1. Commercial Mining Prospects and Challenges
R.P.Ritolia
Former CMD, Central Coalfields Ltd
Former Advisor to Managing Director, TATA Steel
September 2017

2. Commercial mining for Private Sector
Commercial mining by private sector has been successfully operating in other mineral sector like Iron-Ore, Bauxite, Manganese and Chromite.
For Coal: Amendment in Nationalization act, for commercial mining, is a thing in awaiting since 1991 resulting into monopolistic situation & hence compromise on productivity and key performance areas
Commercial Mining in Coal can be a Panacea for the Coal sector

3. Coal Sector has inefficiencies
Background Indian coal sector is dominated by Government companies; Out of 654 Mill. Tonnes production 90% of total production comes from CIL & SCCL
Coal Sector has inefficiencies
Coal processing cost in CIL are of order $16/MT while best-in-class mines incur processing cost of order of $10/MT
Source: BCG-CII report on Future of Coal
Coal India’s average OMS was 6.2 tonnes for FY 15 vs. global average of >15 tonnes
Source: World Coal Association
Improving processing cost can translate into saving of INR ~300/Mt for end users
Source: BCG-CII report
Coal mining is suffering with issues of cost & process optimization; lack of competition is one of the major reasons of sectoral inefficiencies
Production inefficiencies, absence of quality control and beneficiation has forced end-users to import huge amount of coal
India imported around 193 million tonnes of coal in FY 2016
Source: ministry of coal

4. Coal blocks auction 9 ~12 MTPA
So far 74 coal blocks have been allocated/auctioned; however production hasn’t taken off as expected
Coal Blocks auctioned/alloted
So far 74 coal blocks have been allocated/auctioned; only 9 captive coal blocks are producing coal.
Land acquisition and regulatory clearances are key reasons of delays
Coal Miners have been struggling to arrange project funds
Schedule II
Schedule III
Auction 17
Auction 14
Allotment 18
Allotment 25 9
out of 72* auctioned/allocated blocks operating
~12 MTPA
Production from these 9 blocks
Captive coal blocks’ production & performance are contingent to status of end-use plants. Key end-user i.e. Thermal coal based power projects are facing multiple project issues which is impacting the success of linked coal mining projects
Note: Block Allocated to SECL (being CIL subsidiary) excluded; Moher & Moher-Amlori production not considered here as it is an UMPP block allocated before 2015
Source: Coal Directory 2016

5. Industry Competitiveness
Key issues 1
Captive Mining
Coal mining requires different skill sets to develop and operate than end-use power plants. Hence a power company may not have mining related competencies 2
Industry Competitiveness
Due to monopolistic situation of PSUs/Govt entities, industry performance has been sub-optimal and scope of technological & operational improvement is high 3
High ash coal
Due to high ash ROM coal, significant amount of coal is unusable because of insufficient beneficiation capacity 4
Delay in clearances
Auctioned/allocated blocks are suffering from the issue of delayed clearances 5
Scale of operation
Captive mines have limitations on production limit which is determined by the capacity of linked end-use plant thus may lead to sub-optimal mine capacity

6. Commercial mining may lead to debottlenecking of some of the critical issues in the sector
Commercial mining may be a big boost in achieving the dream of 1.5 MTPA coal production by 2020
CIL
1 Billion Tonnes
2020
1.5 Billion Tonnes Coal
SCCL
0.1 Billion Tonnes
Others
0.4 Billion Tonnes

7. Electricity Supply- Installed Capacity
Year 2047: Coal is expected to continue playing a strong role in Indian power sector
As per the recent joint report (Energizing India) of NITI Aayog and IEEJ, Japan - Coal will contribute 42% of total energy supply in 2047 (ambitious scenario). Coal based power stations will increase from 125 GW to 459 GW (ambitious scenario). Competition from Renewable Energy sector calls for efficiency improvement & cost optimization in coal sector.
Electricity Demand
Electricity Supply- Installed Capacity
Sector
2012
2047
TWh
BAU
Ambitious
Buildings
240
3016
2472
Industry
336
1692
1891
Transport 79
296
275
Pumps & Tractors
136
501
353
Others 14
145
153
Total
805
5651
5144
Sector
2012
2047 GW
BAU
Ambitious
Gas Power Stns 24 50 83
Coal Power Stns
125
333
459
Carbon Capture (CCS) 35 80
Nuclear 5 26 45
Hydro 41 75
105
Solar PV+CSP 1
396
477
Wind 17
233
292
Small Hydro 3 20 30
Distributed solar PV
191
216
Biomass 11 23
Waste to Electricity 6
Total
221
1375
1816
Investment in power generation capacity by 2040 ( $ trillion) Source: Bloomberg
India has more than 310 Billion tonnes of coal reserves; still we are importing around 190 MTPA of coal which is impacting our current account deficit
Additionally, 33 Billion tonnes of coking coal reserves is present in our country excavation of which will substantially reduce our import bills.

8. How commercial mining may help the industry & suggested recommendations1
Improvement in Efficiency
Unlike captive mining, where performance of a mine is linked to project status & performance of end-use plant, the mine owner can sell coal to open market. Hence a miner can achieve optimized performance
Recommendations
Auctioned Captive coal blocks may be allowed to sell coal in the market; will reduce dependence on linked end-use plant for its performance 2
Optimized Pricing
Due to competition miners will focus on modern cost optimization, project management and technological practices, thus achieving a healthy KPI levels
Beneficiation may be considered as end-use and blocks may be allocated to beneficiation plants 3
Coal Quality Improvement
Market competition will force players to supply desired quality coal pushing the industry towards cleaner practises
Blanket in-principle approval with requisite conditions shall be given along with the LOA; the miner shall get into project execution from day- I with parallel regulatory clearance processes. 4
Reduction in coal import
Commercial mining, specially for coking coal, may help reduce dependence on imported coal

9. Thank You