|9th Five Year Plan (Vol-2)|
Energy || Power Sector || Oil and Natural Gas
6.153 Against the average growth in coal production of 6.4% annually during the Seventh Plan, production of coal in the Eighth Plan was projected to grow at an average rate of 6.08% annually. The target for coal production in the terminal year of the Eighth Plan was fixed at 308 mt against an achievement of 229.29 mt in 1991-92. However, the production increased at an annual rate of about 4.5% only. This has been mainly due to fixation of lower production targets for Coal India Ltd. with a view to liquidate the mounting pithead stocks in the initial years of the Plan. Domestic coal availability, however, fell short of the demand in the subsequent years of the Plan. The target of coal production in 1996-97 was set at 288.65 mt (CIL 252 mt, SCCL 30.2 mt and Others 6.45 mt) against the initially envisaged target of 308 mt (CIL 270 mt, SCCL 33 mt and Others 6.5 mt). The domestic availability was lower than the estimated demand in 1996-97. The decision of the Ministry of Coal (MOC) not to take up coal projects yielding less than 16% of IRR has delayed work on a large number of new projects and has led to significant shortfalls in coal availability from new projects during the Eighth Plan.The new underground projects could not be taken up due to costs of production far exceeding the prevailing prices. As a result, the underground:opencast production ratio has declined and touched a low of 25:75 in 1996-97 as against 28:72 at the beginning of the Plan.Besides, there have been severe shortfalls in capacity additions from new projects as a result of resource constraints and delays in the implementation of ongoing projects which have adversely affected the coal production programme. The details of coal production are given in Table-6.21 and the company-wise production details are given in Annexure 6.4.
6.154 In the year 1995-96, the MOC had reviewed the pithead stocks position of CIL and declared some of the stocks as non-vendible. As a result, stocks standing at 48.58 mt (CIL 47.8 mt, SCCL 0.70 and Others 0.08 mt) at the beginning of the Eighth Plan have come down to a level of 30.04 mt (CIL 27.88 mt, SCCL 1.91 mt and Others 0.25 mt) as on 1.4.1997. The envisaged draw down from the pithead stocks of CIL during the Plan has also not materialised. It was planned to draw 20 mt in 1992-93, 13.8 mt in 1993-94, 8.9 mt in 1994-95, 7.5 mt in 1995-96 and 2 mt in 1996-97 from the stocks of CIL. As against this, there was an accretion of 2.3 mt in 1992-93, a nominal reduction of 0.49 mt in 1993-94, a reduction of 4.45 mt in 1994-95 an accretion of 1.91 mt in 1995-96, and a nominal reduction of 0.10 mt in 1996-97.
6.155 It was envisaged that the average ash content in the washed coking coal for steel plants at the desired level of 17% +/- 0.5% would be maintained by the coal industry by undertaking the necessary modifications and retrofitting etc. of existing washeries as per the recommendations of the Altekar Committee by 1994-95. However, the problem of higher ash content has not been overcome and the steel industry is increasingly depending on imports mainly due to inconsistencies in the quality of washed coking coal being supplied by CIL at about 21% ash. The washed coking coal production from CIL washeries has almost remained stagnant at around 9 mt in the Eighth Plan. The yield of the washeries has come down from 54% in 1992-93 to about 51% in 1996-97. The two new coking coal washeries namely Kedla and Madhuband which were scheduled to be commissioned during the Plan have not been commissioned.
6.156 Regarding beneficiation of non-coking coal for supply to the power plants situated at a distance of more than 1000 kms. from the coalfields, it was envisaged that beneficiation facilities would be set up in the Eighth Plan. However, excluding the facility at Piparwar project, no new non-coking coal washery has come up in the Eighth Plan.
6.157 The Eighth Plan envisaged matching of the field-wise production plan with the requirements of the consuming sectors keeping in view the evacuation facilities. It was also envisaged that the coal supply to Southern and Western region power stations would be based on a carefully drawn up action plan necessitating movement of coal by coastal shipping from the Eastern region. However, the originally envisaged targets of coal production and coal demand have fallen short by 7.3% and 4.8% respectively during the Plan. The constraints of rail evacuation facilities have resulted in increased pithead stocks in the initial years of the Plan. Though the rail movement of coal has increased significantly during the Eighth Plan, movement constraints were noticed particularly in areas like Korba,Talcher, Ib Valley, North Karanpura, Rajmahal etc. which have large unrealised production potential. The critical rail links have been identified and are to be taken up on priority by the Railways.
6.158 The annual imports of coking coal by the steel sector have reached a level of 9 mt due to lack of adequate availability and suitable quality of coking coal from indigenous sources. Delays in completion of the modification/retrofitting of existing washeries as per the Altekar Committee recommendations and delays in implementation of new washery projects have resulted in the shortfall of washed coking coal availability. Shortage of suitable raw coal feed to the washeries has also affected the washery performance. The proposed utilisation of Low Volatile Medium Coking coals (LVMC), to increase the availability of raw coal feed for coking coal washeries supplying coal to the steel sector, has not come up to the required extent.
6.159 Delays in implementation of projects and non-availability of resources for taking up new projects have adversely affected the coal production programme in the later part of the Plan.
6.160 The constraints of production from underground mines continue. Though there has been an increase in the overall coal production, it has been mainly the result of the increase in production from opencast mines.
6.161 New coal projects for an annual production of 72 mt were to be sanctioned and started during the Eighth Plan. Against this, the total capacity sanctioned was only around 43 mt. The CIL and SCCL have not been able to take up a number of technically viable projects in view of the unsustainable low financial rate of return in the context of the administered prices. Implementation of the ongoing projects has also suffered due to problems of land availability and forest and environmental clearances.
