The coal industry is really at the crossroads today given the countervailing forces in the marketplace. While the economic growth will increase the demand for electricity and accordingly the demand for coal - given that bulk of our power generation currently is coal-based - the diminishing cost of renewable power and the growing concerns on pollution caused by coal-based power generation will restrict coal usage, feels Satnam Singh, Director Energy, CRISIL Infrastructure Advisory. Excerpts of the interview...
What are some of the main benefits that will likely accrue from the recent coal auctions?
The amendments in mineral laws in March 2020 allowed commercial coal mining, which was hitherto reserved for government companies like Coal India and Singareni Collieries. The reform allows for freedom of pricing and selling of coal by private miners. The present coal auctions are for such commercial mining and are unprecedented as the previous 10 rounds of coal auctions were undertaken for captive usage only. There will likely be several benefits of commercial coal mining. Private investments in coal mining are likely to increase in the absence of any restrictions in end-use; imports of coal will come down as production from these blocks comes on-stream. The quality of coal will improve as commercial miners can undertake selective mining and blending through proper planning and operations. New benchmarks for efficiency will be set and prices will be more competitive as production would increase in the long run.
What do you make of the government's proposal to facilitate the rationalisation of coal linkages?
The Govt of India is furthering the rationalisation of linkages to bring down the inefficiencies in the current system where imported coal is being consumed in the hinterland and domestic coal near coastal areas. Essentially, the objective is to bring down the cost of coal transportation and eventually the landed cost of coal. The resultant cost savings can help bring down the cost of power procurement for distribution companies.
Of late do you find any improvement in obtaining environmental clearances by the coal mining companies?
The entire process of approval and monitoring is online, which is indeed a positive and it has yielded certain incremental benefits. However, other elements of capacity in terms of augmentation of human resources and training them to collect the right information and in the right form and similar intervention at the scrutiny end is inter-alia interventions that would be required to make a transformative impact in the process.
To meet the demands of India's growing economy it will be imperative to also ensure the early commencement of production and development of a robust market. Is the policy cognisant of these realities?
The policy is indeed cognisant of the need to develop the coal market at the earliest. And various steps are being undertaken to that effect. Opening up coal mining for commercial purposes is evidence of that. Further, the terms for auctions of commercial coal mines, which are underway, are relatively more attractive as compared to the previous 10 rounds of coal auctions. Land acquisition currently is a key bottleneck in the development of a green-field coal block. The Govt of India is contemplating amending the Coal Bearing Act of 1957, which provides certain relaxations for the acquisition of land to only government undertakings, to facilitate the timely acquisition by private entities. Relatedly, on the non-coal side, for minerals like iron-ore and limestone, the government has come out with a policy wherein the different mineral-bearing states can auction mineral blocks with pre-embedded clearances. This will not only expedite development but also realise better value for the state government, as clearances are a key risk that a developer envisages.
Although Coal India will continue to be the world's largest producer of the commodity what will be the role of private players going forward?
Private players will expand supplies and accordingly overcome and minimise the supply deficit that exists today. Operational efficiencies are also expected to be improved in terms of equipment and manpower productivity. Currently, a number of coal consumers are not satisfied with the quality of coal that's being supplied and grade slippages that tend to occur. A potent benefit envisaged is an improvement in the quality of coal or more consistent quality, as end-users demand the same to save on their maintenance costs.
To what extent will the commercialisation of mining help in reducing the country's dependence on imported coal and help in achieving the goal of aatmanirbharta or self-reliance?
Commercial coal mining will indeed help in reducing India's dependence on imported coal, though it will not eliminate the same, as coastal end-use plants like power generators may continue to import thermal coal owing to technical, economic and logistics factors. The country doesn't have much quality coking coal reserves, so the dependence on coking coal will continue to remain. Essentially, imported thermal coal that's getting consumed in hinterlands owing to lack of domestic supplies is likely to get replaced by commercial coal, subject to these blocks coming on-stream in a timely manner.
In conclusion, what do you see as some of the biggest pending or emergent challenges before the industry?
Timely procurement of statutory approvals and land acquisition remains a persistent challenge. The industry has traditionally been focused on meeting production targets. However, there is a pressing need to have proper systems and processes for the environment, social, health and governance factors. Notwithstanding, the key challenge the industry faces is its future. The coal industry is really at a crossroads today given the countervailing forces in the marketplace. While the economic growth will increase the demand for electricity and accordingly the demand for coal û given that bulk of our power generation currently is coal-based - the diminishing cost of renewable power and the growing concerns on pollution caused by coal-based power generation will restrict coal usage. Accordingly, there's a need to comprehensively look at these factors and accordingly set out the roadmap for the sector. Further, calibrate the coal supplies in line with the demand with feasibilities of new projects tested for a variety of scenarios.
- MANISH PANT