Coal and Lignite

Mineral Laws (Amendment) Bill, 2020

The Parliament has passed The Mineral Laws (Amendment) Bill, 2020 for amendments in Mines & Mineral (Development and Regulation) Act 1957 and The Coal Mines (Special Provisions) Act, 2015.

The Ministry of Coal, after a long gap of 4 years, has approved the allocation of five Coal Mines. This was the result of the electronic auction conducted by Ministry of Coal in first week of November 2019. The Ministry had initiated the auction processes for 27 coal mines for Non-Regulated sectors previously.

The total consumption of coal during 2014-15 was 819.7 MT against the supply of domestic coal of 607.6 MT. The gap between the total consumption and domestic supply has been met through import of coal to the extent of 212.10 MT. India is the 3rd largest producer of coal in the World.

The year 2015 witnessed the coal mines auction conducted in an efficient and transparent way. In order to laid down robust & transparent system after the Supreme Court order, an Ordinance was promulgated to legally enable the Government to re-allocate 204 coal mines cancelled by the court and ensure smooth transfer of right, title and interests in the mine along with its land and other associated mining infrastructure to the new allocatee to be selected through an auction or allotment to Government companies.

Eight coal blocks have been allocated to private power generating companies so far.

S.
No.
Private Power Plant Capacity State Coal Block Name of the Allottee PPA
1 Raikheda (Unit-1,2) 2 x 685 MW Chhattisgarh Talabira I GMR, Chhattisgarh No PPA
Ganeshpur
2 Budge Budge (Unit- 1,2) 2 x 250 MW West Bengal Sarisatolli CESC Ltd. 100 % of total capacity is tied up with embedded Distribution
Licensee
3 Jaypee Nigrie (Unit-
1,2)
2 x 660 MW Madhya Pradesh Amelia North Jaiprakash Power Venture Ltd. PPA for Capacity – 495 MW
4 Mahan TPP (Unit 1,2) 2 x 600 MW Madhya Pradesh Tokisud North Essar Power Ltd. PPA for Capacity –
60 MW
5 Mundra TPP
Kutch(Unit1, 2,3,4,5,6)
4 x 330
+ 2 x
660 MW
Gujarat Jitpur Adani Power Limited PPA for Capacity – 2434 MW
6 JITPL
Derang (Unit 1,2)
2 x 600 MW Odisha Mandakini Mandakini Exploration and Mining Ltd. (JV of Jindal India and Monnet Power
Company Ltd)
Coal block surrendered and PPAs expired
7 Malibrahmani TPP (Unit 1,2) 2 x 525 MW Odisha Mandakini Mandakini Exploration and Mining Ltd. (JV of Jindal India and Monnet Power
Company Ltd)
Coal block surrendered and PPAs expired
Utkal – C Monnet Power
Company Limited

The development of captive coal block is a major project and involves a gestation period of 3 to 4 years for obtaining various clearances from State or Centre agencies. In some cases, the development of captive coal blocks has suffered as the allocatees were not able to obtain various approval or clearances from the State or Central Agencies like Environment Clearances (EC), Forest Clearances (FC), Mining Leases and purchase, acquisition, mutation of land, etc. within the timelines prescribed in the Allotment Agreement.

A non-binding Memorandum of Understanding (MoU), on cooperation in the area of coal mining with an objective to emphasize on coal exploration and exploitation, research and development, clean coal technologies and capacity building, was signed between the Ministry of Coal of the Republic of India and the Ministry of Energy of the Republic of Poland on 4 February, 2019.

Demand of coal is higher than the current level of supply of coal in country. Coal is imported to bridge the gap between domestic demand and domestic supply. As per coal import policy, the import of coal has been kept under Open General License (OGL) and users are free to import coal from the sources of their choice as per their contractual prices on payment of applicable duty.

The New Coal Distribution Policy, 2007 (NCDP, 2007), provided for distribution of coal to those units or consumers in small and medium sector across the country whose requirement was less than 4,200 tonnes per annum and were otherwise not having any access to purchase coal or concluded Fuel Supply Agreement (FSA) for coal supply with coal companies.

The type-wise and quality-wise break-up of coal reserves (in million tonne) in India.

The policy for Auction of Coal Mines or Blocks for Sale of coal was issued on 27 February, 2018. The objective of the policy is to create a market place for coal with multiple producers to drive competition and adopt best practices in mining as well as environment management. The auction of coal mines for sale of coal in a transparent manner is expected to encourage transparent pricing of coal, based on the market forces. Any variation in coal cost directly varies the energy charges.

