Coal shortage in India

WHY IN NEWS?

• With temperatures soaring and demand for electricity increasing every day, the concerns over power crisis looms large as several thermal power plants in the country are facing severe shortage of coal.
• As per the Central Electricity Authority report on coal stock (as on April 2022:
  • Of the total 173 thermal power plants in the country, 100 thermal power plants' coal stock situations are critical.
  • The CEA marks a thermal power plant critical when its coal stock is less than 25 per cent against the normal stock.
  • The total coal stock in thermal plants was 22.52 million tonne against normal stock of 66.72 million tonne, which is just 34 per cent against normal stock

BACKGROUND:

• Coal is the most important and abundant fossil fuel in India.
• With a cumulative total of nearly 319.02 billion tonnes, India has the fourth largest reserve of coal in the world.
• The Coal resources of India are available in older Gondwana Formations of peninsular India and younger Tertiary formations of north-eastern region.
• Gondwana coal accounts for 99 % of India’s coal production.
• Types of coal found in India:
  • Anthracite: It is the highest grade of coal, containing 80-95 % carbon. It is found in smaller quantity in regions of Jammu and Kashmir.
  • Bituminous: It is a medium grade of coal having 60 to 80% of carbon content. It is found in Jharkhand, Odisha, West Bengal, Chhattisgarh, and Madhya Pradesh.
  • Lignite: It is the lowest grade coal with 40 to 55% carbon content. It is found in the regions of Rajasthan, Tamil Nadu, and Jammu & Kashmir.
• Supply:
  • India is the second largest producer and consumer of coal after China.
  • India produced 729 million tonnes coal in 2019-20 and 716.01 MT during 2020-21.
  • Top 5 States in terms of total coal reserves in India are Jharkhand, Odisha, Chhattisgarh, West Bengal and Madhya Pradesh.
• Demand:
  • Coal accounts for 52.6% of the country's energy mix.

ISSUES IN COAL SECTOR:

• I. PRODUCTION SIDE:
  • Import dependency:
    • India lacks sufficient reserves of good quality coking coal and boilers of many thermal power plants are designed to run only on imported coal.
    • Hence, there is heavy dependence on imports.
    • Example: The country imported 215.92 million tonnes (MT) coal in FY21 from 247.10 MT in FY20.
  • Continuing Monopoly:
    • Despite encouraging private participation in coal mining, Coal India limited (CIL) continues to have a monopoly.
    • However, Coal India has not been able to meet the increasing demand for coal.
    • Ex: Of the 730.87 million tonnes coal produced in 2019-20, Coal India and its subsidiaries accounted for 83% of output (602.13 million tonnes).
  • Lack of adequate technology:
    • Technology adoption in underground mining remain limited.
    • 87% of the underground coal mines of CIL are either semi-mechanised or non-mechanised (manual).
  • Lack of competitiveness:
    • Because of strict regulations and lack of mechanization, Indian coal plants have higher operation and maintenance costs.
    • Even in mechanized coal fields, operating performance is lower than global peers.
    • Ex: Similar class of shovels in international mines are operated 40–50 per cent more hours annually than they are at CIL.
  • Safety concerns:
    • Accidents and loss of human life due to mine collapse and flooding is a recurring issue in Indian coal mines.
    • There are also issues of child labour and exploitation of workers in mines.
  • Rat hole mining and child labour:
    • Despite a ban, rat-hole mining remains a prevalent practice for coal mining in Meghalaya.
    • A rat-hole mines comprises a deep vertical shaft with narrow horizontal tunnels, two to four feet in dimension, dug on its sides. Miners, often children, go into these horizontal tunnels to take out coal.
    • The National Green Tribunal (NGT) banned it in 2014, on grounds of it being unscientific and unsafe for workers.
    • The Meghalaya government has challenged the NGT ban in the Supreme Court.
    • Since the coal seam is extremely thin in Meghalaya, no other method would be economically viable.
    • Workers involved in rat-hole mining, the majority of whom are children, are generally lured into this work due to the wages offered and the poor living conditions.
    • Most of the children are either migrants or trafficked from neighbouring countries of Nepal and Bangladesh by agents.
• II. DISTRIBUTION:
  • Logistical challenges:
    • 80% of coal resources in India are concentrated in four states.
    • This necessitates better logistics for bulk transportation over long distances.
    • However, environmental concerns over road transport, cross subsidy and shortage of sufficient rail rakes remain major impediments.
  • Tax structure and transportation cost:
    • Taxes, duties and levies account for up to 25% and freight accounts for up to 34% of the overall coal cost, undermining the competitiveness of domestic coal.
• III. CONSUMPTION SIDE:
  • NPA crisis in power sector:
    • Steel and power sector are two major consumers of coal. But these sectors are the most affected by the NPA crisis.
  • Global aversion to coal:
    • There is shrinkage in global coal consumption, due to threat of climate change and also due to global economic slowdown.
    • India’s commitment under COP21 (Paris agreement) of UNFCCC does not allows us to expand our coal consumption in the long-run.
• IV. OTHER ISSUES:
  • Competition from renewables:
    • With increasing efficiency and declining cost of production, renewable sources such as solar and wind are emerging as reliable alternatives to coal energy in India.
  • Judicial interventions:
    • In 2014, the Supreme Court had cancelled 214 coal blocks that were allotted since 1993.
    • This was a major setback for the mining industry in general and coal sector in particular.
  • Land acquisition and eviction:
    • Involvement of multiple agencies, environmental considerations and questions over eviction of local population results in delays in getting requisite clearances for mining operations, leading to cost overrun
  • Corruption:
    • Recurring mining scams are a major political issue in India. The nexus between politicians and mining mafia has resulted in numerous Illegal mines sprouting across the country.
  • Threat from left wing extremists:
    • The major coal belts continue to be hotspots of Naxalism in India.
    • This affects ease of doing business in the country and dissuades private players in the sector.
  • Ecologically bad practices:
    • Recently Government did away with the regulation requiring power plants to use “washed” coal, by terming it an unnecessary cost on coal users.
    • This increases the environmental impact from using coal.
    • Coal washing in India:
    • Coal washing is a process that is undertaken in a coal washery where coal is refined or cleaned of impurities using water, mechanical techniques.
    • These technologies are meant to allow the conservation and optimal use of coal reserves by improving the quality and efficiency of low grade, high ash Indian coal.
    • In 2014, as part of its climate change commitments, India made coal washing mandatory for supply to all thermal units beyond 500 kms from the coal mine. This was done away in 2020.

WHY THE SUDDEN SHORTAGE?

• Sharp fall in imports due to high prices.
• Increased economic activity after the second wave of the pandemic has driven up demand for coal.

STEPS TAKEN TO CONTROL THE CRISIS:

• To battle the looming energy crisis in the country due to constraints on domestic coal supply, the central government has decided to take a number of steps to increase the use of imported coal for power generation, including for blending purposes.
• These steps include:
  • All the companies have been asked to operationalise their power plants at full capacity to reduce pressure on domestic coal demand.
  • The Centre has decided to allow the cost of imported coal as a pass-through till December 2022.
  • It has asked all the states to use imported coal for blending purposes to the extent of 10% instead of only 4% to ensure maintaining adequate coal stocks at the power plant as per the advised coal stock norms.

EFFORTS TO REFORM COAL SECTOR:

• Coal Mines (Special Provisions) Act, 2015:
  • The act paved the way for greater private participation in coal mining in India.
  • It amended the coal mines (Nationalisation) Act, 1973 and the MMDR Act, 1957 and introduced three categories of coal mines.
  • It provided for allocation of coal mines to successful bidders and allottees through a transparent bidding process.
• Mines and Minerals (Development and Regulation) Amendment (MMRDA) Bill, 2021
  • It provides for removal of restriction on end-use of minerals, transfer of statutory clearances, allocation of mines with expired leases and sale of minerals by captive mines, among others.
  • The bill was passed by both houses in March 2021.
  • The bill will promote ease of doing business in mining and attract investment into the sector.
• UTTAM (Unlocking Transparency by Third Party Assessment of Mined Coal) Application:
  • In 2018, Ministry of Coal has launched UTTAM app to ensure transparency and efficiency in coal quality monitoring process and bring coal governance closer to people.
• SHAKTI (Scheme to Harness and Allocate Koyla (coal) Transparently in India):
  • It aims to centralise the process of allocating coal to thermal power plants.
  • Under this, coal linkage would be first given to DISCOMS and after that the government would assign linkage to state or central power generation companies through allocation or auctions.
• Online Coal Clearances System:
  • Ministry of Coal has developed Online Coal Clearances System to provide a single window access to its investors to submit online applications for all the permissions / clearances and approvals granted by Ministry of Coal.
• Coal Allocation Monitoring System (CAMS):
  • A new web portal for Small and Medium Sector consumers of Coal India Limited (CIL) for ease of business and to bring transparency in distribution of coal to SME sectors.
• Coal Mitra Web Portal:
  • It has been designed to bring about flexibility in Utilization of Domestic Coal by transferring the reserves to more cost-efficient State/Centre owned or Private sector generating stations, leading to lower generation costs and ultimately lesser cost of electricity for the consumers
• The Mineral Laws (Amendment) Act, 2020:
  • Removal of restriction on end-use of coal:
    • Currently, companies acquiring coal mines through auctions can use the coal produced only for specified end-uses such as power generation and steel production. This Act removes this restriction.
  • Eligibility for auction of coal and lignite blocks:
    • The Act clarifies that the companies need not possess any prior coal mining experience in India in order to participate in the auction of coal and lignite blocks
  • Composite license for prospecting and mining:
    • Currently, separate licenses are provided for prospecting and mining of coal and lignite. The Act adds a new type of license, called prospecting license-cum-mining lease.
  • Transfer of statutory clearances to new bidders:
    • The Act provides that the various approvals, licenses, and clearances given to the previous lessee will be extended to the successful bidder for a period of two years.  During this period, the new lessee will be allowed to continue mining operations
  • Prior approval from the central government:
    • Act provides that the state governments no longer require prior approval of the central government for granting licenses for coal and lignite, in certain cases.
  • Advance action for auction:
    • The Act provides that state governments can take advance action for auction of a mining lease before its expiry.
• Alternative Disputes Resolution Mechanism (ADR):
  • Ministry of Coal has constituted an Alternative Disputes Resolution Mechanism (ADRM) forum to resolve the disputes between State power utilities and CIL and its subsidiaries.
• Coal Mines Provident Fund Organisation (CMPF):
  • It serves as the official pension fund of Coal miners and is financed by coal producers on a per-tonne basis.

WAY FORWARD:

The challenge for policy makers is to identify the route which maintains a fine balance between meeting the demand–supply scenario while maintaining a sustainable developmental trajectory. Some measures in this regard can include:

• Coal Regulator:
  • Establish a coal regulator with clear mandate to enable competitive market structure in coal sector in India.
• Improve competitiveness of domestic coal:
  • Establish a technical committee for rationalization, standardization of all approvals (Central, State level) for opening of coal mines in India.
  • Greater focus on cost competitiveness of domestic coal must be ensured in order to retain their competitiveness as compared to imported one.
• Improve safety performance:
  • A dedicated effort is to be made to ensure achievement of the goal of zero fatalities and injuries.
  • The government must ensure that the welfare of coal miners in private mining is at par with the status of workers in CIL.
• Coal trading platform:
  • Establish an online platform to facilitate coal trading/transactions in India including spot/forward auction.
• Collaborate to minimize environmental impact:
  • Create a joint forum of power developers and coal mining companies to undertake investment in R&D for Carbon Capture and Sequestration (CCS) and coal washing technologies in India.
• Technology in exploration:
  • Increase adoption of remote sensing, geophysical and geochemical logging, 2D and 3D seismic survey in the exploration of coal reserves.
• Improve rail infrastructure:
  • Emphasis should be given on improving the carrying capacity of railway lines availability of rakes and review of cross subsidy system.
• Coal beneficiation:
  • As India’s coal is high in ash content, coal beneficiation should be done to reduce the ash content and improve its grade.
• Centre of Excellence:
  • Create a CoE focused on mechanization and automation and digital technologies in mining in collaboration with a leading global organization

PRACTICE QUESTION:

Q. ‘Despite the growth of renewable energy, coal has an indispensable place in India’s energy mix.’ In this regard, discuss the issues faced by coal mining sector in India. What measures have the government taken to promote the sector