In an attempt to keep Infraline Energys’ readers abreast with the key issues and challenges engulfing the sector, Infraline Energy tries to bring forth the opinion of key personnel whose decisions and opinion play a vital role in shaping the sector. Please find below excerpts from the interview that Infraline Energy conducted:
Coal India should look at selling coal on commercial terms to entities outside India
Coal consumers were left staring at a serious fuel crisis in 2014 when the Supreme Court cancelled all but a handful of captive coal blocks. However, NDA government moved fast on reallocation of cancelled blocks and averted the looming crisis. Not only that, thanks to government support, CIL was also able to step up coal output. As a result, fuel shortage has become a thing of the past and there is excess coal available with producers, prompting the government to think of exports. Dilip Kumar Jena, Manager - Mining, PwC, shares his views on government’s strategy for the coal sector.
How do you assess NDA government’s performance in augmenting coal supplies? Will the current strategy work in the long run?
After de-allocation of 204 coal blocks by the Supreme Court vide judgment dated 25th August, 2014 read with its order dated 24th September, 2014, Government moved relatively fast, and rightly so, in promulgating the Coal Mines (Special Provisions) Act, 2015. This is helping in auction of the de-allocated coal blocks to corporations and allotment to government companies. Further, for optimal utilisation of coal from allotted coal blocks, the Act provides for swapping of coal between projects and among the successful bidders, falling within the definition of the same specific end use. This shift is in right direction (from the earlier policy of allotting coal blocks for specific project). Also, the Government has opened up doors for the auctioning of coal linkage for non-regulated sector. Since the new policies provide for greater transparency, competition and optimal utilisation of coal resources, the strategy may work in the long run.
Coal India is planning to export excess coal. Will this be the right strategy?
In the long run, all government-owned corporations should work on commercial principles and without any financial support from the government. Working on commercial principles would help Coal India service its debts in a timely manner and give higher dividends to government with time. This requires all the coal mines of Coal India to perform in consonance with their respective mining plans and sell produced coal on commercial terms. Further, it’s been observed that stocks of coal are increasing at power plants and at mine mouth. Such increasing stocks of coal at mine mouth face the risk of pilferage or spontaneous combustion that could result in loss of revenues. Therefore, selling coal on commercial terms to entities outside India, after meeting the domestic demand, would be the right strategy.
Can India meet the target of 1.5 billion tonne of coal production by 2019-20?
This is a rather ambitious target. If all the allotted coal blocks start timely production, after securing forestry & environmental clearances, we may reach near the target. However, the target of 1.5 billion tonnes of coal production by 2019-20, not only faces challenges from limited capacities of allottees to develop the mines themselves but also from the limited infrastructure to evacuate the mined coal from mine mouth and to transport them to consumers through rails and ports.
Do you think time has come for India to allow private players to do commercial mining? Is commercial coal mining better than captive mining?
Time has come for commercial mining provided that the domestic mining companies meet domestic demand before they plan to export.
Do you think pricing of Indian coal should be linked to international indices?
The drivers impacting the demand dynamics of domestic coal market are different from the drivers impacting the demand dynamics of global coal market. Since most of the produced coal within India is consumed for power generation, which is largely a regulated industry, the direct linking of the coal prices to international market may not be viable. The domestic coal market may be opened gradually starting with the sale of coal to non-regulated sectors. And with increase in production of coal from commercial mines, the domestic coal market could be opened completely including the sale of coal to power sector. However, the pricing of coal, reserved for exports, may be linked to international prices.
Do clean coal generation technologies offer a viable alternative to renewable energy?
With lack of quality research within India on total carbon footprints of renewable energy including the carbon footprint of processes for producing PV cells, a quantitative comparison cannot be carried out. However, clean coal option is a viable option to reduce SOx and NOx levels.
Is there any light at the end of tunnel for coal sector which has fallen out of favour with investors and policy makers globally because of climate change concerns?
The share of coal in global primary energy consumption fell to 29.2%, the lowest since 2005. Further, the share of coal in primary energy consumption is projected to decline to 22% in 2040 compared to 28% in 2012. However, the demand of coal increases at a rate of 0.6%/year from 153 quadrillion Btu (~5.51 billion tonnes) in 2012 to 169 quadrillion Btu (~6.08 billion tonnes) in 2020 and to 180 quadrillion Btu (~6.48 billion tonnes) in 2040. This increase in global demand requires new capacity additions in coal production.
Infraline Energy would like to thank the contributor for his/her valuable time and opinion shared on the topic.