6.162 Land acquisition and the related rehabilitation of the land oustees continued to remain one of the major constraints of project implementation. The Plan envisaged that a national level rehabilitation policy would be finalised for adoption by the new projects with a view to mitigate the hardships of land oustees. However, the national level rehabilitation policy has not come through yet.
6.163 The approval and implementation of environmental management plans have become mandatory constituents of the projects as per the project clearance procedures of the Government. Coal companies have also started reclamation of mined-out areas particularly the opencast mines as per the approved environmental management plans. Similarly, strict measures for controlling the effluents of washeries, mines and workshops are also under implementation.
6.164 Measures for protecting the environment of coalfields have been continuing and special efforts have been made by creating a head under "Environmental Measures and Subsidence Control" to tackle fire and subsidence problems in Jharia and Raniganj coalfields respectively. An action plan is to be drawn up for effective implementation of the schemes. A High Powered Committee has been constituted by the Government of India for this purpose and its report is awaited.
6.165 To arrest the low productivity in the underground mines and to improve the overall productivity of men and machinery, the coal companies have drawn certain action plans, like implementation of voluntary retirement scheme, de-commissioning of uneconomic mines, re-location of under-utilised manpower, re-orientation of investment programmes with preference for projects with relatively low gestation and higher outputs and maximisation of underground production. As a result of these measures, there has been a significant improvement in the overall Output per Manshift (OMS) levels of coal companies. However, the improvement in OMS has been mainly confined to opencast mines only and underground OMS needs to be further improved. Against the Plan target of OMS of 1.65 t (UG 0.66 t, OC 4.32 t) for CIL and 1.36 t (UG 0.86 t, OC 6.43 t) for SCCL, the OMS in 1996-97 (Actual) for CIL was 1.82 t (UG 0.59 t, OC 4.88 t) and for SCCL 1.19 t (UG 0.72 t, OC 6.25 t). In the case of machine productivity, though the targets of machine utilisation have been achieved when compared with the norms fixed by Central Mine Planning and Design Institute Ltd. (CMPDIL) for various Heavy Earth Moving Machinery (HEMM) particularly in CIL, there is a necessity to review these productivity norms with a view to improve the capacity utilisation.
6.166 About 66% of the coal offtake is by railways. Though the movement of coal by Merry Go Round (MGR) system for pit-head power stations is increasing, still the component of rail transportation continues to remain predominant in the overall coal movement. In order to reduce the dependence on road transport mainly in view of energy conservation, transportation of coal by rail needs to be further increased. Critical transportation bottlenecks like construction of rail links between Gevra and Pendra road, doubling of Champa Gevra line in Korba, new railway line linking Rajmahal coalfield with main line, construction of new line from Hindgir railway station to Gopalpur in Ib Valley, Tori-Dhonia link in North Karanpura field, increasing the capacity at Mugalsarai Junction etc. have already been identified and work needs to be undertaken on these projects by the Railways on priority.
6.167 Coking coal imports by the steel sector by the end of the Plan was about 9 mt. A gap of 20 - 25 mt existed between the estimated demand and domestic availability of coal for the power sector in the beginning of 1996-97, warranting high level of non coking coal imports by the power sector. However, the matching coal handling facilities at ports were not adequate. As per the Ministry of Surface Transport, at the beginning of the Eighth Plan the dedicated capacity for coal handling in Indian ports was reckoned as 7 mt only. Out of this, 5 mt was available at Haldia and 2 mt at Tuticorin. The number of coal berths at Haldia are two and at Tuticorin one. In addition, coal is also being handled at cargo berths at Vishakhapatnam, Paradip and Madras on the East Coast. One coal jetty has been added at Tuticorin port during the Eighth Plan for an ultimate capacity of 2.5 mt. However, the interim capacity of this is only about 1 mt. Thus, the aggregate coal handling capacity at major ports by the end of the Plan was 8.5 mt only. Some minor ports under State Governments are also handling some coal imports for which no statistics is available. Thus, the option of large-scale imports does not appear to be available during the Ninth Plan due to capacity constraints in the ports.
Science and Technology
6.168 The thrust areas for R and D activities during the Eighth Plan continued to be Production, Productivity and Safety; Coal Beneficiation; Coal Utilisation; and Environment and Ecology. During the Eighth Plan, apart from the continuing projects, forty new S and T projects were sanctioned till 1995-96 at an estimated cost of Rs.14.96 crore. However, no major project has been undertaken during the Eighth Plan under the S and T grant. Even the IS-STAC projects under Department of Science and Technology did not come up in the desired way during the Plan. As a result, the total S and T expenditure in the Plan has been limited to Rs.19.78 crore (23%) against an approved outlay of Rs.87 crore.
6.169 Development of lignite in the Eighth Plan has not been satisfactory in spite of the thrust given. The Barsinghsar Integrated Lignite Mine-cum-Power Project of NLC in Rajasthan has been deferred and this project is now to be taken up in the private sector. The Mine-I Expansion Project of NLC from 6.5 mtpa to 10.5 mtpa has got badly delayed due to the delay in the approval of the linked TPS-I Expansion Project and the funding arrangements. However, the lignite production by GMDC has increased from 3.2 mt at the beginning of the Plan to 5.19 mt at the end of the Plan. As against the NLCs targeted growth of 7.5% annually for lignite production, the actual growth was 6.7% only.
Private Sector Participation
6.170 In order to augment the coal availability, certain measures were initiated for facilitating private sector participation in the coal sector during the Eighth Plan. However, it was limited to captive consumption only. Following were the areas allowed for private sector participation:
6.171 Forty seven mining blocks were identified for captive mining with an estimated reserve of about 14 bt and an annual production potential of 150 mt. Of these, 16 proposals were cleared for power generation and 3 for steel making in both private and public sector. Action was also initiated for construction of 7 washeries in private sector (3 coking coal and 4 non-coking coal). However, the pace of development has not been as desired.
