September, 2007, the Metaljunction in collaboration with McCloskey Group
organized their annual event "The Indian Coal Markets - 2007" at New Delhi.
Apart from presenting an address in the inaugural session, I had also been
invited to chair the next session, which was "CEO's Round Table on Power
Development Issues". This session took note of some of the important points
which had been made during the inaugural session and also had panel discussions
on some of the important questions which were raised.
observations of the inaugural session, which was addressed, among others, by Mr.
Seth, Addl. Secretary (Coal), are summarized below:-
Indian Coal Sector performed at an annual growth rate of 5% during the 10th
Five Year Plan (2002-07).
support the targeted growth for the 11th Five Year Plan it must
perform at an annual growth rate of 9 to 10%.
the year 2011-12 the production needed would be at about 730 million tonnes and
import at about 30 - 35 million tonnes.
far, 165 coal blocks have been allocated for captive coal mining. It is
expected that in next five years the production of the order of about annual 100
million tonnes should be possible from these blocks. Developers will need to
put required efforts for this.
present system and method of coal block allocation needs a change and such a
change is under consideration of the Government.
Demand Side Management (DSM) should form an important part of our coal
management strategy. With technology upgradation and efficient consumption
practices, upto an extent of 20% of coal consumption could be saved.
exploration has so far remained confined to the Coal India subsidiary, namely
CMPDI. There is a need to expand the coal exploring capacity for which private
sector needs to be brought in.
There is a need for Regulatory Authority to take care of development of coal
industry in the most cost effective and optimal manner and to take care of the
interests of all the stake holders namely the investors, developers and
country may need to import coal in the range of 40 million tonnes per year,
depending on the actual needs during the 11th Five Year Plan.
presentation by Mr. Gerard McCloskey highlighted the demand projections and
export opportunities for steam coal during the next few years. Some of the
conclusions from his presentation are summarized below:
Projected Exports to the Atlantic
*Main Exporters: -
Russia (46.4 MT), Colombia (67.3), South Africa (50.4), Indonesia (24.0)
Projected Exports to Asia/Pacific
Australia (181.6), Indonesia (114.1), China (41.7), Russia (15.7), South Africa
Current Asian Demand Prospects
Japan (115), Korea (69), Taiwan (58), India (40), China (25)
Current Atlantic Demand Prospects
*Main Countries :-
UK(35), US(32), Germany (29), Med. (51)
Atlantic demand as given in the above Table which is likely to be of the order
of 219 million tonnes in 2007 and 222 million tonnes in 2008 has in fact
substantially declined from 236 million tonnes in 2006. These very well
correspond to the projected exports to the Atlantic as highlighted earlier in
were followed by the panel discussions in the CEO's Round Table. The panelists
included Mr. Ahmed Buhari, President and CEO of Coal and Oil Group, Mr. T.
Mukherjee, Executive Director of JSW Energy and Managing Director Barmer and Mr.
P. Sinha, Project Director of TATA Power. I had the privilege of chairing this
panel. A number of issues were discussed in this session but I will like to
confine to the following few issues and present the response to these issues.
Land acquisition and obtaining
environmental clearance are difficult obstacles. What can be done to ease
Both these issues
are really ticklish. India is a democratic society. It has to be sensitive not
only to the legal process and requirement but also to the genuine feelings,
expectations, aspirations and grievances of people. We cannot afford to ignore
these and bulldoze to acquire land. In any case, such moves will only meet with
a negative outcome. The Govt. of India has already come out with a comprehensive
rehabilitation and resettlement policy. In the recent months it has also been
announced that the package of compensation and rehabilitation could be further
reviewed. All that the developers need to keep in mind is that identification
of the people concerned with the development of the project would be a must.
They must see, in these projects, a benefit to the country and to them also.
Wherever this approach has been followed the things are comparatively easier and
clearance has been streamlined in recent months by proper re-engineering of the
procedure. If the environment impact assessment study has been done properly,
public hearing appropriately conducted; in most cases it has been possible to
secure environmental clearance. However, forest clearance has been, and
continues to be a major problem. In recent months this has been further
compounded by a new development which requires each case of forest clearance a
concurrence by Forest Advisory Committee and then a report to the Supreme Court
before sanction is accorded. The Ministry of Environment and Forest of the
Govt. of India is fully seized of this matter and is trying to have these
procedures reviewed by the Supreme Court so that each case does not have to be
reported to the Court. However, as of now, since this is a reality, we may only
have to advance our cycle time for preparation and keep due cushion for such
Acquiring captive coal blocks for non import stations. Is this process still
not fully transparent and fair? And if so what can be done? What may be the
reasons for very few captive coal blocks having been developed relative to
many which have been awarded?
We need to
appreciate the positive aspects of far reaching policy initiatives which have
been taken by the Govt. of India. It may be recalled how difficult it was for
power plant developers to have captive coal blocks allotments even till 2004.
