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The Black Gold

The mining in India happens to be a major economic activity contributing significantly to the economy of India. The GDP contribution of the mining industry varies from 2.2% to 2.5% only, but going by the GDP of the overall industrial sector it contributes close to 11%. The Coal has a proven reserve of 860 billion tones is mined the most in the world. At the same time the demand curve for this sector is always on the rising side because of the soaring power demands in India and the ever growing worldwide steel production in the world. India is a prospering economy and the coal market is all set on the blocks to witness a huge boost in the near future because of drastic initiatives by the new government specially the reallocation of the coal blocks and the stake sales in the PSUs are some of the major steps taken which will not only aid in boosting the production but also lure the investors in the coal sector. But whatsoever the upward pressure would definitely widen the demand supply mismatch in the coming years and to monitor these concerns The Indian conglomerates are making the efforts in the overseas acquisitions as well as also exploring the unconventional alternatives such as coal gasification for supply of energy. 

There are varied coal gasification technologies which are ever evolving over the globe to replace the conventional methods of the power generation. The global coal resources have b been estimated at over 860 billion tons and out of which India amounts close to 286 billion tons of coal reserves. Coal meets to around 30.3% of the global primary energy needs and generates 42% of the world’s electricity. In this 2011 the coal happened to be the fasted growing forms of the energy after renewable sources and its share in the global primary energy consumption which was 30.3% which was the highest since the year 1969 and the coal production in the Asian Pacific region has grown tremendously and accounts to 67% of the total production globally as compared to 27% global contribution in 1981. The world’s five largest coal using countries are China, USA, India, Russia and Germany. India has the fifth largest coal reserves in the world and out of the total close to 88% are non-coking coal reserves and the tertiary coal reserves accounts for near 0.5% and the remaining is the coking coal. The Indian coal is typically known for its high ash content up to 45% and low on the sulphur content. 

The power sector is the largest consumer of the coal and close to the heals are the iron and steel and cement sectors. India’s coal production has increased from 431MTin 2006-2007 to 554 MT in 2011-2012 that is 28.5% growth. On the other hand if we look at the coal which has grown at a CAGR of more than 7% in the last decade and has reached around 600 MT. The India’s total demand supply gap including coking coal is paged by the Indian Energy book at 98 MT and out of this India’s imports about 85 MT of coal.

The sector wise coal consumption in India is – electricity-70%, steel—7%, cement—3% and others 20%. At present the government of India enjoys the monopoly in producing coal with over 90% of the production coming from the government controlled mines. The policy of captive mining was introduced in 1993 which opened the coal sector to private investments, India happens to be the world’s largest energy consumer accounting to 4.1% of the global energy consumption. Maharashtra is the country’s leading state in the electricity generation; the per capita only further indicates the high potential scope of growth in this sector. Out of the total electricity consumed in the country almost 81% is produced by coal and the other sources of electricity generation—Thermal—8.33%, Nuclear—3.69%, Hydro—14.88% and Imports—0.60%.

The Steel Sector—the coal happens to be a very essential input in the steel production. The worldwide steel production reached 1,518MT in 2011 clocking a growth of 6.2% over 2010. The per capita finished steel consumption in 2011 clocked to 215 kg as against 460 kg for China, while for India it is estimated to be 55kgs, which clearly hints at the vast scope in increasing the per capita steel consumption a factor which correlates with the coking coal availability and production within the country. India has very limited reserves of the coking coal which is the key raw material for the steel production. Coking coal accounts for only 15% of the country’s overall coal reserves which we have. In Jharkhand the Jharia coal field has the majority of the coking coal reserves. The steel production is projected to be 105 MT by 2016-17 and the corresponding requirement of coking coal for this quantity works out to be around 62 MT by 2016-17. The cement sector in India makes India as the second largest cement producer globally and obviously large amount of energy is required during the production of cement and the coal is used to meet the energy requirement as a source. In the process of the cement manufacturing coal is burnt in the form of the powder and around 450kg of coal is consumed to produce 900kg of cement.

 To add here the cement industry happens to be the third largest consumer of coal in the country because of the high cost and intermittent inadequate supply of oil and gas, so the coal happens to be the obvious choice of main fuel in the cement industry. But however due to the rapid adoption of the dry process the specific coal consumption for producing cement has dropped significantly and has improved the efficiency in the cement kilns and increased the use of fly ash which is produced in the power plants and granulated slag which is produced in the blast furnaces of steel in the production of cement.

Although India has the fifth largest reserves of coal in the world it is yet to meet its domestic demands, the overall long term demand of coal is closely linked to the performance of the sectors in the end use. In India the end user sector of coal are electricity, iron and steel, cement and some unorganized sectors bricks and ceramic industry.

The Ministry of steel (MoS) has projected to build the steel production capacities of 200MT by 2020 to meet the rising demands and out of this 70% of the steel will be based on basic oxygen furnaces (BOF) technolology. By 2035 India will be the second largest consumer of coal because the coal based thermal power projects will be the main drivers of demand in India. The projected coal fired generation capacity in India will rise from 95,000 MW. To 2,94,000 MW in this decade which is  300%  increase!!!! Coal prices also just like any other commodity are determined by the level of supply and demand, however the response of the overall demand and supply variation is slow due to the structure of the coal industry as well as the nature of the end user of the industry.

The government has recently sanctioned 200,000 mw of thermal power capacity and can be said in simple manner as Rs10 lakh crores in the coming decade., As the coal blocks are ready on the blocks to be auctioned again and the power industry is back on its heels for constructions the headwinds are blowing stronger in favour of the black gold once again as coal still enjoys the cheapest form of form of energy in the world. India’s peak demand comes when the sun sets so our country desperately looks for the other alternate sources.

India’s current power consumption is 6000 Twh and the projected consumption by next five years is just double i.,e 12000 Twh, 550 Thermal plants have been approved and total additional capacity approved is around 200,000. The other alternate sources of energy available in India are coal, hydro power, renewable energy, natural gas and nuclear energy. The nuclear energy has fission and fusion as its source and has low emissions environmental friendly and large capacities, but is difficult to dispose and has great risks of proliferation. Its future is grim for at least couple of five decades as all the countries has a coal stock of ten decades. Another alternate is solar energy which is freely available in day time only, requires ample area and is getting cheaper. Then there is geothermal which is also freely available but has some environmental disturbances but its future is a bit too grim, even hydro thermals are cost effective but difficult to maintain big dams, evacuation of people causing forced exodus, another option is wind mills but it is dependent on wind, another option is  biofuels also have some environmental concerns.  

Improvement required: - Operational issues like fund raising and so also exploration which is a very specialized job and is considered to be a risky venture and so the investment should be encouraged in this sector through professional initiative and also the security of the tenure. Performance, productivity and accountability is a must. The mineral associated are not reported and so the level of confidence among the investors to invest is not high and so it is the government who should promote the training camps held through IBM and DGM.

We can get rid of long queues of mining applications long pending at different levels of coo, state DGM, DGMS, tribunals, state and central agencies and multiple registrations for miners, transporters, traders and end users just by applying the Single Window Clearance Agency (SWCA), so that all the clearances from land, water, air, minerals, environmental, forests etc etc are cleared in one go. The time is not far away when we are thick into the Black Gold Rush.