6.172 Towards the end of the Eighth Plan, on 12th Feb., 1997, based on the recommendations of the Committee on `Integrated Coal Policy, the Government has taken decision in principle to permit commercial mining of coal by the private sector without the captive-use restriction. However, it is subject to legislative approval. Other decisions are enumerated in para 6.178.
6.173 The Eighth Plan envisaged the coal industry to be made financially viable and capable of supporting itself through improvements in efficiency and productivity levels. Accordingly, the coal sector has initiated action for rationalisation of manpower and closure of uneconomic mines etc. As a result of these measures and decontrol of prices of all coking coals and superior grade non-coking coals (A, B, C and D), the internal resource generation has increased which has led to reduced reliance on budgetary support. The Government has approved capital restructuring packages for SCCL in 1994 and CIL in 1996 to facilitate their turn around. But, due to delays in timely revision of coal prices, prior to decontrol of certain grades of coal, the likely benefits of capital restructuring have got diluted.
Plan Outlays and Expenditure
6.174 The Eighth Plan approved a Central outlay of Rs.10507 crore (at 1991-92 prices) for coal and lignite sector excluding the contribution of the Government of Andhra Pradesh towards its share of equity in SCCL estimated at Rs.850 crore. In addition, the outlay approved for NLC (Power) was Rs.1000 crore. As against this, the cumulative expenditure in the Plan (1992-97) has been Rs.10656.7 crore excluding the contribution of Rs.487 crore from Government of Andhra Pradesh for SCCL. The cumulative expenditure in the case of NLC (Power) has been Rs.429.48 crore. Thus, the overall expenditure of MOC has been Rs.11143.7 crore including the contribution of Govt. of Andhra Pradesh and NLC (Power) against the corresponding overall outlay of Rs.12357 crore. The overall expenditure forms about 90% of the total outlay at current prices and about 71% at constant prices (1991-92). The main reasons for the shortfall in the expenditure have been delay in the revision of coal prices and non realisation of outstanding coal sale dues affecting the generation of internal resources. Also, the envisaged market borrowings have not fully come through. All these have affected the Plan expenditure adversely.
6.175 Based on the progress of various major projects, the spillover to the Ninth Plan of both coal and lignite projects is of the order of Rs.5598.72 crore (CIL Rs.3019.42 crore, SCCL Rs.740.33 crore, NLC Mines Rs.1838.97 crore) and of NLC (Power) it is 1847.15 crore, totaling Rs.7445.87 crore.
6.176 Considering the important position of coal and lignite in Indias energy strategy and the urgent need for rapid development of these resources, the Planning Commission constituted a Committee on `Integrated Coal Policy, which submitted its report in May, 1996. The Committee has made a number of recommendations for augmentation of coal and lignite production and private sector participation in the coal sector. The major recommendations include coal conservation through reduction in specific coal consumption levels for power generation and adoption of improved coal utilisation technologies for power generation and steel making, augmentation of domestic coal production by involvement of private sector, offering of coal blocks both for exploration as well as mining on competitive bidding basis, integrating the exploratory efforts for coal and lignite, creation of a Special Fund and an independent body for coal and lignite exploration, deregulation of coal prices, creation of a Regulatory body for looking into price disputes etc., setting up of more pithead coal/lignite-based thermal power stations, augmentation of railways and port infrastructure facilities, amendments/modifications in various Acts viz. Coal Mines (Nationalisation) Act 1973, Colliery Control Order, 1945, Coal Bearing Areas (Acquisition and Development) Act, 1957, Mines and Minerals (Regulation and Development) Act, 1970, Forest Conservation Act, 1980 etc. for facilitating private sector participation and expediting project clearance procedures.
6.177 Following recommendations of the Committee have been accepted by the Government:
NINTH PLAN (1997-2002)
6.178 Following priority areas have been identified for the coal sector in the Ninth Plan:
6.179 As against the actual coal consumption of 296 mt excluding 4.74 mt of washery middlings, in 1996-97 the demand for coal estimated by the Working Group on Coal and Lignite, in the terminal year of the Ninth Plan, 2001-02, is 405 mt, excluding 7.70 mt of washery middlings. However, the coal demand for power, as estimated by the Working Group at 254.8 mt, excluding 5.5 mt of washery middlings, was on the lower side and a review was made considering the new coal-based power plants yielding benefits in the Ninth Plan. Accordingly, the coal demand for the power sector utilities in 2001-02 is now estimated at 262 mt, excluding 5 mt of washery middlings. Thus, the overall coal demand in 2001-02, the terminal year of the Ninth Plan, is now estimated at 412.20 mt, excluding 7.70 mt of washery middlings, implying an average annual growth of 6.85% in the Ninth Plan against about 5.3% in the Eighth Plan. The power utilities are the largest consumers (64%) followed by steel (12%), cement (5.2%), etc. It is to be noted that the estimated demand for power utilities will, however, depend on the various clearances for the new private sector power projects by the end of 1997-98 and finalisation of fuel supply agreements with the coal companies. The broad sectoral coal demand is given in Table 1 and details are given in Annexure-6.3.
