The Hindu Business Line : Coal security

Coal India must tap a private partner’s technology strengths as well as tie up partnerships abroad to raise coal production in line with the demand.

For an energy-starved and coal-hungry nation, increasing coal production is of utmost importance, as the fossil fuel is the main source for more than half the country’s installed power generation capacity. One of the reasons cited for the tardiness in adding power generation capacity is the lack of coal linkage or the delays in supplying the raw material to the thermal power plants. Over the last few years, coal production has not kept pace with demand growth, not ju st from the power sector, but also from the steel and cement sectors. Companies have been either importing coal to meet part of their requirement or even buying stakes in mines abroad so that they have an assured supply. The Government has also allocated captive coal blocks to the end-users. In this too, there has been a general slackness in developing the mines, for various reasons. Indian coal suffers from another problem too — that of lower calorific value compared to Australian, Indonesian or South African coal and higher ash content.

The state-owned Coal India Ltd, the monopoly producer, is under pressure to raise production from the coal-mines. More tonnes of coal pulled out of the earth do not necessarily translate into more energy extracted given the deteriorating quality of the coal. That is another of Coal India’s problem and attempts to involve the private sector in developing some high capacity mines must be viewed in this context. It hopes to complete the bidding process to finalise the private parties that will identify the technology to develop these seven mines that can produce 3-5 million tonnes a year each. Simultaneously, Coal India is looking to attract the private sector to set up washeries that will rid the coal of the high ash content. It is also looking to get equity coal by picking up stakes in mines abroad jointly with some partners, and the response to its offer has been quite good.

Given the well-entrenched lobbies in the coal sector, Coal India’s approach of involving the private sector in a greater way — not just in allotting captive coal blocks — is probably the only way forward if coal production is to increase significantly in the next few years. Nearly two-thirds of the 78,700 MW planned to be added during the 11th Plan will be coal-fired power plants. For 2009-10, the shortfall is estimated to be 41 million tonnes, or 10 per cent of the total demand. The gap, from the power sector’s perspective, is estimated to be 46 million tonnes in 2010-11 and 74 million tonnes the next year. The challenge for Coal India is only getting bigger; the question is whether it will measure up.