Year End Review 2020- Ministry of Coal

Coal Reforms-Background

India is currently producing about 729 million tonnes of coal. However, it is a fact that domestic production is not able to meet the demand of coal in the country. India has imported 247 million tonnes of coal last year and had spent 1.58 lakh crore as foreign exchange. 

Despite India being the world’s second largest coal producer and being the 5th largest country in terms of coal deposits, with coal reserves which may last at least 100 years more, the country is unable to produce adequate quantities of coal to meet the requirement of domestic industry and development.

1. Coal Sector Reforms introduced ease of doing business while retaining transparency – ushering Commercial Mining of Coal in 2020.

Government appointed (June 2019) a High Level Committee headed by Vice-Chairman of NITI Aayog to liberalize the coal sector while retaining transparency. 

This HLC made several important recommendations (October 2019) for coal block allocations and the most important being a paradigm shift wherein coal was not to be viewed as a source of revenue and instead it should be considered as an input to economic growth through the concerned sectors consuming coal. 

The government should focus on early and maximum production of coal and working towards its abundant availability in the market. 

Accordingly, it made recommendations to fulfill these objectives in line with the changed paradigm. Government accepted these recommendations with certain modifications and initiated several actions.

Relevant provisions of the CMSP Act and the MMDR Act were amended through the Mineral Laws (Amendment) Act, 2020 with a view of ensuring ease of doing business, removing redundancy in provisions and bringing flexibility in allocation. 

In addition to change in law, the auction process and methodology was further simplified in 2020. It was decided to auction the coal blocks without restriction on sale and/or utilization of coal. Export of coal was also allowed in accordance with Applicable Law. 

With the above changes in law and policy, the auction of coal blocks for commercial mining was launched in June 2020 with 38 blocks in the first tranche. 

2. Import Substitution

In the above background it is seen that Import substitution is one of the topmost priorities of the Govt. of India presently. An Inter-Ministerial Committee (IMC) has been constituted for the purpose. Towards the goal of Aatmanirbhar Bharat, the Ministry along with all stakeholders is actively pursuing to achieve the mission of Import Substitution. The impetus for import substitution has been triggered off primarily due to the following:

• Coal import in 2018-19 was 235 MT, further risen to 247 MT in 2019-20.

• Huge outflow of precious foreign exchange (1.71 lakh crores in 2018-19).

• Abundant coal availability with all time high Stock of 75 MT in different Coal Subsidiaries of CIL as well as to the power.

• Ambitious production plan of all coal companies.

Fortunately, the country is now blessed with an abundance of non-coking coal and the consumers can confidently look forward to substituting their import coal requirement with domestic coal. 

For promoting import substitution, thrust is being made to offer large quantities of domestic coal through various formats of e-auctions so that the consumers are not inclined towards import of coal.  

3. EXPANSION OF COAL SECTOR 

Progressing towards 1 Billion Tonne Coal Production

To eliminate substitutable quantities of the import of coal in country, focus is to increase domestic coal supplies to the consumers, rationalize coal movements, review certain levies, incentivize domestic coal consumption to distant consumers who are attracted to coal imports for economic reasons and thereby maximizing domestic coal consumption which shall lead to achieving the goal of ‘Atma Nirbhar Bharat’. 

4. First Mile Connectivity

The ‘Transformative Idea’ of First Mile Connectivity project aims to ease the life of people residing in coal mine areas by reducing traffic congestion, road accidents, adverse effects on environment and health around coal mines and by enhancing coal handling efficiency through employing alternative transport methods like mechanized conveyor system and computerized loading into railway rakes. Coal companies have formulated a strategy to develop an integrated approach for eliminating road transportation of coal in the mines.

5. Diversification Plan

Diversification was felt a necessity, especially in the light of climate change debates, diversifying into non-coal, secure new businesses, productively utilize sizeable reserves/funds in their Balance Sheet, fiduciary responsibility towards long-term future of coal-mine workers, leveraging economic growth, particularly in eastern region, need to invest in coal mines and related infrastructure to eliminate substitutable coal imports, support 100 MT coal gasification and likely coal exports.

Three broad baskets of diversification have been envisaged as below:

  1. New Business Areas (Diversification) to transform CIL/NLCIL from coal companies to energy companies
  2. Clean Coal Technologies (Technology-related) to provide sustainability to coal business
  3. Coal Mining Projects (Core business) to help achieve 1 Billion Tonne coal production by 2024 and create essential related infrastructure

6. GREEN INITIATIVES 

Implementation of the coal reforms will ensure India’s commitment to protect the environment and get coal a continuing acceptability and help it earn some respectability. The various steps taken to make coal environment friendly are as below:

  1. Coal Bed Methane: It means a natural gas trapped in a coal seam. Coal bed Methane (CBM), an unconventional source of natural gas is now considered as an alternative source for augmenting India’s energy resource. India has the fifth largest proven coal reserves in the world and thus holds significant prospects for exploration and exploitation of CBM. In order to harness CBM potential in the country, Government has undertaken several initiatives including the CBM policy.
  1. Surface coal gasification: India has a reserve of 289 Billion tonnes of non-coking coal and about 80% of coal produced is used in thermal power plants. Coal gasification is considered a cleaner option as compared to burning of coal and utilises the chemical properties of coal. SynGas produced from Coal gasification can be utilised in producing Synthetic Natural Gas (SNG), energy fuel (methanol & ethanol), production of urea for fertilisers and production of Chemicals such as Acetic Acid, Methyl Acetate, Acetic Anhydride, DME, Ethylene and Propylene, Oxo chemicals and Poly Olefins. These products will help in import substitution and help the mission of Government of Atmanirbhar Bharat.
  2. Setting up of Coking Coal Washeries: The Government plans to increase the supply of washed coking coal to the Steel sector from 3 to 15 MT. For this, 02 coking coal washeries have already been commissioned.
  1. Sustainable Development Cell: Recognizing the importance of bringing sustainability in coal mining, a “Sustainable Development Cell” has been created in Ministry of Coal and also in all coal PSUs to promote adoption of better environmental management practices in coal mines, thereby providing a better environment to people working and residing in nearby areas and also improve the overall image of coal sector in the country.