6.180 As against the actual coal production of 285.66 mt in 1996-97, the Working Group has estimated a coal production of 359.60 mt consisting of 303 mt from coalfields of CIL, 36 mt from those of SCCL, 7.6 mt from TISCO/IISCO/DVC and 13 mt from the Captive Blocks, in 2001-02. However, after reviewing the possibilities of incremental coal production from CIL it has been found feasible to increase the CILs target by 11 mt totaling to 314 mt in 2001-02. Thus the overall coal production target in 2001-02 is fixed at 370.60 mt, implying an average annual compounded growth of 5.3% during the Ninth Plan against the actual growth of 4.5% in the Eighth Plan. The details of coal production are given in Table 2 and company-wise coal production is given in Annexure-6.4.
6.181 The incremental production in the Ninth Plan over the Eighth Plan is about 85 mt against 56 mt of incremental production in the Eighth Plan. The category-wise coal production is as given in Table-6.22.
6.182 The coal production from the new schemes of CIL and SCCL is estimated at 60.04 mt which is about 17% of the total production and will be available only if these projects are taken up immediately with strict monitoring for their timely implementation and completion. Besides, the contribution from Captive Blocks at 13 mt (3.5% of the total) is subject to the action taken by the promoters.
6.183 From the additional coal production potential of 41 mt, from CIL sources (ECL- 2.5 mt; CCL-2.0 mt; WCL-3.4 mt; SECL-17.5 mt and MCL-15.9 mt) which has been identified by the Working Group, an increase of 11 mt (MCL-4 mt; SECL-3 mt and WCL-4 mt) has been considered to be feasible in 2001-02.
6.184 Of the total projected production, 75% is envisaged to come from opencast mines and 25% from underground mines. This trend is fast depleting the reserves amenable for opencast mining and neglecting the development of underground mines where large potential exists for meeting the future demand. Therefore, immediate action would need to be initiated for developing underground mines in view of their long gestation periods.
Demand Supply Management
6.185 When compared with the domestic availability there lies a large gap in meeting the projected demand of coal in the year 2001-02. Against the assessed demand of 412.20 mt, excluding 7.70 mt of washery middlings, the indigenous availability is 370.60 mt only leaving a gap of 41.60 mt. The steel sector has proposed to import 19 mt of coking coal and two thermal power stations have proposed to import 2.3 mt of non-coking coal in 2001-02. This still leaves a gap of 20.3 mt in 2001-02.
6.186 In view of this large demand-supply mismatch there is a need for policy changes to augment coal production in the Ninth Plan and beyond by measures like facilitating private sector participation in a big way, including the commercial mining by rationalisation of coal prices. In addition to these measures, proper demand management for coal by adopting suitable coal utilisation technologies by the end-use sectors, locating more and more pithead power stations to overcome the rail movement constraints, necessary amendments to the various Acts/Regulations, competitive bidding of coal blocks, restructuring of coal industry etc. are some of the areas which need immediate attention, as brought out by the Committee on Integrated Coal Policy.
6.187 Augmentation of rail movement capacity by implementing the already identified critical rail links in potential coalfields is essential in the Ninth Plan to avoid mismatches and help materialisation of coal demand. The MOC has listed the following rail network constraints:
6.188 While the trunk routes are looked after by the Ministry of Railways(MOR), the movement facilities from the coalfields to the trunk routes is lagging due to resource crunch being faced by the MOR. It is, therefore, felt necessary by the MOC that it would have to fund these new infrastructural rail links through collections from excise duty leviable under Coal Mines Conservation and Development Act (CCDA) 1974, which is also meant for improvement of transport infrastructure in the coalfields. Presently, approximately Rs.335 crore is lying unspent in the consolidated fund of the Government of India which were collected in the form of excise duty since the inception of CCDA in 1974. As per the estimates of the MOC, rail line for a distance of 490 kms in different coalfields of CIL is required to be covered with an estimated cost of Rs.1127 crore.
6.189 The coal contributes 48% of the total railway revenue earning freight and out of this 68% is from coal moved to power sector. The regular increase in the coal freight charges are adversely affecting the landed cost of coal at consumers end. This may lead to competitive dis-advantage to the domestic coal. Therefore, the increase in the freight charges of coal should be so devised to encourage the consumers to resolve to rail transportation.
Pit-head Power Stations
6.190 In order to avoid coal transportation bottlenecks, it is essential to the extent feasible to opt for coal pit-head based power plants, with suitable arrangements for evacuation of power to the consuming States. The potential locations for such coal-based power plants at Talcher and Ib in Orissa, North Karanpura in Bihar, Singrauli in U.P., etc., and lignite-based power plants at Jayamkondam, Mannargudi etc. in Tamil Nadu have been identified.
6.191 Development of port facilities is an important area for facilitating transport of coal both indigenous and imported. Substantial imports are contemplated in the Ninth Plan in view of the projected deficits between demand and domestic availability. It has also been suggested by the Committee on Integrated Coal Policy, that the coastal-based power stations may import power grade coals for the purpose in view of the contemplated shortfall in the domestic availability in the Ninth Plan and beyond. Proper policy for developing in-land water-ways for coal transportation needs consideration to supplement rail and road transport capacities and to conserve energy.
6.192 In the Ninth Plan, it is proposed to provide mechanised coal handling facilities at Ennore near Madras and at Paradip for handling thermal coal. The number of berths for coal handling, to be added, are four, two in each port. Once these facilities are completed, the expected additional coal handling capacity will be of the order of 28 mt by the end of the Ninth Plan, of which 20 mt will be at Paradip and 8 mt will be at Madras amounting to a total capacity of 37 mt in 2001-02 against a total capacity of 8.5 mt in 1996-97 at the end of the Eighth Plan.
6.193 Productivity in terms of output per man shift for CIL is targeted at 2.24 tonne (UG-0.69 t, OC-6.53 t), in 2001-02, against the actual achievement of 1.86 t (UG-0.57 t, OC-5.12 t) in 1996-97. In the case of SCCL the overall target is 1.30 t (UG-0.79 t, OC-4.50 t) in 2001-02, against the actual achievement of 1.19 t (UG-0.72 t, OC-6.25 t) in 1996-97. Measures would need to be initiated for improving the productivity further.
