Coal Age

NOV 2014

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The issue, which does not grab the headlines, is simply that India was fast running out of cheap options of open-cast mining. Pressures of population of land, resultant protests against land acquisition by locals, high cost of rehabilitation and resettlement of displaced people were reducing options of government miners to rapidly plan and implement projects to increase production. Underground coal mining takes time to develop. The proportion of coal pro- duction from underground and open-cast mines in India was diametrically opposite to global trends. Of total coal production last year, only 51 million mt was account- ed by underground mines. During the past three years, the share of underground coal to total production has fallen steadily from 18.5% to 13.39% to 9%. The substantial fall in production from underground mines were largely owing to CIL. They have been slow to develop underground mines since the geology of the reserves did not permit an under- ground mine capacity of more than 2 mil- lion mtpy. The operational costs for such small capacity mines were not economi- cally feasible for the miner. With the average Indian underground mine taking six years of planning, the coun- try lost valuable time to reverse the trend, more so since most of the existing under- ground mines were loss-making with aver- age costs far higher than open-cast mining. In a communication to the Coal Ministry in September, CIL said that cost of production from operational under- ground mines had gone up by an average $16 per mt over the past year while pro- duction was falling at rate of 1 million mt per year. The miner said that cost of production of underground mines was about $54 per ton, and to ensure a minimum rate of return of 12%, the government would have to permit the miner to have differential pricing for coal mined from underground and open-cast methods. CIL, along with SCCL, last year sought differential rate of royalty payments for underground and open cast mines along with a "tax holiday" as incentive to invest in underground mines, but unfortunately the government has not responded. Of the 467 mines operated by CIL, 270 were underground, 160 open cast and 30 mixed mines. For the past several years, CIL had been attempting to revive 18 abandoned underground mines through global mine developers and operators, but very few global miners have showed inter- ests in such Indian projects. Lacking in Logistics Faced with creaking logistics, miners can do little but throw up their hands. And, with transportation controlled by the gov- ernment, they can do very little. "CIL can increase capacity by 300 mil- lion mt, but there is no infrastructure available for evacuation of additional pro- duction, and hence our production can rise by 30 million mt at best over the next few years," said a CIL official. This related to the Tor-Shivpur- Kathotia in the North Karanpur coal block in the eastern Indian state of Jharkhand, Bhupdeopur-Korichhaapar in Mand Raigadh mines in central state of Chhattisgarh, and Barpali-Jharsuguda in IB Valley, Orissa, in eastern India where various mine projects were in various stages of implementation but did not have any railway corridor to transport produc- tion to user industries. According to the CIL official, $1.2 bil- lion investments for construction of rail- way links across coal-bearing provinces in eastern and central India were held up by issues ranging from land acquisition, envi- ronmental and forest clearances, rehabili- tation of local population and insurgency of left-wing extremists. Even the existing freight carrying capacity of the government-owned and operated Indian Railways was inadequate to handle any incremental production. Of its total production, CIL supplied 304 million mt of coal to thermal power plants across the country. With new power plants with capacity of about 78,000 MW slated to go into production, an additional 308 million tons of coal would be required, entailing transportation of 612 million tons of coal. About 90% of total coal mined was transported by Indian Railways and accounted for 42% of its total $13 billion revenues. To handle the incremental demand for coal, Indian Railways freight carrying capacity would need to increase by 17% while its growth in total freight capacity has fallen from 6.5% in 2009-2010 to 4% in 2013-2014. At the same time, 12 major ports equipped to handle coal have an aggre- gate capacity of 67 million mt and are pro- jected to increase to 177 million mt by 2016-2017, but by then coal imports are forecast to increase to 265 million mt. "The new Indian government, soon after taking charge earlier this year, has appointed an advisory committee to look into the growth issues of the coal and pow- er sector. This committee will take a holis- tic view and various linkages including bottlenecks in transportation capacity building," a coal ministry official said. But considering that it takes no less than 12 years to get a coal mine opera- tional in the country, the jury is still out on the future trajectory of the Indian coal sector. November 2014 www.coalage.com 51 i n d i a n c o a l m i n i n g c o n t i n u e d India depends on coal-fired power for electricity, and the logistics of moving coal from the pits and ports to the power plants is becoming more complex.

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