Lignite: A Cost Effective Substitute for Coal - Metalworld.co.in

FocusLignite: A Cost EffectiveSubstitute for Coal- Metalworld Research TeamOften referred to as brown coal, lignite is the lowest rankof coal and used exclusively as fuel for steam-electricpower generation. Lately, the mineral has foundapplications in metals production in India in absence of highquality coal and coke. It is brownish-black and has a highinherent moisture content, sometimes as high as 66 per cent,and very high ash (50 per cent) content compared withbituminous coal. Because of its low energy density, brown coalis inefficient to transport and is not traded extensively on theworld market compared with higher coal grades. It is oftenburnt in power stations constructed within 1000 km to itsmines.Lignite is primarily used as substitute for coal. But, however, itis preferred for coal only when consumed from pit-head forpower generation. The cheapest source of power generation isusing natural gas (INR 0.63/ Kwh) followed by pit-head minesof coal (INR 0.77/ Kwh) and pithead lignite (INR 0.95/Kwh).Transporting lignite is not feasible option as the cost of powergeneration goes up to as high as INR 1.77/ Kwh.15November 2008

FocusWorldwide about 79per cent of lignite coalis used to generateelectricity, 13.5 percent is used togenerate syntheticnatural gas, and 7.55per cent is used toproduce fertilizerproducts (anhydrousammonia andammonium sulfate).ApplicationIn IndiaWorldwide about 79 per cent of lignite coal Coal and lignite industry in India operatesis used to generate electricity, 13.5 per cent under a strictly controlled regime and is stillis used to generate synthetic natural gas, and under government control. The Mines and7.55 per cent is used to produce fertilizer Mineral Act, 1957 constitutes basic lawsproducts (anhydrous ammonia and governing the mining sector in India and theammonium sulfate). A very small coal sector also comes under its purview.percentage is used as home heating fuel, for Before notification No.38035/2/97-CAuse as fertilizer and for use as oil well dated 12th December, 2001 only Centraldrilling mud.government was allowed for coal andlignite mining. But the notification alloweds t a t e g o v e r n m e n t c o m p a n i e s o rundertakings to mine coal and ligniteanywhere in the country with followingconditions:a) For coal and lignite mining, the willingcompanies need to obtain permission fromthe government controlled Coal India Ltd(CIL) and Neyveli Lignite Corporation(NLC) respectively?b) Mining leases can be granted to stategovernment companies or undertakingsonly if CIL and NLC have no plan orwillingness to undertake mining operationsBesides its application in power generation, for coal or lignite in the concerned area.the mineral also finds applications in c) The proposed mining area has not beenvarious other sectors including cement, allotted to any captive mining company.paper, soda ash and chemicals, bricks and (Can be any private or public company).ceramics, textiles, and many other Occurrence of lignite in India is confined tomiscellaneous sectors. Demand for lignite the southern states of Tamil Nadu andfrom such sectors is expected to grow at a Kerala, western states of Gujarat andcompounded annual growth rate (CAGR) Rajasthan and eastern states of Pondicherry,of 12 per cent from 8.3 million tons in 2007- Jammu & Kashmir, where coal availability08 to 20 million tons in 2011-12. is almost 'nil'. In view of rapidly increasingR e q u i r e m e n t b y t h e s e s e c t o r s demand for energy, non availability of coalindependently are very miniscule in deposits for exploitation in the states ofcomparison to power sector standalone. For Tamil Nadu, Gujarat and Rajasthan,limited requirement by these industries, it is problems faced in the transportation of coalnot feasible for them to have their captive from far off coalfields and high costlignite mines and as a result such industries involved in transporting coal over a longmeet their lignite needs from merchant distance, it is considered necessary that thesellers.lignite deposits available in these states are16November 2008

Focusexploited for power generation whichwould be the best economic and viableoption.Cost and Pricing Structurefrom lignite fueled power stations. NLC,Gujarat Industrial and power company Ltd(GIPCL), Gujarat Mineral DevelopmentCorporation Ltd (GMDC) are some of thePrices of coal and lignite are based oncosting and a particular profit margin.Costing generally includes cost of land, costof forestation, other capital costs(appropriately apportioned over the life ofthe project, and other operating costs.Rising ProductionLignite production inIndia has beencontinuouslyincreasing, backed bydemand from lignitefueled powerstations.Lignite production in India has beencontinuously increasing, backed by demandSource: Ministry of powercompanies who have been setting uplignite-based power plants in theirrespective states. As a result of suchcontinuously rising demand for lignite, itsproduction has increased from 20.8 milliontons in 1999-00 to 32 million tons in 2006-07 at a compounded annual growth rate(CAGR) of 7 per cent.Demand RationaleThe low cost of power generation using17November 2008

FocusDemand is expectedto grow at a CAGR 12per cent from 35.84million tons in 2007-08 to 55.93 per centtons in 2011-12especially fromRajasthan andGujarat with severalinitiatives taken bythese governments.coal/lignite, and the availability of huge which coal and lignite accounts for nearlycoal/lignite reserves in India, are some of 83 per cent.the major incentives for setting up Demand is expected to grow at a CAGR 12coal/lignite-based power plants. per cent from 35.84 million tons in 2007-Currently, in India, thermal power account 08 to 55.93 per cent tons in 2011-12for 65 per cent of total power generation of especially from Rajasthan and Gujaratwith several initiatives taken by thesegovernments.Nearly 2225 MW lignite based powerplants are expected to be installed in XIplan to be completed by 2012.ConclusionWith growing energy demand fromdomestic and industry sectors alike,lignite is likely to remain in forefront infuture.