6.194 Productivity for HEMM in terms of machine utilisation in CIL in 2001-02 is targeted at 72% for shovels, 60% for dumpers, 63% for dozers, 65% for drills and 93% for draglines against the CMPDIL norms of 58%, 50%, 45%, 40% and 73% for these machines respectively. In the case of SCCL the targets are 57%, 55%, 72%, - , 98% respectively. There is an urgent need to review the capacities, as well as norms for better utilisation of HEMM, fixed by the CMPDIL.
Economics of Coal Projects
6.195 The reforms in the coal sector leading to deregulation of prices would change the economics of coal projects. Earlier, coal projects used to be considered for approval by the Government for low financial IRRs (12% or even less) in larger economic interests of the country. However, in view of the mounting losses of coal companies, the MOC decided not to consider any coal project for approval with financial IRR of less than 16%. This resulted in the shelving of many coal projects and the number of new coal projects being planned and approved came down sharply. This trend may lead to an unwelcome supply-demand mismatch. It is to be noted that coal projects invariably have long gestation periods and cannot be planned and implemented hurriedly. The recent recommendation of the Committee on Integrated Coal Policy regarding negotiated pricing for any coal produced from new mines is therefore welcome. Coal companies would now be able to take up new projects based on negotiated prices. The selling price of coal from these projects to yield the desired finacial IRR may be worked out through commercial agreements between the producers and the consumers. Therefore, the criteria of financial IRR at 16% should not become a hurdle in taking up of new projects.
Washed Coking Coal
6.196 The projected washed coking coal availability in 2001-02 from the CIL sources is 10.90 mt only. The incremental production in the Ninth Plan over the Eighth Plan is 1.2 mt. However, the projected yield of the washeries is only 48.2%. This is a matter of serious concern. All possible measures need to be taken for improving the yield and the capacity utilisation of washeries and thereby improve the availability of washed coal. Also, no new washery project is proposed by CIL in the Ninth Plan. The proposed imports of coking coal by the steel sector in 2001-02 is 19 mt on qualitative and quantitative grounds. Any additional availability of suitable quality of washed coking coal from CIL would reduce these imports and help the steel industry.
6.197 Utilisation of LVMC coals after washing needs to be taken up on priority during the Ninth Plan.
Beneficiation of non-coking coal
6.198 The notification dated 19.9.1997 issued by the Ministry of Environment and Forests (MOEF) makes it mandatory for thermal power plants located 1000 kms from pithead and also those located in urban areas/sensitive areas/ critically polluted areas, irrespective of their distance from pithead, excepting any pithead thermal power plant, to use beneficiated coal with ash content not exceeding 34% from 1st June, 2001. As there is only one non-coking coal washery, namely Piparwar, there is an urgent need to create the required capacities for beneficiating non-coking coal to comply with the MOEF notification. Also, 37% of the total despatches to the power sector, currently, are over long distances. This implies that about 120 mt of washing/beneficiation capacity would need to be created by 2001-02, which would require a capital investment of about Rs.3000 crore at a specific investment of Rs.25 to 30 crore per million tonne. The power sector has to enter into agreements with the coal companies for bearing this extra beneficiation costs. Also, to make the beneficiation economical, the washery rejects need to be utilised in FBC route power generation. Therefore in view of CILs policy of not commissioning any washery of its own other than on BOO or BOOT basis and the long gestation period of 36 to 48 months required for building washeries and also the enormous costs involved, there is an urgent need for finalisation of the agreements with the consumers so that these washing/beneficiation capacities can be created well in time. Though the private sector was permitted to wash coal by suitably amending the Coal Mines (Nationalisation) Act, 1973, the response has not been as desired due to issues involved in the settlement of commercial terms with the power producers. Therefore, the setting up of washeries by private parties as agents of power stations need to be promoted. This could be on the lines of the Bombay Suburban Electric Supply (BSES) which has entered into the activity of washing and despatch of its linked coal.
6.199 There is a need for beneficiation of non-coking coal and it would be necessary for the consumers to bear the additional cost of beneficiation. Also, MOC may pursuade coal companies to supply beneficiated coal to consumers on cost plus basis. Alternatively, beneficiation plants/deshaling plants may be offered on BOOT.
6.200 In spite of the efforts being made to encourage coal-based domestic fuels like Coal Briquettes, Soft Coke and Special Smokeless Fuel (SSF), the growth in their production/consumption has not been encouraging. Suitable measures need to be taken to encourage increased private sector participation in producing these fuels to improve their availability at affordable prices, particularly for the people in rural areas.
6.201 In the Ninth Plan, regional/promotional/detailed exploration activities need to be intensified for upgradation of reserves to `proved and `recoverable/mineable categories to permit projectisation of suitable blocks for increased production to meet the rapidly increasing demand for coal and lignite. So far, regional/promotional exploration has been funded through budgetary support and carried out by Geological Survey of India (GSI) and Mineral Exploration Corporation Ltd. (MECL). Detailed exploration has been funded and implemented by the National Coal Companies (NCCs) themselves.
6.202 In the emerging deregulated environment in the coal sector, the NCCs may no longer be interested in investing on exploration as it is not always certain that the particular coal bearing area on which the company has incurred heavy expenditure on exploration will be allotted to the same company for mining.
6.203 To ensure that there is no let up in regional exploration efforts, greater intervention by the Central Government in this area becomes imperative. The manner in which such exploration activity should be funded and the institution that should be entrusted with this responsibility are issues that assume considerable importance during the Ninth Plan.
