A strong domestic coal production and delivery system is important to achieve energy sufficiency and long-term energy security. Also, an independent coal regulator is required to create confidence of private investors, writes A Shivkamal. India is the seventh largest country in the world with a total land area of over 3,287,260 sq km and with a growing population of 1.22 billion that has put severe strain on the Indian infrastructure. In the past decade, India has witnessed rapid urbanisation and unprecedented growth in the rural areas. This has led to unimaginable developments in housing, industrial and infrastructure needs, which in turn has placed a huge demand on the energy needs of the country and the demand for electricity is continuously growing on a daily basis. While the country's power deficit is at around 8.5 per cent, the demand for electricity is continuously growing; however, supply is unable to keep pace with the demand, primarily due to fuel shortage. The International Energy Agency estimates that India needs an investment of at least $135 billion over the next five years to provide universal access of electricity to its population. The electricity consumption per capita for India is just 571 kWh, according to the World Bank and it is far below most other countries or regions in the world. Even though 85 per cent of villages are considered electrified, around 57 per cent of the rural households and 12 per cent of urban households, ie 84 million households in the country, do not have access to electricity. Electricity consumption in India is expected to rise to around 2,280 BkWh by 2021-22 and around 4,500 BkWh by 2031-32. As of December 2012, the installed capacity of the power sector in India stood at 210.951 GW, world's fifth largest while captive power plants generated an additional 31.5 GW. While non-renewable power plants constitute 88.55 per cent of the installed capacity, 11.45 per cent is contributed by the renewable energy sector. With this, India generated 855 BU (855,000 MU ie 855 TWh) electricity during 2011-12 fiscal. In terms of fuel, coal-fired plants account for 56 per cent of India's installed electricity capacity. Coal and lignite combined accounted for about 57 per cent of India's installed capacity. Thermal power plants account for over 65 per cent of India's generated electricity. India's electricity sector consumes about 80 per cent of the coal produced in the country. India expects that its projected rapid growth in electricity generation over the next couple of decades is expected to be largely met by thermal power plants. The total installed capacity of thermal power in India stood at 140,206.18 MW, which is 66.99 per cent of total installed capacity, as of October 31, 2012. With Maharashtra being the largest producer of thermal power in the country, the current installed base of coal-based thermal power is 120,103.38 MW which comes to 57.38 per cent of total installed base. Role of coal Coal is the most important and abundant fossil fuel in India, which accounts for 55 per cent of the country's energy needs. We all know that rapid industrialisation and urbanisation has today led to global warming world over. In terms of per capita equity, India is 145th in the world with a release of 1.25 t CO2 per annum. Though coal has the maximum global warming potential followed by natural gas and others, coal forms an important source to generate electricity, along with other clean technologies. To provide energy security to the country, guaranteed supply of coal with improved quality is a primary requirement. However, for India, like most developing countries, the cost of producing electricity has always been a concern. The country's industrial heritage has been built upon indigenous coal. Energy consumption for commercial purposes has grown by about 700 per cent in the last four decades. "More than 50 per cent of India's installed generation capacity is coal-based. Over the last five years, the demand for coal has been growing at an average rate of 8-9 per cent annually as compared to a 5-6 per cent increase in domestic production. This has widened the demand supply gap, leading to growing dependence on imported coal. In 2011-12, the country imported around 100 million tonne of coal (including thermal and coking coal),pointed out T Narayan, Managing Director, CLL Logistics, a major trader of coal for power companies in India. The Ministry of Coal has planned to increase the coal production by an average of 36 million tonne per annum in the 12th Five Year Plan. It is estimated that coal production will grow at a CAGR of around 9 per cent from 2011-12 to 2013-14. It is also anticipated that the demand for thermal coal by power and steel sectors respectively will gain momentum in near future. The size of Indian coal industry is estimated at Rs 800 billion by the end of fiscal year 2012. Indian coal is undoubtedly a unique eco-friendly fuel source for the domestic energy market. With hard coal reserves around 246 billion tonne, of which 92 billion tonne are proven, hard coal deposits, spread over 27 major coalfields, are mainly confined to eastern and south central parts of India. It has been estimated that at current levels of consumption, the proven reserves of coal will last for 80 years and if all the inferred reserves also materialise it can last for over 140 years at the current rate of extraction. "To meet the energy requirements, India is seeing an upward swing in the coal consumption, whereby its current coal reserves will last for only a few years more. If domestic coal production continues to increase at a rate of 5 per cent, the extractable reserve will run out in around 45 years, observed Ashok G, CEO, SLN Mining Consultancy. Operational difficulties Having said this, it is difficult to predict the long term demand for coal owing to rapid changes in the prices and availability of other fuels, technological advancements and new policies. With the coal deposits in India concentrated in the eastern regions, setting up of a coal fired power plant in western or north-west India makes it difficult to transport coal over distances exceeding 1000 km, which is sure to increase the price of power generation. According to a Credit Suisse report, it is estimated that the coal deficit in India will increase to 400 million tonne in FY 2017 from around 50 million tonne in FY 2011. Further, as per the Planning Commission report it is expected that demand for coal will rise to around 937 million tonne by 2021-22 and to more than 1,415 million tonne by 2031-32. With this, power generation companies will be forced to look at offshore coal, either through mine acquisitions or buying coal from international markets. Also, experts say offshore coal is not an easy alternative for power companies to meet their requirements in India, as cost of mining, acquisition of leases and shipping costs will add to the power generation expenditure. So, what are the factors that play a crucial role? Dr TH Hanumanthaiah, a well-known geologist and member of the Geological Society of India, lists out several reasons that can work for or against the power sector in India if there is an over dependence on coal.