Coal deposits are mainly confined to eastern and south central parts of India. The states of Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana and Maharashtra account for 98.58 % of the total coal reserves in the country. The State of Jharkhand had the maximum share (26.29%) in the overall reserves of coal followed by the State of Odisha (24.58%).

Total of 14 blocks (7 Coal and 7 Lignite) has been identified which are under consideration of Inter Ministerial Committee (IMC) which has been constituted for the purpose of UCG development in India. No commercial or pilot scale project of Underground Coal Gasification (UCG) technology has been commissioned as yet under Indian Geological conditions.

Coal production targets and achievements of Coal India Ltd. and its subsidiaries in 2018-19.

Subsidiary 2018-19
Target Actual
ECL 46.76 50.16
BCCL 38.00 31.04
CCL 68.70 68.72
NCL 95.09 101.50
WCL 49.70 53.18
SECL 159.50 157.35
MCL 151.50 144.15
NEC 0.75 0.78
Total CIL 610.00 606.89

In million tonnes

As on 30 June, 2018, there are total 267 thermal power plants in India which include plants based on Coal, Lignite, Gas and Diesel. The estimated quantity of coal required during 2018-19 based on the generation target by the coal based thermal power plants in the country for 2018-19 is 656 Million Tonnes (MT).

Ash content of coal produced in India varies from 15% to 45% with majority of coal produced falls under 35% to 45% range. Average ash content of imported coal varies from 10% to 20%. Indian Coal due its drift origin contains higher percentage of Ash as compared to import coal. However, Indian coal’s Sulphur content is low.

The imported coal quantity of 2017-18 at 208.27 MT is less than the imported quantity of 2014-15 which stood at 217.79 MT even as power generation and industrial activities grew substantially after 2014-15.

The Government approved fading away of the existing Letter of Assurance (LoA), Fuel Supply Agreement (FSA) regime and introduced Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI), 2017, which was issued by Ministry of Coal on 22 May, 2017.

CIL has been tasked by Government of India to become Net Zero energy company. In this connection, following activities have been undertaken by CIL:

  1. An MoU has been signed with Solar Energy Corporation of India (under MNRE). Accordingly, one solar park has been identified at Neemuch, Madhya Pradesh by Solar Energy Corporation of India (SECI) for development of 200 MW solar power project for captive consumption of two subsidiaries of CIL, namely - SECL and NCL.

  2. Approximately 911 Ha of land has been identified in five subsidiaries of CIL.

  3. SECI has prepared a draft DPR for 100 MW solar power project at the reclaimed land of Bishrampur and Bhatgaon Area.

  4. MoU has been signed on 8 October, 2018 with NLCIL (A Govt of India U/T under Ministry of Coal) for formation of JV to establish 3000 MW of solar power.

Coal India Limited (CIL) has signed an MoU with NLC India Ltd on 8 October, 2018 for formation of a Joint Venture Company for generating 3000 MW of Solar Power and 2000 MW of Thermal Power to create power assets to cater to the requirement of their own companies as well as for mutual benefit of business growth and diversification of respective promoter companies.

Under Non-Regulated Sector (NRS) linkage auction policy of 15 February, 2016, steel sector consumers are offered linkages in auction of Steel (coking) sub-sector. In the three tranches of NRS linkage auction by Coal India Limited (CIL), about 7 Million Tonnes per Annum (MTPA) coal linkages were offered against which linkages for 0.22 MTPA were booked by the consumers under this sub-sector.

The entire demand of coking coal is not met indigenously as the supply of high quality coal or coking coal (low-ash-coal) in the country is limited and thus no option is left but to resort to import of coking coal.

Central Mine Planning and Design Institute (CMPDI) is the nodal agency for exploration of coal in India. It is using latest techniques to explore the fresh coal reserves like Hi-Tech Hydrostatic drills for drilling; 2D & 3D seismic survey with Vibrosis & interpretation with Paradigm software; satellite imagery for identification of forest and probable coal bearing areas & modern software such as AutoCAD, ArcGIS and Minex for preparation of Geological reports which is equivalent to industry best practices worldwide.

An Inter-Ministerial Task Force (IMTF) was constituted in June, 2014 to undertake a comprehensive review of existing sources of coal with a view to optimize transportation cost and materialization under the given technical constraints. The linkage rationalization for State and Central PSUs was implemented initially, based on IMTF recommendation and carried forward by Coal India Limited (CIL) / Singareni Collieries Company Limited(SCCL) based on coal availability and requests of public sector Power Plants.