6.204 Exploration is a continuous activity. The mineable coal reserves are estimated to be around 20 billion tonnes out of the estimated coal reserves of around 204 billion tonnes. The Plan envisages increased efforts for coal exploration with the objective to bring the estimated coal reserves into mineable coal reserve category. A total of 5.55 lakh metres of regional and promotional drilling for coal and 4.45 lakh metres for lignite is to be carried out during the Ninth Plan. The Plan envisages upgradation of additional reserves of 10 bt of coal and 15 bt of lignite. Both regional/promotional and detailed exploration will be extended to deeper areas. Regional/promotional exploration will be carried out over the uncovered parts of the known coalfields, areas where coal reserves occur at depths beyond present day depth-cut offs and the virgin coalfield areas which are unexplored so far. Besides, areas underlying the volcanic traps will also be explored. Detailed exploration will be carried out for proving the reserves occurring in the uncovered parts of the known coalfields, as well as reserves occurring within the depth range of 300 - 600 metres. Exploratory efforts for coking coal will be intensified in the new areas of Damodar Valley, as well as outside Damodar Valley - particularly in parts of Rewa Gondwana Basin.
6.205 Regional/promotional exploration for lignite will be carried out to trace the lateral extensions of the existing seams and for locating more deposits in geological continuity in Ramnad basin and other coastal areas in Tamil Nadu - Pondicherry region; Barmer, Bikaner and Nagaur basins in Rajasthan and in Kutch, Bhavnagar, Surat and Bharuch districts of Gujarat. Besides, systematic exploratory work for lignite will be carried out in potential coastal areas of Kerala, Karnataka, Andhra Pradesh and Maharashtra.
6.206 Considering the urgent need for accelerating exploration for coal and lignite in view of the sharply growing demand for coal and the inability of the NCCs in funding detailed exploration of the coal blocks and also to establish matching reserves, it is proposed to set up an Independent Body for both regional/promotional and detailed exploration activities which will be carried out by private and public sector agencies and will be financed from a Special Fund created for this purpose by levying an appropriate surcharge on every tonne of coal and lignite produced in the country. Exploration is a risk venture. It would, therefore, be necessary that financial incentives and concessions as allowed for infrastructure industries, are provided to Coal Sector, with an objective to mobilise resources for coal exploration. In order to encourage private sector participation, there should be legal back-up for commercial exploration agencies to be given priority for exploitation as well. However, they should apply for exploitation within the time frame prescribed after exploration of the block is completed.
Science and Technology
6.207 Thrust on completion of ongoing S and T projects and identifying suitable schemes for industrial application under the four thrust areas, namely , production, productivity and safety, coal beneficiation, coal utilisation and environment and ecology will continue to get priority, in the Ninth Plan along with the development of in-house R and D in coal companies. A three-pronged approach for development of S and T in the coal sector has been proposed by the Working Group as mentioned below:
6.208 The thrust areas for IS-STAC programme have been identified as under:
6.209 Greater emphasis needs to be given to the area of Coal Bed Methane exploration in view of the large potential that has been estimated in the coal fields of the country and as a new resource of commercial energy which is environmentally-friendly.
6.210 The thrust on improving the environmental management of coalfield areas will continue in the Ninth Plan. Strict implementation of the environmental management plans for mitigating the adverse effects of coal mining like land degradation, mine effluents, sound and air pollution etc., will be undertaken for sustainable development of coal resources.
6.211 The issue of ash disposal is very critical from the environmental point of view. Most of the Indian coals, being used for power generation, have 35% or more ash content. Currently, about 203 mt of coal is being fired for power generation alone in the country generating about 71 mt of ash per annum. Therefore, appropriate measures are required for handling this huge quantity of ash being produced annually from burning the power grade coals. Some of the measures like filling the mined-out areas, both opencast and underground mines, with the ash from power plants to be carried by the railway wagons in their return, preparation of bricks for construction activities, ballasting the railway tracks, etc. maybe taken up. The services of some NGOs may be useful in implementing and monitoring of such projects for ash disposal with due regard to the environmental aspects. Some schemes, by providing subsidies from Government, may deserve consideration. Use of clean coal technologies like FBCC, IGCC etc. should be promoted.
6.212 Efforts towards stabilisation of the mined-out subsidence-prone areas of Raniganj coalfield and control of fires in Jharia coalfield will be continued in the Ninth Plan. Forestry maps will be superimposed over, and correlated with, the coal bearing areas maps for balanced development of coalfields with minimal damage to environment. Shifting the inhabitants from the affected areas is of utmost importance and to be pursued with the help of the local administration.
6.213 Cleaning of non-coking coal for transportation over long distances with a view to bring down the ash content to acceptable limits (34%) needs to be vigorously pursued both for environmental and economic consideration.
6.214 As a number of coal mining projects were being delayed due to land acquisition and related rehabilitation of the project displaced persons, it was felt necessary to have an uniform rehabilitation policy at least in coal sector. A draft rehabilitation package was accordingly formulated for project-displaced persons in coal and power sectors which was considered by the Government. Final decision is awaited. A quick decision on this issue could reduce the time and cost overruns of the projects.
Private Sector Participation
6.215 The Ninth Plan envisages participation of the private sector in a big way in the coal and lignite sector. This is all the more necessary to tap the large production potential of the blocks offered to the private sector in order to augment domestic coal production and to reduce the gap between the envisaged demand for coal and domestic availability in the Ninth Plan and beyond. While the public sector undertakings(PSUs) will continue to have lions share, efforts of coal PSUs would be supplemented by private sector coal companies to avoid any slippage between coal
demand and coal production levels. Coal has been delicensed recently. It makes it, therefore, imperative to bring in necessary legislative changes to the existing legal framework to facilitate private sector participation in coal production and distribution. To achieve this objective, Government has already initiated certain actions, efforts would need to be made to further streamline administrative procedures to expedite the necessary clearances and required legislative changes.
