Overview of Coal Mining Industry in India - Office of Fossil Energy

CONTENTSN1234TOPICBackgroundNationalisation of Coal IndustryTurn around of CILX Plan performanceSLIDE No.1-67-1112-1516-1956ABCDDemand and production projections20-25THRUST AREAS 26New Strategy27-38Beneficiation of Non-coking coal39-41Clean coal technologies42-45Coal Videsh46

% SHARE OF COMMERCIALPRIMARY ENERGY RESOURCES - INDIANUCLEAR2%HYDRO2% NATURALGAS9%COAL51% OIL36%1

A.CIL :COAL PRODUCING SUBSIDIARIES54318EASTERN COALFIELDS LTD. (1)BHARAT COKING COAL LTD. (2)CENTRAL COALFIELDS LTD. (3)NORTHERN COALFIELDS LTD. (4)WESTERN COALFIELDS LTD. (5)SOUTH EASTERN COALFIELDS LTD.(6)MAHANADI COALFIELDS LTD. (7)NORTH EASTERN COALFIELDS. (8)( A UNIT UNDER CIL(HQ) )2PLANNING & DESIGN INSTITUTE67COALLIGNITECENTRAL MINE PLANNING & DESIGNINSTITUTE (CMPDIL)B.SINGARENI COLLIERIES CO. LTD. (9)910C.NEYVELI LIGNITE CORPORATION (10)2

INDIAN COAL RESOURCES – 2007 (Bill T)33.2222CokingNon-Coking3TOTAL RESOURCE – 255.2

NATIONALISATION OF COAL INDUSTRY• Pursuant to a Oil price shock a high powercommittee was formed in early 1970s.• The Committee identified - Coal as themainstay for future energy requirements.7

• Growth of coal Industry was sluggish prior to1970s – less than 2% per annum.• Private investment was not forthcoming due tonon-remunerative coal price.• Hiking Coal price was not feasible.• Substantial investment was required to reach alevel of 5.5% growth to sustain GDP growth of5%.8

• The situation necessitated channelising publicfunds into coal mining.• Mainly for these reason, Coal mining wasnationalised between 1971 & 1973.• Coal India was formed as PSU in Nov 1975.• During 1975-91 massive investment by Govt.helped to achieve a growth rate of 5.3%9• ‘Coal at any cost’ continued to dominate theinvestment strategy during this period.

• In 1991 Govt. adopted a policy to keep PSUs atarms length• Progressive phasing out of budgetary supportcommenced.• However, a pragmatic coal pricing policy wasput in place to enable CIL mobilize internalresources.• CIL earned a modest profit in 1991-9211

THE TURN AROUND OF CIL.• Beginning VIII Plan (1992-93) investment were madeonly in financially viable projects (IRR 16% at 85%capacity Util.)• Thrust on improvement of Availability and Utilisation ofequipment• Reduction of manpower through natural attrition andalso by VRS in loss making subsidiaries• Creating track record of consistent and timely debtservicing to Govt. without any default.12

• The efforts eventually led to consistent up-trend in allperformance parameters and established credibility ofCIL.• Govt. approved a restructuring package in 1996• Budgetary support completely phased out in 1996-97 asa fallout of liberalisation.13• The situation enabled CIL to finalise a USD 1.06 bnborrowing programme with World Bank and JBIC tofinance expansion of 24 viable opencast projects.Since then, Coal India has not looked back.• In the last decade CIL emerged as one of the largest taxand dividend paying PSUs.

