Investment to boost coal production

• Coal demand in the country is expected to be in the range of 1.2 to 1.5 billion tonnes (BT) by FY 2020
• Despite over 300 BT of coal reserves, India meets over 20% of its coal requirement from imports 
• Government’s role critical to achieve maximum production efficiency and promote investments from new and non-traditional sources. 

New Delhi, June 22, 2016: India has set an ambitious target of 1.5 billion tonnes (BT) of domestic coal production by FY 2020 and will need huge investments adding up to more than 10 lakh crore INR in coal mining and its allied sectors like power, steel, cement, infrastructure for logistics, and coal washeries for achieving this goal.

The Government would need to take steps to promote smooth land acquisition, easy availability of water, augment infrastructure for logistics, develop coal washeries, capacity building and skill development, etc., to provide the support system for developing a cohesive environment for achieving the coal production target. Additionally, strong and focused efforts are required from all stakeholders, especially governments, industry players, investors, funding agencies, and infrastructure developers.

These observations are part of the PwC and ICC report “Bridging the gap: Increasing coal production and sector augmentation,” which was launched at the 8^th Coal India Summit in New Delhi.

With the economy poised to grow at the rate of 8–10% per annum, energy requirements will also rise at a substantial level and coal will continue to remain the key contributor. Coal demand in the country is expected to be in the range of 1.2 to 1.5 BT by FY 2020 and despite being world third largest coal producer, India is dependent on imports to meet around 20–25% of its coal demand. 

As per the report, India has more than 300 BT of coal reserves, out of which around 90% are non-coking coal reserves; but despite this, non-coking coal accounts for nearly 75–80% of the Indian coal imports.

In order to meet this massive demand and reduce coal import (especially non-coking coal), the Government has put coal production in the country on fast track and has set a target of 1.5 BT of domestic coal production by FY 2020, the report added.

As per Kameswara Rao, Energy, Utilities and Mining Leader, PwC India, “The development of the sector will be critical to India’s economic growth. Major policy changes over the past couple of years have given the necessary impetus to the sector. The government will have to lead the growth of the sector by creating favourable conditions in terms of infrastructure, funding, technology upgradation and skill development.”

One of the critical success factors for achieving sector augmentation is technical and financial capabilities mainly for exploration, mine development, logistics infrastructure and coal washing. The government would also need to promote international collaborations for bringing in technological upgradations in the sector, which in turn would attract investment in the sector from various countries.

Another crucial aspect for the growth of the sector is building coal transportation infrastructure. Rail transport has a comparative advantage over road transport in terms of energy consumption (75–90% of road costs), financing costs (80% of road costs) and CO2 emissions (20% of road costs),  yet the percentage of coal transported by CIL and SCCL through railways is only 55% and 70% respectively. Railways need to play a bigger role in coal evacuation and improve their percentage share of efficient coal transportation.

A major challenge faced by the coal industry is timely acquisition of land and gaining confidence of the locals residing nearby. A proper assessment of the local economic and demographic scenario, and focus on customising the spending on District Mineral Fund (DMFs) for effective development of the local area can help in improving the social indicators and developing a positive perspective of the coal industry. This is in turn can help in smoothening the process for acquisition of land and taking locals onboard.

While India has sufficient coal reserves, the government and private coal producing companies will have to focus on technological advancements, addressing issues pertaining to land acquisition, manpower availability, water supply, skill development etc., in order to achieve maximum production efficiency with support for government to resolve infrastructure and logistics issues.

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