6.216 During the Ninth Plan, the ongoing process of deregulation will need to be accelerated by expediting the required legislative changes. This implies deregulation of the pricing of the remaining grades of coal, greater freedom to consumers to choose coal sources and negotiate the quantity and the price of coal to be purchased by them and removal of port/railway bottlenecks to increase and improve movement of coal, including imported coal, to provide a wider range of choice for the consumer.
6.217 In view of the long gestation periods in developing coal projects, the necessary policy changes for facilitating private participation will be taken up on priority. For this purpose, the coal blocks will be offered on competitive bidding basis. It is suggested to frame separate rules under MMRD Act for grant of prospective license /mining lease in this regard.
6.218 In order to encourage investments and accelerate development in the coal and lignite sector, it would be necessary to extend the benefits (both tax and fiscal) being extended to the infrastructure sectors like power, telecommunication, ports etc, to the coal and lignite sector as well.
6.219 During the Ninth Plan, a legislative framework and an institutional structure need to be set up for the promotion and regulation of private sector participation in coal and lignite development. The coal and lignite companies should be encouraged to set up joint ventures, wherever possible, for developing new mines to attract private investment on a large-scale.
Singareni Collieries Co. Ltd. (SCCL)
6.220 The SCCL is a joint venture of Andhra Pradesh Government and Government of India with equity share holding in the ratio of 51:49 respectively. Because of its location, SCCL primarily meets the major coal requirements of the consumers in the Southern States. If SCCL is to continue to play this role, a substantial enlargement in its activities would be necessary, which in turn would call for SCCL making investments on new coal mines development on a much larger scale than now. This would not be possible unless the Centre and the State Government of Andhra Pradesh contribute towards a significant expansion in SCCLs equity base. Though the State Government has been able to contribute its share fully after a comprehensive capital restructuring plan implemented in 1994, it is now finding it difficult to continue the desired level of contribution during the Ninth Plan. Even otherwise, SCCL has been relying more and more on borrowings over the years for its new projects, specially those taken up during the Eighth Plan. The company has accumulated a heavy debt burden and is now, once again, not in a position to produce enough coal to meet the rapidly increasing demand of the Southern States. It is, therefore, imperative that the State Government should continue to contribute its share of equity. This will allow SCCL to expand its operations with the State Government retaining 51% control over the company. SCCL should also make efforts to form joint ventures for developing new mining areas.
6.221 Lignite deposits are available in Tamil Nadu, Gujarat and Rajasthan. All these States are far away from coalfields which are mostly located in eastern part of the country. It is, therefore, necessary to formulate and implement more number of lignite projects and lignite based power plants to avoid unnecessary coal transport costs and stress on railway infrastructure. Thus priority for the development of lignite resources continues in the Ninth Plan. The Working Group has assessed the demand for lignite in 2001-02 to be 54.44 mt. The region-wise and sector-wise lignite demand is as given in Table-6.23.
Table 6.23 Lignite Demand 2001-02 (MT) ------------------------------------------------------- Region/ Sector State Power Cement Industry Total ------------------------------------------------------- Tamil Nadu 25.15 1.85 1.99 28.99 Gujarat 3.60 1.40 4.50 9.50 Rajasthan 14.00 - 0.90 14.90 Others - 1.05 - 1.05 Total: 42.75 4.30 7.39 54.44 --------------------------------------------------------
6.222 The production of lignite from NLC is targeted at 22 mt in 2001-02. The present capacity of 17 mtpa of Mine-I and Mine-II is to reach 21 mtpa by way of expanding Mine-I project from 6.5 mtpa to 10.5 mtpa. However, in view of the contemplated additional lignite consumption by TPS-I operating at 80% PLF and operation of TPS-II at 75% PLF the consumption of lignite is expected to increase from the current level. Besides, the TPS-I expansion project is also to come up in the Ninth Plan for which lignite requirement is 2.94 mt. In addition to this, NLC has to supply 1.9 mt of lignite to a new power project, namely, ST-CMS Unit of 250 MW in the private sector. The overall lignite requirement in Neyveli thus comes to 24 mt taking into account around 1.2 mt of lignite supplies to nearby industries, particularly, cement and paper units. This has necessitated the opening up of a new mine, namely, Mine-1A project for a capacity of 3 mtpa in the Ninth Plan. In addition, NLC has proposed Mine-II expansion project for 3 mtpa capacity linked to TPS-II expansion project of 500 MW in the Ninth Plan.
6.223 It is also proposed to develop through the State Government the Jayamkondam Block for 9.5 mtpa to support a 1500 MW generation capacity and the South of Vellar Block for 3 mtpa capacity to support 500 MW generation capacity in the Neyveli region. These mines and power projects are proposed to be set up by the power sector.
6.224 Besides the lignite production by NLC, production of lignite in the State sector by GMDC is projected at 10 mt and by Rajasthan at 13.1 mt in the year 2001-02.
Implementation of coal projects
6.225 During the Ninth Plan, efforts would need to be continued to further streamline project implementation procedures to reduce the delay caused due to problems of land acquisition, rehabilitation, environmental and forestry clearances, inadequate infrastructure facilities etc., so as to avoid cost and time overruns. The responsibility of identification and implementation of compensatory afforestation should be on the part of the concerned State Governments and the coal companies both public and private should deposit money for this purpose with the State Government and should be allowed to operate without any further delay. However, in order to ensure strict implementation of environmental mitigation measures, reputed NGOs alongwith the Governmental bodies may be involved.