PRODUCTION GROWTH OFINDIAN COAL INDUSTRY&COAL INDIA LTDFIG IN Mill T.YEARWISEPRODUCTIONALL INDIA(MILE STONES)COAL INDIA1947>30-1974-75>90791977-78>100891989-90>2001791999-00>300261142005-06>400343

PLANWISE PRODUCTION AND ANNUALISED GROWTH5004504005.4%3503005%2.2%Mill T2502001505.2%6.4%6.4%10050066-74(IV)74-79(V)79-85(VI)85-90(VII)90-97(VIII)97-02(IX)02-07(X)15COAL INDIA* 69.96 90.05 130.81 178.6 250.62 279.65 360.94INCREASE 20.99 40.76 47.79 72.02 29.03 81.29Five Year Plan period* Production figures – For terminal year of the plan period

X PLAN PERFORMANCE• During X Plan period the company has augmented coalproduction by 81 Mill T.• Aggregate payment to the Govt. of India by way ofcorporate tax, dividends and tax on dividend Rs.164 bn(USD 3.66 bn)• In 06-07 alone CIL earned pre-tax provisional &estimated profit of Rs. 82.12 bn (USD 1.88 bn)16• Paid Rs. 30.20 bn (USD 0.69 bn) as corporate tax,dividend and tax on dividend.

YEAR WISE INCREASE IN PROFITABILITY(PROFIT BEFORE TAX)MILLION US$-57-167-116-227-328-17264758127179457159360112515821928188024002000160012008004000-400-800-12001975-7677-7879-8081-8283-8485-8687-8889-9091-9293-9495-9697-9899-00'01-02'03-04'04-05'05-06'06-0717

• CIL has secured AAA the highest credit ratingby CRISIL in 2005-06 reaffirmed for 06-07• Highest credit rating LAAA↑ by ICRA.• This is despite CIL supplying coal to its coresector consumers at a competitive price perenergy unit at consumption point vis-a-visimported coal.18

USD bnGROSS TURN OVER FOR LAST SIX YEARS- COAL INDIA LIMITED5.065.385.836.817.568.1810864202001-022002-032003-042004-052005-062006-07GROSS TURNOVER19

20Demand and productionprojections

DEVELOPMENTS IN COAL INDUSTRYPRIOR TO1972-731970 S EARLY1990 S1996 2000-06Mostly inprivate handsexcept for twopublic sectorunits namelySCCL & NCDC1972-73Coal minesNationalisationact1975CIL formed asholdingcompany with 6subsidiaries1993Amedment inact to allowcaptive miningby privateoperator and notfor sale1995-96BudgetorysupportwithdrawnCapitalRestructureTo decontrol ofprice &distributionCoal mines(Nationalisation)amendment bill(Colliery ControlOrder 2000)-Pricing anddistribution fullyderegulated.Budget 06-07Some CIL blockopened forcaptive mining21

PROJECTED PRODUCTION OF COAL BYDIFFERENT AGENCIES• Integrated Energy Policy envisages a coal demand of 1.5 BillT in 2031-32 under the least coal intensive option or 2.6 BillT otherwise.• As projected in Coal vision 2025 document, the demand at8% GDP will be 1.25 Bill T by 2025.22• Working group on coal & lignite (WG) has detailed thedemand/ production scenario upto the terminal year of XIIthplan as below:• In 2011-12 the projected demand is 731 Mill T that risesto 1125 Mill T in 2016-17.• All India production during 2011-12 and 2016-17 are 680Mill T and 1055 Mill T , leaving a gap of 51 and 70 Mill Trespectively.

ALL INDIA COAL CONSUMPTION/DEMAND BY WGMill TSECTORCONSUMPTIONDEMANDIX PLAN(01-02)X PLAN(06-07)XI PLAN(11-12)XII PLAN(16-17)POWER249.23312.80483750POWER(CAPTIVE)16.0226.3049.6685CEMENT15.2218.3339.3050STEEL29.8417.6068.50105OTHERS41.645.1890.6413523TOTAL351.91420.21731.101125

GROWTH OF MAJOR COAL CONSUMING SECTOR (AT 8% GDP)SECTORPOWER (UTILITY)POWER (CAPTIVE)STEEL/HOT METALCEMENTBRICKGROWTH (CAGR)7.11%11.17%5.68%9.18%6.63%ASSESSED OUTPUT(2024-25)2058 BU753 BU83 Mt765 Mt548 BU24

