Coal Production in India 2022

Background of Coal Production in India 2022

• Coal contributes to over 70% of India’s power generation. Of this, over 12 per cent is import-based coal.
  • India in April-May 2022, faced coal supply shock, leading to increase its import of coal despite high international prices as the country was staring at a power crisis scenario.
• In 2021, India was left with less than four days worth of coal stock (on average across the country) by mid-October.
• Electricity supply in the country fell short of demand due to a shortage of coal, which fuels 70% of India’s power demand.
• Coal stocks, at more than 100 thermal power plants in India, have fallen below 25% of the required stock (critical mark).
  • In over 50 thermal plants, the coal stock has depleted below the 10% mark,
• Reasons for Coal Supply Shock:
  • Russia-Ukraine war: It led to a disruption in international coal supply, making the coal import much more expensive.
  • Increasing power demand over the years: In 2021, demand increased to 124.2 BU per month from 106.6 BU per month in 2019. In 2022, the demand has further increased to 132 BU.
  • Prolonged rains: Heavy rains in coal mining areas like West Bengal, Chhattisgarh, Jharkhand and Tamil Nadu had resulted in lesser coal production.
  • Stock build-up: Prior to the monsoon season, there was inadequate coal-stock build-up in most thermal plants, pushing them below critical levels.
  • Logistical Issues: Domestic Supply of coal was disrupted due to the reduced availability of railway rakes to transport coal.
• Steps Taken to Ensure Adequate Supply of Coal: India is unlikely to face a coal shortage situation during the next peak power demand period in April-May 2023 as it would have adequate coal stock. Reason for Adequate coal Stock:
  • Increasing domestic coal production: Coal production in the country may touch 900 million tonne this fiscal.
  • Increasing Coal Import: Around 3.58 lakh tonne of coal has been imported by Coal India Limited (CIL) from Indonesia on behalf of thermal power plants (TPP) of state generation companies (genco) and independent power plant (IPP).
  • By March 2023 the coal stock at thermal power plants in the country will stand at 40 million tonne.

Highlights of Parliamentary Committee Recommendations

• Overseas exploration: Coal India Limited (CIL) can pursue overseas acquisition of coal blocks after detailed study and analysis of the blocks, especially low ash coking coal, which is not abundantly found in the country and import is the only option left.
  • Coal India Ltd (CIL) had acquired prospecting licences for coal blocks in Mozambique in 2009 through its wholly-owned international subsidiary Coal India Africana Limited.
  • However, due to lack of cost effectiveness, the company surrendered the licences in 2016.
  • At present the state-run coal mining major is not pursuing acquisition of any overseas coal blocks.
• Expanding mining areas: Increased impetus should be given to start mining in new areas after getting the necessary environment and forest clearance and also sought information of the new mining areas planned for the next three years.

Future Prospects

• During the 2022 post-monsoon season, India had a minimum coal stock of 11 days, and on average, coal stocks were three times higher than last year.
• India did not experience a coal-shortage induced power crisis this year, due to:

1. No unanticipated increase in electricity demand: There was an anticipated increase of 15 per cent in energy demand in September and October 2022.

• However, the actual increase was 7 per cent. Lower than anticipated electricity demand implied lower thermal power generation, and therefore a truncated demand for coal.

2. Increased generation from solar and wind: During September and October 2022, the installed capacity for solar and wind generation increased by 2.3 GW and 0.6 GW, respectively. This resulted in their higher than anticipated contribution to meeting the electricity demand.
3. Planned shoring up of coal stocks: At the onset of September, cumulative coal stock at power plants stood at 29 MT – more than twice the last year.
4. Record production and priority dispatch of coal to the power sector over non-regulated sectors ensured a significant coal stocks.

Way Forward

• A study from 2021 estimates that up to seven per cent reduction in coal demand could be achieved by deploying efficient generation assets that are already a part of the current fleet.
• Power plants must plan for stock-piling of coal in the pre-monsoon period to avoid undue stress on the value chain during the monsoon and post-monsoon season.
• Improve the liquidity of the discoms and ensure timely payment of power purchase dues, so that they are able to off-take as much coal as possible before the monsoons.
• Increase in the penetration of renewables
• Government should review the way coal is allocated, reduce distortions introduced by coal freight, and enable our most efficient assets to generate and dispatch power.

About Coal

• It is the most abundantly found fossil fuel. It is used as a domestic fuel, in industries such as iron and steel, steam engines and to generate electricity.
• Electricity from coal is called thermal power.
• India has 4th largest reserves of coal and holds about 286 billion of world’s some 850 billion of proven reserves.

About Coal India Limited (CIL)

• It is the state-owned coal mining corporate and came into being in November 1975.
• It is the single largest coal producer in the world and one of the largest corporate employers.
• CIL functions through its subsidiaries in 84 mining areas spread over eight (8) states of India. Coal India Limited has 318 mines
• It is a Maharatna company.

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