6.226 Coal projects are time consuming and have long gestation periods. Greater number of economically viable coal projects both for production and coal beneficiation are to be formulated to satisfy coal demand and meet production targets/projections.
Safety and Welfare
6.227 As in the Eighth Plan, safety and welfare of the coal miners will continue to receive the utmost attention of the Government during the Ninth Plan. Coal industry will continue to strive to enhance the levels of safety in coal mine operations by means of safe mining technologies with a proper layout of mines and haul roads, installation of mining electronics for communications and operational controls in both underground and opencast mines, lighting and degassification of mines, installation of telemonitoring systems in gassy mines, training of workers, audio visual alarms etc. Computer-aided total mine management systems will be introduced in more mines on selective basis to improve both safety and productivity of mine workers.
6.228 The following major thrust areas for safety of coal mine workers have been identified for the Ninth Plan:
6.229 A proper action plan for disaster prevention and mitigation has to be formulated by the coal companies.
6.230 Housing satisfaction in the coalfield areas will be increased from the current level of 60% to about 77% by the end of Ninth Plan in CIL and from 38% to 44% in SCCL. Water supply facilities will be provided to cover an additional population of around 2 lakhs in CIL and around 0.6 lakh in SCCL. It is proposed to provide 7 hospitals with 5772 beds in the Ninth Plan in CIL and 6 hospitals with 680 beds in SCCL by 2001-02. Besides, measures for development of roads, community buildings and school buildings have also been proposed.
6.231 The occupational diseases associated with coal mining like pneumoconiosis, anthracosis, silicosis, etc. are mainly due to air-borne dust in the mines and working places. The working environment needs to be improved by proper ventilation and dust suppression particularly in the underground mines. Deep underground mines need to be ventilated by conditioned air. Regular medical checkups for coal miners as per the Statute should be rigorously pursued. Regular monitoring of air-borne dust in the mines and corrective steps should be strictly undertaken. Improvements in the mining technology in this regard for preparation of coal, transportation etc. in underground mines are desirable.
Problems of PSUs
6.232 The national coal companies have been facing various constraints in making available the planned coal production. Some of the major problems are enlisted below:
The recommendations of the "Committee on Integrated Coal Policy have already addressed these issues, which need to be expeditiously implemented in the Ninth Plan.
Coal Companies and Competition
6.233 In the liberalised economy the competition is the guiding factor for reliable product and services. Currently, 98% of the coal produced in the country is from national coal companies. Of this, 88% is produced by CIL and 10% by SCCL. As such there is no competition in the industry. In order to inculcate the spirit of competition in the changed economic scenario, it is preferable to do away with the concept of holding company like CIL. Each subsidiary of CIL should be made independent and restructuring needs to be done as recommended by the "Committee on Integrated Coal Policy". At the same time, facilitating private sector participation in a big way is another critical area in the industry to bring in competition amongst the coal producers. Unless private sector is given free hand, competition will be theoretical in nature particularly for public sector coal companies and there is always a scope for formation of cartel for price control etc.
6.234 It may now become imperative for the domestic coal companies to chalk out fresh strategies both for coal production and marketing. This could be in the form of having joint venture projects with majority or minority stake for coal production and beneficiation, in order to infuse higher level of resource availability, improved technology and overall efficiency. Coal companies would have to adopt more consumer-friendly approach towards coal quality and price. Some of the independent power producers (IPPs) may have the resources to take up mining activity as well, but, they may not be having the experience of mining coal. In such cases, these IPPs may like to enter into equity participation with the existing NCCs. Similarly, public sector utilities like National Thermal Power Corporation (NTPC) may like to enter into equity participation with the coal producers like SCCL/CIL for their proposed pithead power stations. On the same lines, the Steel Authority of India Ltd. (SAIL)/ other steel producers in the private sector, may also like to enter into joint ventures with CIL for developing new coking coal mines instead of banking only on imports for their future requirements.
6.235 The demand-supply gap, resulting from the delays in taking up new coal projects due to shortage of funds, may get reduced by these joint ventures. Further, these joint ventures will bring in consumer satisfaction with regard to quality, quantity and assured coal supplies with feasible economics. The coal companies both in public and private sector may explore the possibility of joint ventures in coal projects with the concerned State Governments. This would help in resolution of some of the procedural difficulties usually being faced in project implementation particularly land acquisition and rehabilitation of land oustees and forestry clearances etc.
Problems of High Ash, High Price of Indian Coals
6.236 The percentage of high ash coals particularly E, F and G grades of coal which contain more than 35% ash is approximately 49% of the total coal reserves in the country (204 billion tonnes). Production-wise, around 42% of total national coal production is in the form of these lower grades only. As a major part of these coals is used in thermal power plants, it has its telling effect on the performance of the plants and disposal of ash at the plant heads. Price-wise too, the landed cost of such coals at thermal power plants become disadvantageous specially due to railway tariff over long distances. Of late, the consumers located in coastal States like Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu are finding it cheaper to import coal from abroad than to purchase coal domestically.
6.237 Since the inferior grades of coal have lower calorific value and higher inherent ash content, their quality can be improved through beneficiation at the mine head. Beneficiation also reduces cost of coal transport and makes it economic where coal has to be transported over long distances. Beneficiation of coal to be transported beyond 1000 km has been made mandatory by the MOEF from the year 2001 A.D. In totality, the landed price of indigenous coal, including railway transport charges and high State levies, has become higher on thermal equivalence basis when compared to the price of imported coal, specially in areas which are farther from the coalfields.
6.238 The Ninth Plan (1997-2002 ) assessed outlays for coal and lignite sector are given in Annexure-6.5.
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