The matter was presented by the Ministry of Power to the Energy Coordination
Committee presided over by the Prime Minister. The need for opening up of the
coal sector was emphasized so that, in addition to the public sector coal
companies, other agencies also contribute toward developing new coal mines. It
needs to be recognized that intention of the Govt. has been to restructure the
coal industry for which Coal Mine Denationalization Bill has been pending
consideration of the Parliament for last more than seven years. It has,
however, been recognized that in the present situation it might be difficult to
push through this legislative change. Therefore, the government did the second
best. Toward the end of 2004, it was decided that development of more mines and
therefore more production of coal could be effected through an easier and more
streamlined procedure for captive coal mining. NTPC was allotted a large coal
block in the state of Jharkhand. Subsequently more power plant developers have
been allotted coal blocks. The Energy Coordination Committee took a historic
decision in the middle of 2005 that 20 billion tonnes of coal reserves could be
identified and earmarked for captive mining. This would mean that if these coal
blocks are developed, approximately they should be sufficient for almost 75,000
major decision of the govt. was responded in a big way by a large number of
intending agencies requesting for coal block allotments. As many as 700
applications, which were received, needed to be processed. Ministry of Coal is
trying to evolve as objective and as transparent as possible the process and
procedure. Sankar Committee which was set up by the Ministry of Coal has also
made some specific recommendations. It has suggested that there should be well
laid criteria which should include (a) networth of the company, (b) turnover,
(c) status of preparedness for the project. When there are disproportionately
large number of intending agencies, and the number that can be accommodated,
keeping in view the limitations of number of blocks available, situations of
disappointments and frustrations becomes unavoidable. This is not to say that
the process and the approach does not need refinement and that there is no scope
for improvement. It is also a fact a large number of blocks which were allotted
a few years back have not been developed. In most cases there is no
satisfactory progress. It is precisely for this reason that in the proposed
dispensation substantial amounts of bank guarantees have been suggested so that
non serious developers are excluded and defaulters are penalized.
Awarding captive coal blocks to prospective power plants, in some sense,
turns power plant developers into coal miners? This forces power companies to
move away from their core business strength - producing power to mining coal?
arrangement that is expected to be put in place by the power plant companies has
not been fully appreciated. As per policy, power plant companies need to put a
minimum of 26% equity only into the coal mining company. What has been
envisaged is that power plant companies should enter into joint venture
arrangement with major coal developing companies, including with companies from
all over the world. This should also have the advantage of bringing latest
modern coal production technologies in India so that the productivity and
efficiency is improved. Obviously, therefore, the power plant companies would
not get into management of the coal production companies. Through minority
equity stake they will facilitate, but their attention will not get diverted
from their core business. It is only in due course of time that this type of a
diversifications might see them, and that too with not definitive certainty,
into managing coal business. This is a win-win situation that has been
stipulated, and most likely this will lead to positive outcome and result.
Most Indian power plants interested in using imported coal appear to only
want to do so if they can take an equity position in international coal
supply sources? Is this likely to continue or is it likely to change in the
As a matter of
fact Indian Power companies, or for that matter Indian companies, have been slow
into thinking on this strategic issue. In global context, energy security is
high on the agenda of any country. There are countries which have taken prompt
actions in procuring coal mines abroad just as many of them have procured oil
fields and gas fields abroad. In India it is only in the last two years that
this awakening has happened and some of the power companies and others have
started looking at acquiring coal mines or taking equity positions in coal
companies abroad. In most cases even these are at preliminary and exploratory
stages. In fact these acquisitions should have happened long back. India's
energy development programmes in general, and power development programmes in
particular are unparalleled in the world. Even China, which has already
expanded its capacity to a much larger level, may not need India's types of
expansions in coming decades. Therefore, Indian power sector has to follow a
twin strategy - a) serious attempts at acquisition of coal mines and b) coal
supply supplemented through appropriate imports. Both these are logical and are
based on weighty considerations.
Is imported coal a swing supplier to fill gaps in domestic supply or will it
change to be a more integral part of the overall energy mix?
The whole concept
of Ultra Mega Projects, which was formulated by the Ministry of Power in early
2006, is based on a very thoughtfully conceived approach. India has, no doubt,
huge coal reserves (approximately 260 billion tonnes). Of course all of them
are not extractable. Yet, they can last and support India's power development
programmes, may be, for more than 50 years. Even then, for the energy planners
it is essential to see that all these natural resources are not exhausted in
this manner. We must leave a lot of them for our future generations. It is
therefore essential that India follows an approach under which it also
supplements the domestic coal supplies with a substantial amount of import.
This consideration led to the emergence of, besides pit head power plants, a
chain of Ultra Mega Projects, along the costal line, both in the east and in the
west. In addition to these Ultra Mega Projects, there would be a number of
projects with somewhat smaller capacities to be developed at the initiative of
the state governments along the coast. Therefore, dependence on coal from
abroad is not just as a stop-gap arrangement or a quick response for solutions
to problems of a temporary nature. It is, in fact, a well conceived strategy in
our overall energy management.
There were a few
other issues brought out during the panel discussions. These included (a)
inadequacy of transport infrastructure, (b) financing of coal development
programmes, (c) period and pricing approach for long term coal contracts. These
have, however, not been discussed here to keep this paper short as also due to
the fact that these issues were covered in the paper, I presented in this very