Daily News Analysis

Coal Sector in India

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Why in the News?

Recent data from the Ministry of Coal highlights a significant decrease in the share of imported coal in India, with a Compound Annual Growth Rate (CAGR) of -2.29% from 2014-15 to 2023-24, compared to 13.94% from 2004-05 to 2013-14.

Key Reforms/Initiatives in Coal Sector

  • Coal Mines (Special Provisions) Act, 2015 (CMSP Act):
  • Permitted auctioning of coal mines for commercial mining by private entities.
  • The first auctions for commercial coal mining were launched in 2020.
  • Mines and Minerals (Development and Regulation) Amendment Act, 2021:
  • Enhanced transparency and efficiency in the allocation of mining licenses.
  • Introduced Composite Prospecting Licence-cum-Mining Lease (PL-cum-ML) for a seamless process of prospecting and mining.
  • Relaxed end-use restrictions for captive miners.
  • National Coal Index (NCI):
  • A price index that combines prices from all sales channels (notified, auction, and import prices) to provide insights into market dynamics and price fluctuations.
  • Foreign Direct Investment (FDI) and Technological Advancement:
  • Allowed 100% FDI in coal mining to attract global expertise and technology.
  • Amendment to New Coal Distribution Policy (NCDP):
  • Allowed transparent and objective sales of coal from closed/abandoned/discontinued mines.
  • Recent Initiatives:
  • Integrated Coal Logistic Policy and Plan, 2024: Aims to develop a resilient and cost-effective coal evacuation logistics system.
  • Investment in Coal Gasification: Approved comprehensive scheme with a Rs. 8,500 crore outlay to promote coal/lignite gasification projects.
  • PM Gati Shakti-National Master Plan: A strategic plan to enhance coal sector infrastructure and logistics.

Persistent Issues/Challenges

  • High Import Dependence:
  • Limited availability of high gross calorific value (GCV) coal in India.
  • Major import sources include Australia, Russia, South Africa, and the US.
  • Industries like iron and steel rely heavily on coking coal with lower ash content.
  • Dominance of Coal India Limited (CIL):
  • CIL produces over 80% of India's coal.
  • Issues include market dominance, supply of lower quality coal, and opaque contract conditions.
  • Lack of Upgradation:
  • Technological obsolescence in mining techniques leads to lower productivity and higher costs.
  • Logistics Issues:
  • High logistics costs due to limited multi-modal transport options.
  • Environmental Issues:
  • Open-cast mining causes irreparable environmental damage and renders land unusable.
  • Developing New Coal Mines:
  • Challenges include land acquisition and potential displacement of communities.
  • Other Issues:
  • Non-payment of dues by power sector consumers.
  • Labor and industrial relations issues in coalfields.
  • Unseasonal and extended rainfall affecting coal-bearing areas.

About Coal

Definition and Formation

  • Coal: A readily combustible sedimentary rock, predominantly made of carbon. It forms from peat, which is a soft, organic material consisting of partly decayed plant and mineral matter.

Types of Coal Found in India

  • Anthracite
  • Characteristics: The highest grade of coal with a high percentage of fixed carbon. It is hard, brittle, black, and lustrous.
  • Occurrence: Found in smaller quantities in Jammu and Kashmir.
  • Bituminous
  • Characteristics: Medium grade coal with high heating capacity, widely used for electricity generation.
  • Occurrence: Predominantly found in Jharkhand, Odisha, West Bengal, Chhattisgarh, and Madhya Pradesh.
  • Subbituminous
  • Characteristics: Black in color, dull (not shiny), with a higher heating value than lignite but lower than bituminous coal.
  • Lignite
  • Characteristics: The lowest grade of coal with the least carbon content. It is brownish-black and has a lower heating value compared to other types.
  • Occurrence: Found in Rajasthan, Tamil Nadu, and Jammu & Kashmir.

Top Coal Reserves by State

  • Odisha: One of the leading coal-producing states with substantial reserves.
  • Jharkhand: Known for its significant coal deposits.
  • Chhattisgarh: Major contributor to India's coal reserves.

Collectively, these three states account for approximately 69% of India's total coal resources.

Way Forward

  • Promoting Sustainable Practices:
  • Implement the Miyawaki plantation method to enhance green cover around mining areas.
  • Encouraging Private Players:
  • Reducing reliance on CIL by inviting private sector participation, which will also drive technological advancements.
  • For Import Substitution:
  • Rationalization of Coal Linkage Policy: Reduce transportation distances from mines to consumers.
  • Early Operationalization of Captive/Commercial Coal Blocks: Expedite the operationalization of allocated coal blocks.
  • Mandate Domestic Coal Usage: Encourage domestic coal use by power plants and ensure adequate supply and logistics.
  • Enhance Coal Gasification: Increase coal gasification to produce synthetic gas, especially for sectors reliant on imported coal.

By addressing these issues and implementing these strategies, the Indian coal sector aims to reduce import dependency, improve efficiency, and foster sustainable practices

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