The allocation of coal mines are made under the provisions of the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957.

Allocation is made through auction to public and private sector companies and through allotment to public sector companies.

In the 4th tranche of auction, 9 coal mines were put for auction for the Non-regulated Sector - Iron & Steel, Cement and Captive Power Plants. Due to low response, online bids were not opened and the 4th tranche of auction was annulled.

In the 5th tranche, 6 coal mines were put for auction for the specified end use "production of Iron & Steel". As there were less than 3 bidders or technically qualified bidders, the 5th tranche of auction was also annulled.

So far, 31 coal mines have been auctioned under the CM(SP) Act, 2015. Out of the originally auctioned 31 Coal Mines, Coal Mine Development and Production Agreements have been terminated in respect of 6 Coal Mines. So, 25 auctioned coal mines remain.

Transparency in Coal Mines Auctioning

To keep the process transparent, the first ever auction of coal mines were conducted in December, 2014 through e-auction mode on an electronic platform. No physical bids were accepted or considered. Applications were required to be submitted online for allotment of coal mines to Government companies also.

Further, to ensure the fool proof security of the E-platform of MSTC, Security Audit had also been conducted prior to auction of coal mines. It was one of the most transparent auctions where bids were placed on an electronic platform accessible to everyone with an internet connection. In fact, everyone had the option of tracking the progress of the auction on their mobile phones.

The number and names of the companies which had applied were publicly disclosed in open forums where hundreds of bidders were present along with members of the media too. The entire proceedings were videotaped. There were also press releases and names were disclosed on the auction website. Technical and financial parameters for the qualification of bidders were clearly laid down in the tender document.

Grounds for disqualification were also clearly mentioned in the tender document. Specific reasons were given to such bidders. The initial bid price (applicable floor price) and subsequent bids were also visible to the public. The parameters for determining the floor price and subsequent bids were part of the methodology and on public display on the website. Thus, each and every data point was actually available in the public domain.

The value of India’s coal imports have risen by 38.2% to Rs.1,38,477 crore in 2017-18. However, the quantity of coal imports has increased only by 9.1% from 190.95 MT to 208.27 MT during this period.

Exploration of coal resources in the country is a continuous process. Ministry of Coal through its central sector scheme supports the promotional or regional exploration and detailed exploration in non Coal India Limited (CIL) blocks.

At present only lignite mines are operated by NLC India Limited (NLCIL). Lignite is produced by NLCIL from various operational mines: three Lignite Mines at Neyveli, Tamilnadu and one Lignite Mine at Barsingsar, Rajasthan.

On account of enhanced production by CIL, India has moved from a regime of coal scarcity to a coal surplus situation. The vendible stock of CIL has increased from 53.62 MT as on 1 April, 2015 to 61.92 MT as on 1 April, 2017. The off take or dispatch of coal of CIL has also increased from 488.86 MT in 2014-15 to 542.82 MT in 2016-17.

The methodology for auction of coal mines or blocks for sale of coal under the provisions of the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 has been approved by the Government and Order in this regard has been issued on 27 February, 2018.

The methodology for auction for coal mines and blocks for sale of coal under the provisions of the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 including enabling provisions for Foreign Direct Investment has been approved by the Government and Order in this regard has been issued on 27 February, 2018.

The following research works which have been carried out in Government institutes and organisation to enhance the quality and production of coal in the country.

Coal India Limited (CIL) has increased its production from 462.41 Mt in 2013-14 to 554.14 Mt in 2016-17. On account of enhanced production by CIL, the country has moved from a regime of coal scarcity to a coal surplus situation.

CIL has taken the following measures to improve the work efficiency of coal mines:

  1. Planning for higher capacity mines with heavy mechanization to take advantage of economy of scale.

  2. Introduction of state of the art technology to improve its work efficiency with high capacity HEMMS like 42 cum shovel with 240T Rear Dumper.

  3. Introduction of Surface Miners in opencast mines to improve operational efficiency & cater to environmental needs.

  4. Introduction of In-pit crushing & conveying/in pit conveying.

  5. Introduction of mechanized mass production technology like powered support long wall technology and continuous miner in UG mines.

  6. Thrust on mechanization of coal winning/loading system by gradually phasing out manual loading by SDL/LHD loading, manual drilling into UDM drilling, haulage system of transport to conveyor system wherever feasible.