COAL PRODUCTION TREND/ PROGRAMME (WG)Mill TonnesACTUALPROGRAMMECOMPANYIX PLANX PLANXI PLANXII PLAN (16-17)(01-02)(06-07)(11-12)CIL279.65360.9520.50664.00S.C.C.LTD30.8137.740.8045.00OTHERS17.3331.9119.70346.00TOTAL327.79430.5680.001055.00CAGR2.535.79.479.18GROWTH INPRODUC-TIONXTH OVER IXTHPLANABS%XITH OVER XTH PLANABS%CIL81.2529143.502825ALLINDIA102.7131375.0055

26THRUST AREAS

NEW STRATEGIES FOR INCREASING COALPRODUCTION (OPENCAST MINES)• Production growth envisaged from 06-07 level is 148 mill.t inXI Plan (2011-12) i.e 47% and further 141 mill.t in XII Plan(2016-17)27• This Necessitates Introduction of higher size equipment towork at a larger Stripping ratio in mines with capacity notless than10 mtpa• Draglines with bucket capacity of 45-55cum.• Rope shovel up to 42 cum• Rear dumper- 240 t• 10 cum rope shovel & 85t/100t/120t dumper to continue asbackbone• 10-15 cum hydraulic shovel with 850 hp dozers• Life cycle MARC with OEM.

• Inpit crushing & conveying technology as analternative for large volume handling• High wall mining• Trolley assist dump trucks for long distance haul• Use of Mobile crushing unit28• Use of IT in mining operation.

EXPECTED POPULATION OF DRAGLINE IN CILYEAR2006-072011-122016-172955 M 3 345 M 3 2230 M 3 2--24 M 31515124-10 M 3 15161620 M 3 77715 M 3 322TOTALCapacity(MCum)421124211942133

EXPECTED POPULATION OF ELECTRIC ROPESHOVEL IN CIL302016-17-YEAR2006-07 2011-1212.5M 3 942 M 3 10 1920 M 3 9 21 4210 M 3 111 228 294

EXPECTED POPULATION OF DUMPER IN CILYEAR2006-07(Existing)2011-122016-17240T-5595170T44125250120/110T268400600

EXPECTED POPULATION OF DOZER IN CILYEAR2006-07(Existing)2011-122016-171000HP1429770-850HP84361

EXPECTED POPULATION OF DRILL IN CILYEAR2006-07(Existing)2011-122016-17400 MM-1429311 MM164361

TENTATIVE REQUIREMENT OF OTR TYRESUPTO 2016-17 17 (REPLACEMENT)TYRESIZEEXISTING06-0707-0808-0909-1010-1111-12TOTALUPTO11-1216-1740.00 X 57(240T)05971829410641212936.00 X 51(170T)76929222323626097931030.00 X 51(120T)7566886858749129644879102824.00 X 49(85T)186418241823212925802838130583161TOTAL26962663267133083822416819328462834

PROCUREMENT POLICY FOR CAPITAL EQUIPMENT/OTR TYRES OF COAL INDIA LIMITED35• Global tender inviting offers in two coversI. Techno-commercial bid ii. Price bid• Price bids opened for techno-commercially acceptablefirms• Evaluation of price offers done on landed basis• Orders placed on lowest offer basis• Overseas orders placed on f.O.B. Port of shipmentbasis• Domestic orders placed on f.O.R. Destination basis• Overseas suppliers paid through letter of creditContd…

• The supplies carry a warranty period of 12 monthsfrom date of commissioning or 18 months from dateof dispatch which ever is earlier• Bank guarantee for 10% of the value of order keptas performance coverage of the contract andreleased after fulfilment of all contractualobligations.• Supply to be within agreed scheduled time & price.36• In case of non-execution of order- damagesprescribed for both purchaser & seller

