In the backdrop of the ever mounting domestic demand and supply gap, Indian power and coal companies are increasingly acquiring coal assets abroad in order to boost their coal supplies.
InfralineEnergy's Chhavi Tyagi met up with Sachdev to delve into the issues related to the domestic shortage and the reasons for the increasing imports. We discuss the need for capacity augmentation from existing mines to exploring new mines, the need for enhancing the country's infrastructure to transport the coal and the need for joint efforts of the public coal sector and the private players.
Why are the Indian power companies increasing their dependence on the overseas coal?
There are no policy issues. The demand-supply gap is the only reason. However, there is a need for a policy for power developers, which should allow import of coal only for those stations, which are placed closer to the coast. The domestic coal industry should supply the other stations located away from the coast. The new plants should preferably be set up close to the coal fields.
However, all those who feel that the national resources are saved by importing will be repenting after a decade. Take the case of Jharia, we started importing coking coal way back in 1983-84. Today, almost 70 per cent of the coal for the steel plant is being imported while we have the best quality of coal lying unexploited in Jharia because we are depending on the easy way out of imports.
Why can't the domestic coal production be enhanced despite large domestic reserves?
We have large reserves, no doubt. But we have problems associated with raising production quickly because our demand is going up by seven to eight percent every year, whereas the domestic production is growing at less than six percent per year. As a result, the demand and supply gap is growing. Even if there were no environmental hurdles, we have to develop the infrastructure to transport that coal. If you locate the power stations at the coast, you don't need port capacity. You can have a captive jetty and bring coal to the power plant.
Can the washing of domestic coal on an increased scale limit the Indian companies' quest for overseas coal?
It wouldn't have any impact on the coal imports, as the washing is for an entirely different purpose. It is to improve the quality of our own coal, which would increase the performance of power plants. Thus, the importing of coal and washing of coal has no direct co-relation, except in case of blending of coal. Where blending facilities exists, the washed domestic coal is blended with the imported coal to improve the overall quality of the coal.
Can we then infer that quality is not a big factor in acquiring overseas coal?
The quality as of now is not an issue because our coal has been burning since long. However, with the new plants coming up engaging newer technologies, like super critical, etc., the developers would need better quality of coal. For that matter, washing is important. That is why, all the UMPPs (ultra mega power projects) are coming up on imported coal. The larger stations, which NTPC is setting up, will also use washed coal in the plants so that the performance is better.
Do you think that the coal blending could be an alternative to coal washing?
The blending is not a substitute for coal washing. However, it can be very useful in case you have an option of getting a very good quality of coal. For instance, if you import coal from Indonesia with five to seven percent of ash content and have 40 per cent ash in the locally available coal, then there is no harm in blending it because the mixed coal would have ash percentage of below 30-35 per cent. It would be a good advantage, but it does not substitute washing. The blending is a complimentary activity and is required to make the raw feed to the power plant of a uniform quality. If you get imported coal for three months and domestic coal for nine months, you can't burn them separately. You have to put them together.
How can the coal production be stepped-up in the country?
We have to create capacity, which can be created in three segments. The first is when the ongoing production is coming up, second is expanding the existing capacity of mines and the last option is opening up of new mines.
"Coal deposits and forests go hand in hand all over the world, whether you go to Brazil, Australia, China, US or India. Everywhere coal is found under the forests and to tackle this issue you have to make a very judicious plan. `Go and No Go' is a very short sighted approach adopted by the Ministry of Environment and Forests."
The first category of mines is declining in production as they age. So you have to continuously add new capacities. The existing mines will continue as they have to provide coal to the stations, but they have a limit. The country can't afford to take out the entire coal in the next five years. Even the option of supplying coal from different sources is not a good idea because there will be a mismatch in terms of the quantity and quality of coal. I agree that there is a built-in capacity and the production can be increased by say, 5-10 per cent, but let that capacity be there to meet some emergency or eventuality. If there is a drought next year, the stations can use that capacity for increasing production instead of using the capacity for a sudden surge to meet the demands of the power stations. The new mines must come and they should come fast.
What are your views on the 'Go and No Go Areas'?
Both the ministries, Ministry of Environment and Forests and Ministry of Coal, have to take a holistic view. While it is very important to safeguard our environment, at the same time, coal is also very important. While you have the option of shifting the power or the steel plant to a distance, mining can only be done where coal is available.
Coal deposits and forests go hand in hand all over the world, whether you go to Brazil, Australia, China, US or India. Everywhere coal is found under the forests and to tackle this issue you have to make a very judicious plan. `Go and No Go' is a very short sighted approach adopted by the Ministry of Environment and Forests.
"Coal India and private players can come up on a JV basis. PPP mode can play a very big role in many activities like, coal cleaning and even the washeries, which Coal India has tendered. Coal India is providing the money and private players can build, maintain and run the washeries. It is safe to say that the public sector coal industry is going to stay forever in India. Handling the coal sector is a massive job and private players alone would not be able to handle it."
Another important aspect is that an extensive study should be carried out of the real forest areas as the present forest maps are 100 years old. At some places there is not even a single blade of grass and still it is considered as a forest area. Only those areas which are bio-diversity sensitive should be debarred totally. The existing forests are 30 years old, but now with the existing technology you can get the same quantity of growth in three to five years. These steps should be taken up as a mission.
However, the coal industry has also failed in its role in the past of maintaining the environmental mitigation efforts. They have not reclaimed their mines fully.
Do you think importing of coal from other countries can help in restricting China's rising influence in the Asian region?
We should not mix the geo-politics and economics. China is guzzling coal. They are consuming more than three billion tonnes because, like us, their petroleum resources are very small and their steel capacity is the biggest in the world. They have set up 300 million tonnes of steel plant against our 70-75 million tonnes' plant. They are acquiring overseas coal assets to maintain their supply. We are not able to acquire mines faster because we have bureaucratic and financing issues. We can't blame China for that.
CIL and SCCL compositely account for nearly 85 per cent of the coal production and most projects linked with CIL mines are coal deficient. Don't you think we should move towards privatisation as we did in power generation by allocating mine on either PPP mode or asset privatisation to private players?
The privatisation of mines is a term which is being used very loosely. We have a very clear mandate given by the Parliament when mines were nationalised in 1971 and 1973. Coal India will remain as it is and will not be privatised. But at the same time, we have captive mine owners who would increase production.
Coal India and private players can come up on a JV basis. PPP mode can play a very big role in many activities like, coal cleaning and even the washeries, which Coal India has tendered. Coal India is providing the money and private players can build, maintain and run the washeries.
It is safe to say that the public sector coal industry is going to stay forever in India. Handling the coal sector is a massive job and private players alone would not be able to handle it.
However, the private sector has a big role to play and it will grow in its role because we need to produce two billion tonnes of coal against the present 550 million tonnes to meet the increasing demand.
(Shri R K Sachdev was one of the Key Penalist in Infraline's Monthly Round Table Discussion on 'Competitive Bidding of Coal Blocks' held on June 7, 2011 where he has given the following presentation.)