  7. Construction of silos with rapid loading system for faster loading.

  8. For survey/check measurements, use of technology like Terrestrial Laser Scanner (TLS).

Coal is the prime source of energy in India and as per draft National Energy Policy prepared by NITI Aayog, coal will remain as an important source of energy and electricity even in near future due to abundance of coal in India and that too at a cheaper rate. The total number coal mines in Coal India Ltd. (CIL), Singareni Collieries Company Limited (SCCL), Public and Private Sectors as on 31 March, 2017 and total annual production from these mines during 2016-17 is given below.

Coal production in the country during the year 2016-17 was 662.77 million tonne (MT) as compared to 639.23 MTs during 2015-16.

Coal mining, world over, is highly regulated industry due to presence of many inherent, operational and occupational hazards. Coal Mine Safety Legislation in India is one of the most comprehensive and pervasive statutory framework for ensuring occupational health and safety (OHS). Compliance of these safety statutes is mandatory.

In India, the operations in Coal mines are regulated by the Mines Act, 1952 Mine Rules - 1955, Coal Mine Regulation - 1957 and several other statutes framed thereunder. Directorate-General of Mines Safety (DGMS) under the Union Ministry of Labour & Employment (MOL&E) is entrusted to administer these statutes.

The gradation of non-coking coal is based on Useful Heat Value (UHV), the gradation of coking coal is based on ash content and for semi coking / weakly coking coal it is based on ash plus moisture content.

Grades of Coking Coal

Grade Ash Content
Steel Grade - I Not exceeding 15%
Steel Grade -II Exceeding 15% but not exceeding 18%
Washery Grade -I Exceeding 18% but not exceeding 21%
Washery Grade -II Exceeding 21% but not exceeding 24%
Washery Grade -III Exceeding 24% but not exceeding 28%
Washery Grade -IV Exceeding 28% but not exceeding 35%

Grades of Non-coking Coal

Grade Useful Heat Value (UHV) (Kcal/Kg) UHV= 8900-138(A+M) Corresponding Ash% + Moisture % at (60% RH & 40OC) Gross Calorific Value GCV (Kcal/ Kg) (at 5% moisture level)
A Exceeding 6200 Not exceeding 19.5 Exceeding 6454
B Exceeding 5600 but not exceeding 6200 19.6 to 23.8 Exceeding 6049 but not exceeding 6454
C Exceeding 4940 but not exceeding 5600 23.9 to 28.6 Exceeding 5597 but not exceeding. 6049
D Exceeding 4200 but not exceeding 4940 28.7 to 34.0 Exceeding 5089 but not Exceeding 5597
E Exceeding 3360 but not exceeding 4200 34.1 to 40.0 Exceeding 4324 but not exceeding 5089
F Exceeding 2400 but not exceeding 3360 40.1 to 47.0 Exceeding 3865 but not exceeding. 4324
G Exceeding 1300 but not exceeding 2400 47.1 to 55.0 Exceeding 3113 but not exceeding 3865

Grades of Semi-coking and Weakly Coking Coal

Grade Ash + Moisture Content
Semi coking grade - I Not exceeding 19%
Semi coking grade - II Exceeding 19% but not exceeding 24%

Grades of NEC Coal

Grades UHV (Kcal/Kg) Corresponding Ash% + Moisture %age
A 6200-6299 18.85 - 19.57
B 5600 - 6199 19.58 - 23.91

Section 9(3) of the Mines and Mineral (Development and Regulation) Act, 1957, provides that the Central Government may, by notification in the Official Gazette, amend the Second Schedule (which specifies rates of royalty) so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification, provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years.

As such, there is no mandatory provision in the Act to revise the rates of royalty every three year.

The rates of royalty on coal and lignite were last revised on 10.05.2012.

As regards revision of the rates of royalty on coal, a Study Group was constituted on 21.07.2014 for the purpose of examining the issue of revision of present royalty rates on coal and lignite. The Study Group had earlier submitted its recommendation on 27.04.2016. However, pursuant to the change in scenario due to implementation of GST and other factors, the matter was again referred to the Study Group.

The Lignite production during 2015-16 was 43.84 million tonnes which is 9.18% lower than the production during 2014-15 (48.27 million tonnes).

Coal washing is an integral part of coal production. Raw coal coming from mines is washed to remove the ash contents to make them fit for feeding into boilers, particularly those of steel plants. Barring a few instances, a coal washery does not form part of a coal mine in India.

Total installed capacity of washeries in India is around 131.24 million tonne per year (MTY) as on 31.3.2016. A total of 52 washeries, both PSUs and Private, were operating in the country considering both Coking (29.69 MTY) and Non-Coking Coal (101.55 MTY).