Amidst tight global supplies and price rise, it’s imperative to reassess the management of our coal resources and its impact on our energy security
Amongst the major energy sources, coal is the most rapidly growing fuel by consumption on a global basis. Coal plays an important role in electricity generation and steel and cement manufacturing worldwide. Currently, 39% of global electricity produced depends on coal feedstock. The Indian coal industry is the fourth largest in terms of coal reserves and third largest in terms of coal production in the world. But despite its huge resource base, India has not been able to minimise its coal deficit. The country continues to produce a majority of the coal that it consumes, but coal imports are rising at a fast pace, already contributing to over 10% of our coal consumption. And domestic coal production is unlikely to meet the expected demand growth over the next five years. According to a Credit Suisse report, the coal deficit in India is currently pegged at 142 million tonnes and is likely to increase to 400 million tonnes by FY 2017.
The Geological Survey of India estimates proven reserves of coal in India to be 114 billion tonnes, or 40% of the total reserves. The latest proven reserves represent a 3.6% increase over the previous year’s 110 billion tonnes. At current levels of production of about 550 million tonnes, the coal reserves will last for more than 100 years, Coal Minister Sriprakash Jaiswal recently told the upper house of the parliament (Rajya Sabha) in a written reply. Coal demand is anticipated to grow at a CAGR of over 10% during 2011-12 and 2013-14 with the demand for thermal coal and coking coal by the power and steel sectors expected to show maximum growth in the near future.
According to data available from the Ministry of Power, coal-based power generation capacity (86GW) is 53% of the total installed capacity (162GW) in the country and it contributes 66% of the generation (in kWh). There are 105 thermal-generation plants currently in operation throughout India, and another 59, which are expect ed to come into production over the next three years. The Ministry of Power expects coal imports for the power sector to increase from 16 million tonnes in FY ‘09 to 68 million tonnes in FY ‘12. Similarly, total coal requirement for India’s steel sector work out to 68.5 million tonnes/year by FY ‘12. That translates to incremental demand of 33.5 million tonnes of coal by FY ‘12. The cement sector is another important consumer of coal. As per Plan documents, annual cement production during the 11th Plan period should increase 61%, from 156 million tonnes during FY ‘07 to 251 million tonnes during FY12. This, despite the fact that average specific consumption of coal in cement plants has been decreasing in recent years, driven by substantial technological improvements. Nevertheless, coal requirement for incremental cement production is estimated to be at 11.9 million tonnes by FY ‘ 12.
Clearly, a large part of the coal requirement would have to be met through imports as PSU companies, who account for four-fifths of the country’s coal production, are finding it difficult to accelerate production growth. Coal India Limited (CIL), India’s largest coal producer and also the world’s biggest producer of coal has scaled down its production targets for 2011-12 to 452 million tonnes from 460.5 million tonnes. Last year, against the target of 460.5 million tonnes, it produced 431.32 million tonnes. The coal ministry blamed the shortfall on delays in getting environmental clearances, laws and litigation delays, and seasonal rainfalls that disrupt mining activities. The coal sector has been traditionally dominated by government-owned companies and with limited participation from the private sector. But there is no denying that private sector participation is a must for augmenting coal production.
The Geological Survey of India estimates proven reserves of coal in India to be 114 billion tonnes, or 40% of the total reserves. The latest proven reserves represent a 3.6% increase over the previous year’s 110 billion tonnes. At current levels of production of about 550 million tonnes, the coal reserves will last for more than 100 years, Coal Minister Sriprakash Jaiswal recently told the upper house of the parliament (Rajya Sabha) in a written reply. Coal demand is anticipated to grow at a CAGR of over 10% during 2011-12 and 2013-14 with the demand for thermal coal and coking coal by the power and steel sectors expected to show maximum growth in the near future.
According to data available from the Ministry of Power, coal-based power generation capacity (86GW) is 53% of the total installed capacity (162GW) in the country and it contributes 66% of the generation (in kWh). There are 105 thermal-generation plants currently in operation throughout India, and another 59, which are expect ed to come into production over the next three years. The Ministry of Power expects coal imports for the power sector to increase from 16 million tonnes in FY ‘09 to 68 million tonnes in FY ‘12. Similarly, total coal requirement for India’s steel sector work out to 68.5 million tonnes/year by FY ‘12. That translates to incremental demand of 33.5 million tonnes of coal by FY ‘12. The cement sector is another important consumer of coal. As per Plan documents, annual cement production during the 11th Plan period should increase 61%, from 156 million tonnes during FY ‘07 to 251 million tonnes during FY12. This, despite the fact that average specific consumption of coal in cement plants has been decreasing in recent years, driven by substantial technological improvements. Nevertheless, coal requirement for incremental cement production is estimated to be at 11.9 million tonnes by FY ‘ 12.
Clearly, a large part of the coal requirement would have to be met through imports as PSU companies, who account for four-fifths of the country’s coal production, are finding it difficult to accelerate production growth. Coal India Limited (CIL), India’s largest coal producer and also the world’s biggest producer of coal has scaled down its production targets for 2011-12 to 452 million tonnes from 460.5 million tonnes. Last year, against the target of 460.5 million tonnes, it produced 431.32 million tonnes. The coal ministry blamed the shortfall on delays in getting environmental clearances, laws and litigation delays, and seasonal rainfalls that disrupt mining activities. The coal sector has been traditionally dominated by government-owned companies and with limited participation from the private sector. But there is no denying that private sector participation is a must for augmenting coal production.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
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Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
