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By: Shikha Goyal

Introduction Coal will remain the principal fuel to meet the country's energy requirements for the next 30 to 40 years, despite intense efforts to promote the use of other sources of energy including renewable, according to O.P. Bhutani, Director (Engineering, Research and Development), Bharat Heavy Electricals Limited (BHEL). Coal is the most important and abundant fossil fuel in India. It accounts for 55% of the country's energy need. The country's industrial heritage was built upon indigenous coal. Commercial primary energy consumption in India has grown by about 700% in the last four decades. Considering the limited reserve potentiality of petroleum & natural gas, eco-conservation restriction on hydel project and geopolitical perception of nuclear power, coal will continue to occupy centre-stage of Indias energy scenario. Coal is not only required for power sector but also for industries like steel, cement etc. it is also used for domestic purposes. With ha7rd coal reserves around 246 billion tonnes, of which 92 billion tonnes are proven. Hard coal deposit spread over 27 major coalfields, are mainly confined to eastern and south central parts of the country. Coal availability has become a major issue for thermal power projects. Earlier, the delays in projects would neutralise the delay in coal production. However, coal production in recent times has been lagging behind capacity addition as execution delays are shrinking. The coal demand this fiscal is estimated to grow by 43 per cent more than the 2006-07 demand levels while the production may rise by only 32 per cent, widening the gap. According to the Central Electricity Authority, Another 20,000 MW of coal projects or (21% of the current capacity) are expected to be added over the next 14 months while the coal production will only grow at historic rates of 6-7 per cent. In 2011-12, according to the Annual Plan Document, the import of coal is estimated to be 137 million tonnes as against 83 million tonnes in the current fiscal. The eleventh plan projections at 51 million tonnes were revised higher due to slippages in production of Coal India (CIL). Despite of the shortage of coal the PSUs of coal are earning huge profits and therefore Coal India Ltd (CIL) has become a Maharatna' and Neyveli Lignite Corporation (NLC) was conferred with navratna' status this April.

Coal Consumption The coal ministry has predicted the increase in demand of coal. Coking coal requirement for steel production is expected to be 85.34 million tonnes in 2011-12, as steel production is dependent on coking coal, said the Minister Sriparkash Jaiswal.The country is likely to produce about 65 million tonnes of steel in the current financial year. India meets about 70 per cent if its coking coal needs through imports from countries including Australia, Indonesia and the US. Coal demand from the domestic cement industry also looks bright and it is expected that coal need would rise steadily during 2011-12,Sriparkash Jaiswal said. However, the Chairman of the Steel Authority of India Ltd, Mr C. S. Verma said that the domestic steel industry's dependence on coking coal could drop significantly once new technologies such as FINEX and Corex integrate into the industry. Coal production and supply Strapped by a multitude of constraints, most importantly those posed by a new environment index, Coal India Ltd (CIL) may end the current fiscal with a production which may be around 20 million tonnes lower than the targeted 460.5 million tonnes in 2010-11. Accordingly the 2010-11 targets has now been officially revised downwards from the earlier 460.5 million tonnes to 440.5 million tonnes. This was decided after a presentation was presented before the Planning Commission. The Union Coal Ministry has approved this downward revision. The country's steel plants using Australian coking coal must be ready to cough up higher prices for the second quarter contract. This follows devastating floods in the Australian state of Queensland halting exports from the mines accounting for an estimated 50 per cent of the global coking coal capacity Chairman of CIL Nirmal Chandra Jha pointed out that growth and restriction cannot go together and restrictions on coal production and end-users of coal might impact the economy. Justifying himself he said that from a growth rate of 6.8 per cent in 2009-10, CIL ended 2010-11 with virtually nil growth with output standing at 433 million tonnes against 431 million tonnes in the previous year.

