.8 MT per year, on build, operate and maintain (BOM) Scheme.
 Of these, 11 are coking and the rest are non-coking projects with a capacity of
20.58 and 16.22 MT per year, respectively. The total washed coal production
from the existing washeries stood at 12.45 million tonnes last financial year.
 Present capacity utilization of existing washeries of BCCL is around 20 %.
2. Future Prospects:
 Government of India planned to expand coal-washing capacity in India by
13th Five Year Plan. Installation of 20 Coal Washeries in public sector with
total installed capacity of 111.10 MT was envisaged.
 Coal India Ltd (CIL) is planning to construct 18 new washeries by 2020
including nine for processing of coking and the other nine for meant for non-
coking coal.
3. Conclusion
 Thus, attractiveness of Coal Washing Industry in India is high, but also full of
challenges. PESTEL analysis of coal washing industry suggests that India is
heading towards mandatory coal washing before end utilization.
 Challenges: The deteriorating quality of raw coking coal poses challenges
before the scientific community and the industry to find out simple and
 economically viable coal washing scheme for maximum recovery of coking
coal for usage in metallurgical sector.
 Opportunity: There also lies scope for analyzing present condition of existing
washeries, especially in public sector, to look for innovative techniques for
revival of these washeries.

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SOURCES
https://www.ibef.org/download/metals-and-mining-mar-2019.pdf
https://www.ibef.org/industry/metals-and-mining/showcase/coal-india
https://cleartax.in/s/6815
https://energy.economictimes.indiatimes.com/news/coal/coal-india-to-commission-
18-new-washeries-by-december-2020/65978168