STRATEGIES FOR INCREASING COALPRODUCTION (UNDERGROUND MINES)• Development of underground projects with Longwall/Mass production technology on risk/gain sharing basis• Application of Longwall/Shortwall technology inextraction of pillars37• Existing Bord & Pillar & Longwall to Continue• Intensify mechanised Roof Bolting• Opening large Longwall mine (2-10 Mill T) within XIth planperiod .• 100% mechanisation by 2017

• Technology for deep Shaft Sinking• High speed tunneling machine for faster Incline /Drift drivage.• Introduction of state-of-the-art Safety Monitoringdevices• Introduction of Man Riding systems in mines.• Automation and use of IT38• Capacity building through training and redeploymentof manpower.

BENEFICIATION OF NON-COKING COAL• Study by Planning Commission concluded thatcarrying beneficiated coal > 400 kms is moreattractive.• 70% Thermal coal move > 400 km but only 20% ofcoal is beneficiated at present• ROM coal is usually not consistent in quality thusaffecting Power Plants adversely.39

BENEFICIATION OF NON-COKING COAL• Dispatching washed coal shall also:– Reduce strain on Railways.– Reduce pace for investment by Railways to augmentcoal transportation infrastructure and thus save oninterest/opportunity cost– Reduce diesel, maintenance cost per K.Cal-KM oftransport• Ideally CIL should supply only washed Thermal coal to allPower Stations except for those at pitheads and alsogenerate power from rejects40• Formulation of roadmap for the same is being taken up.

COAL BENEFICIATION• Coking Coal‣ CIL’s Washed coking coal during 2006-07 expected to be5.45 Mill T‣ Likely to reach to a level of 7.42 Mill T by 2011-12‣ Additional availability of 5.14 Mill T expected from othersources.• Non-Coking Coal41‣ At present installed capacity is 104.8 Mill T‣ About 85 Mill T is in private sector‣ Additional 140 Mill T/Annum required by 2011-12.

CLEAN COAL TECHNOLOGIES• CBM /CMM/AMM EXPLORATION & EXPLOITATION, R&DPROJECTS.• UNDERGROUND COAL GASIFICATION.• COAL LIQUEFACTION.42

CBM RELATED ACTIVITIES• A UNDP/GEF/GOI funded demonstration project underimplementation for production & utilisation of CBM.‣ Drilling complete in one site. In progress at the secondsite.‣ Three more boreholes are to be drilled.• CIL entered into JV with ONGC for development of CBM in 2blocks.‣ 1 st phase drilling complete (CIL- 8, ONGC – 12 BH)43‣ Report for pilot commercial plant prepared by ONGC• A perspective plan for harnessing CMM/AMM from CILcommand area.

UNDERGROUND COAL GASSIFICATION• ONGC & GAIL pursuing UCG in collaborationwith CIL.• MOU signed between CIL & ONGC for a pilotproject in JV mode.44

COAL LIQUEFACTION• 4 plants currently operational in USA and South Africa for CoalLiquefaction• 6 mt coal can produce 3.6 million barrel of Diesel at NEC &Naptha at a cost of Rs.1532 (USD 35) to Rs.1751 (USD 40) perbarrel.• CIL and Oil India limited to sign an MOU for a 5000 barrels/ day.• Availability of 3 Mill Tonnes coal being explored• Meeting held with Govt. of Meghalaya and Arunachal Pradeshfor availability of coal.45

COAL VIDESH46• CIL Board approved formation of a subsidiary ‘Coal India Videsh Ltd’which is presently under consideration of Government.• Objective is to acquire overseas reserve, produce and import Cokingand high grade Non-Coking coal to India.• To contribute 10 mt of coal by 2011-12 and 50 mt by 2020• Destination :• Coking coal : Australia, Zimbabwe, Mozambique, Russia,Kazakhstan, Canada, Venezuela.• Thermal coal : Indonesia, South Africa• Panel of Investment Bankers & consultants created for due diligencestudies.• Fact-finding Mission team from Coal Videsh Dept. visited targetcountries

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