The devastating floods in the Australian state of Queensland halting exports from the mines accounting for an estimated 50 per cent of the global coking coal capacity. This affects the steel plants in country using Australian coking coal. However, the Coal Ministry expects an increase in output from captive coal blocks during the current fiscal, following its intensified drive against companies not commencing production from these reserves. To increase the credibility of the coal supplying companies letters of assurance (LoA) are signed. Though it is possible that target is not met like Coal India Ltd (CIL) faced a supply shortfall of 450 million tonnes (mt) of coal for consumers with whom it has already signed supply agreements. The shortage in supply has both economic n political effects. It not only adversely hits related dependent industries especially power sector but also cause political disturbances. A coal crunch threatens to trip the power sector in May with a cascading impact on the country's growth story. With domestic coal production floundering amid a sharp upsurge in power capacity addition, over 40,000 MW of new generation capacity could get stranded over years for want of fuel. This is close to 70 per cent of the power capacity slated to come up during the period, most of which is being set up by private developers. The karnatka state govt. has chosen to set up a power plant in Chhattisgarh to ensure easy availability of coal linkages because of coalries over there. But the Union Ministry of Forests and Environment has not cleared the linkages. The Chief Minister B.S. Yeddyurappa has criticised the Centre's non-cooperative attitude towards the State's demand to step up coal allocation and for not providing coal linkage to the proposed 1,600 MW power plant in Chhattisgarh and announced to go for imports of coal inspite of the impact this will increase the input cost. Similarly, to overcome the hurdles in power generation in the state o due to coal shortage, the Madhya Pardesh government has decided to import 8 lakh metric tonnes of fossil fuel for its thermal power stations this fiscal. The power generating capacity of the state has been hit by the shortage of coal and the inadequate central quota of fossil fuel to the state. Various steps are considered time to time to improve the supply and to make coal available for different states and industries.

The import of coal is one of the most prevalent way to ensure proper working of the domestic industries. However, the import result in hike in input cost which hits the profit of the domestic industry. This has given way to tendency of acquiring coal mines abroad. Jindal Resources a subsidiary of Jindal Poly Films Ltd were allotted a coal block in Mozambique this January. Sterlite Industries, part of Vedanta Resources Plc, has completed the acquisition of a 74 per cent stake in Black Mountain Mines in South Africa from Anglo Operations (part of the Anglo American plc) for $260 million (Rs 1,170 crore) in February. Gujarat NRE Coking Coal Ltd, the Australian subsidiary of the Kolkatabased Gujarat NRE Coke Ltd, planned to invest about $200 million a year over the next two years to expand and modernize its coking coal mines in Australia to expand cooking coal capacity. Monnet Ispat and Energy (MIEL) have completed the deal to acquire PT Sarwa Sembada Karya Bumis thermal coal mine in Sumatra, Indonesia, for $24 million in March this year. Spread over 25,000 hectares in the East Asian nations Jambi province, the mine provides the company access to one of the largest thermal coal deposits in the world and gives it a captive source to fire its upcoming power projects. NMDC was set in motion in May in the process for acquiring a stake in a coal mine in Alabama in the U.S. National Aluminum Company Ltd has said it will decide on buying stake in an Indonesian coal mine by July-end after going through the due diligence report. The import policies are further framed with the help of GOI and apex bank RBI. The coal order imports are given in such a way so that minimum importation cost is to be borne. The State Government-controlled West Bengal Power Development Corporation (WBPDCL) has awarded a contract for importing one million tonne of Indonesian thermal coal over 12 months to Adani group

Further the import based companies also ensure minimum cost of transportation by acquiring coal ports abroad. Mundra Port and SEZ Ltd (MPSEZL), the port arm of infrastructure conglomerate and group flagship company Adani Enterprises Ltd (AEL), in May announced its foray overseas with the acquisition of Abbot Point Coal Terminal (APCT), an Australian port, for $2 billion, or nearly Rs 9,000 crore. However, the Government's strategy of hiking imported coal blending at future power projects to tide over domestic shortages could flounder if port capacity and rail infrastructure are not augmented in double quick time. Private power developers have petitioned the Centre in May to sort out the infrastructure constraints to enable imported coal to be ferried to project sites in the hinterland. Therefore, the domestic transportation is required to be intact for in time supply. This gave rise to ventures between coal companies and railways. Having entered into a memorandum of understanding with the Shipping Corporation (SCI) to form a logistics joint venture, Coal India Ltd (CIL) is now aiming to include Indian Railways (IR) as a stakeholder in the project to ensure smooth delivery of imported coal to the power stations. Infact this may, Coal India Ltd proposed to build three new rail links having a total length of 350 km to connect its coal fields in the interiors. CIL has also started e-auctioning of coal with the idea to dispose of huge stock of coal lying at pitheads. There are certain disputes over the policy and it is under review. In the wake of the controversy surrounding the award of telecom spectrum, the Government might be forced to adopt an auctioning model for handing out coal blocks and linkages, instead of the discretionary, point-based screening system followed currently. Pricing and profits The coal India limited has started e-auctioning of the coal which has fueled their profits. But this has resulted in hiked process for the consumers and industries. It is observed that due to short supply of coals and increasing prices the profits of related companies have dipped down. The worlds largest coal miner Coal India has warned of escalation in domestic coal prices this fiscal due to the shortage in company production output caused by mining restrictions imposed by the environment ministry. , Coal India affected a 30 per cent increase in prices for non-regulated sectors such as cement, iron and steel,

aluminum, paper, among many others in February. Further the recent floods in Australia pushed up the cost of operations of major steel producers such as SAIL, Tata Steel, JSW Steel and Essar Steel, impacting their margins in the June quarter. JSW Energy has reported a 30 per drop in net profit at Rs 220 crore for the quarter ended March 31, 2011 as against Rs 315 crore logged in the same period a year ago. SAIL's profits for the quarter and year-ended March 2011 were dented by the rising coking coal prices. This was despite a marginal increase in revenue for the period. SAIL reported a 28 per cent drop in net profits for March quarter at Rs 1,507.12 crore as against Rs 2,084 crore in corresponding last quarter. Turnover was up by a per cent to Rs 13,136.52 crore (Rs 13,005.88 crore). To stave off a domestic coal shortage crisis, power utilities across the country have been instructed to make design changes in all future coal-fired projects. Coal sectors and various problems The mining companies have inadequate safety measures. Sometimes major accidents occur due to non adherence of safety measures by the mining companies. It has been observed that mines are allotted under political pressure to the different companies without considering the displacement fear of the respective residents. Coal mafia has become a big racket which caused great loss to state and central exchequer. However, recently the two leaders of coal mafia were arrested which provide hope for strict actions against mafia in future. Coal has no doubt have adverse affect on environment. If coal mining is allowed in heavily forested areas today, it could deprive the country of a strategic energy reserve for the future, according to the Environment Ministry. It would also go against the Forest Conservation Act, invite judicial intervention, hurt biodiversity and discourage the development of coal technology. The ministry of environment keeps check on the allocation of coal mines. The coal mines are divided into go areas and no go areas. Go areas are the designated zones in forest areas where coal mining is allowed in case they meet the environment clearance. This caused tussle between ministries of coal and environment over mining issues. The Cabinet in January decided to constitute a group of ministers (GoM) to look into

the issue of no-go mining areas. The identification of mines are done in the supervision of ministry of environment. The denial of certain mines and coal blocks result in decrease in coal output. Coal Ministry has to sought permission for mining as well as for undertaking projects. This has resulted in delay of various projects. Though ministry of coal is trying to sort out the matter but this is a ongoing discussion. The Group of Ministers (GoM) on Coal is likely to meet for the fourth time on July 14 to try and resolve issues hurting the production of coal in the country amid an ever-widening demand and supply gap, which is expected to reach 137 million tonnes in 2011-12. In addition to this, Union Coal Minister Sriprakash Jaiswal along with a high-level delegation comprising Coal Secretary C. Balakrishnan and Coal India Chairman Partha Bhattacharya tried to sought the cooperation of the South African Government to enable Indian companies in developing clean coal technologies. Conclusion The coal ministries have reviewed the policy on coals time to time. There is no stable policy. The government doesnt have fair approach towards allotment of mines. The mines are allotted on adhoc basis with political pressure and there is no transparency in allotment. The government should frame a transparent and rightful policy. The mining should be eco-friendly and scientific; and industry should be encouraged to make research for alternative fuels that can lower the dependence on coal. Stern actions should be taken against coal mafia and corrupt officers.