Policy Interventions in Coal Sector
4th Coal Summit 2012
19th November, 2012
Hotel Ashok, New Delhi
D.N. Prasad
Adviser (Projects)
Ministry of Coal
Structure of Presentation
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Planned Development of Coal
Trend in Plan wise coal production
Oil Shock & Focus on coal
Coal Mining & Environmental laws
Trend in production, consumption & Imports
On set of Economic reforms
Policy Shift
Way Forward
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Planned development of Coal
• The need for systematic and scientific
development of coal industry was recognised
from the inception of the process of national
economic planning in the country;
• National coal Development Corporation
(NCDC) was set up in 1956 which was the first
step towards planned development of the
industry;
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Planned development of Coal
• Singareni Collieiries co. Ltd. (SCCL) was already
a government company in 1956 and Central
Government started in equity participation in
SCCL from 1960 onwards;
• However, comprehensive development
programme could be initiated only after
nationalisation of the industry in the early
1970s and formation of Coal India Ltd. (CIL).
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Trend in Plan wise coal production
Five Year Plan
Terminal Year
Coal Production
%CAGR*
Period
(million tonnes)
First Plan
1955-56
38.30
Second Plan
1960-61
55.67
7.76
Third Plan
1965-66
67.80
4.02
Fourth Plan
1973-74
78.20
1.79
Fifth Plan
1978-79
102.02
5.46
Sixth Plan
1984-85
147.41
7.86
Seventh Plan
1989-90
200.89
6.38
Eighth Plan
1996-97
289.32
5.34
Ninth Plan
2001-02
327.79
2.52
Tenth plan
2006-07
430.83
5.62
Eleventh plan
2011-12
539.94
4.62
Twelfth
Plan
2016-17
795.00
8.04
(Target)
* Note: The % CAGR over the last 55 years i.e. 1955-56 to 2011-12 works out to 4.93%
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Oil shocks & Focus on Coal
• Oil shocks of 1970s (1973 & 1979) clearly
identified the need for developing domestic
energy resources, particularly coal;
• Coal industry was nationalised in the early 1970s
and CIL was formed in mid 1970s as a holding
company with four coal producing companies
(now seven) and a planning & design institute;
• As the demand started rising, a number of new
projects were taken up by these companies and
production more or less followed the projected
demand;
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Coal Mining & Environmental Laws
• By mid 1980s it was evident that enhancement of
production was possible mainly through large
scale opencast projects only;
• Mechanization of underground projects was
fraught with inadequate planning and a large
number of projects were to be foreclosed at
much less capacity than the envisaged;
• Forest (Conservation) Act came in to being in
1980 and Environment (Protection) Act, in 1986
and environmental management plans made
mandatory for coal mining projects;
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1990s - Economic Reforms
• Early 1990s was the period of onset of
economic reforms and amongst others, power
sector was opened up for private investments;
• However, the major fuel, coal was opened
limited to captive use;
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Trend in Coal Demand, Consumption &
Production (million tonnes)
Five Year Demand Consum- Producti
Plan
ption
on
(Termina
l Year)
VII Plan
1989-90
VIII Plan
1996-97
IX Plan
2001-02
X Plan
2006-07
XI Plan
2011-12
XII Plan
2016-17
222.00
199.80
200.89
(+) 1.09
Cokin Thermal Total
Imports
g coal
coal
coal
as % of
impor imports imports consumpti
ts
on
4.45
4.45
2.2%
311.00
303.55
289.32
(-) 14.23
10.62
2.56
13.18
4.34%
354.29
351.91
327.80
(-) 24.11
11.11
9.44
20.55
5.84%
474.18
463.87
430.83
(-) 33.04
17.88
25.20
43.08
9.28%
696.03
649.00
550.00
(-) 99.00
30.04
68.90
98.94
15.23%
(-) 185.50 35.50
150.00
185.5
18.91%
980.50
795
Gap
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Trend in Coal Demand, Consumption &
Production (million tonnes)
• Trend indicates that consumption has invariably
been less than the demand mainly on account of
ambitious demand projections for power;
• Till the end of the VII Plan Gap in demand and
domestic production was not a issue but for
coking coal which was to be imported on
qualitative and quantitative reasons for
metallurgical purposes;
• This trend continued till the end of IX Five Year
Plan with little imports of thermal coal mainly by
cement industry to reap the benefit of exports;
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Trend in Coal Imports & APM
• Imports of thermal coal outpaced coking coal
imports from the X Plan onwards as there was
a surge in coal demand for power;
• Coal was put on OGL and import duty was
tapered off ;
• Administrative Pricing Mechanism (APM) for
coal on the basis of normative cost formula of
BICP was in vogue and price rise was allowed
as per the escalation formula by updating the
cost indices from time to time;
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Policy Shift
• Government approved Capital restructuring of CIL
and SCCL in1996 and budget support was withdrawn
and Coal Price Regulatory Account was discontinued;
• Based on the recommendations of Integrated Coal
Policy Committee in 1996, partial decontrol of coal
prices of higher grade coals affected and CIL & SCCL
empowered to notify prices of these grades on their
own;
• Colliery Control Order was dismantled and coal
prices and distribution were decontrolled with effect
from 1.1.2000; Coal companies were vested with the
powers to notify coal prices on their own;
Subsequently Colliery Control Rules were put in place
in 2004 under MMDR Act.;
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Policy Shift
• Though distribution was decontrolled, arrangement
for allocation of coal on long term basis is still
continuing through standing linkage committee under
MoC;
• New Coal Distribution Policy was formed in 2007;
FSAs made mandatory;
• Realising the need for supplementing the efforts of
coal PSUs in enhancing coal production and to bridge
the rising gap between demand and domestic
production Government decided to open the coal
sector for private investments in commercial mining
by the end of the IX Plan and introduced Coal Bill 2000
in Rajya Sabha in April 2000 which is still awaiting
consideration of the Parliament;
13
Policy Shift
• Enhancement of Coal production through
outsourcing resorted to initially due to
financial resource constraints in the end of
1990s; continued for quick augmentation later
on wherever departmental capacities were
not adequate;
• Project appraisal and approval methodology
streamlined and performing coal companies
were provided with enhanced delegation of
financial powers to take up capital investment
decisions;
14
Policy Shift
• Disinvestment of NLC (6%) took place in 199192 and CIL (10%) in 2010;
• Acquisition of coal equity abroad permitted
for ensuring energy security;
• Emphasis laid on development of clean coal
technologies including coal beneficiation,
exploration and exploitation of CBM/CMM,
UCG etc.
15
Policy Shift
• CBM policy came in to existence in 1997 and 33
blocks thus far have been allotted to various
players in public and private sector;
• Legislative Amendments to MMDR were made to
bring in more transparency in offering the coal
blocks through competitive bidding and notified
in September 2010;
• Modalities are being finalised for offering the
identified blocks through Competitive Bidding;
• Emphasis laid on building rail infrastructure in
potential coalfields and strengthening port
infrastructure;
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Policy Shift
• Government has sensitized all the coal
bearing states not to permit construction of
large scale structures on coal bearing areas;
• With a view to ensure consistency in quality
of coal supplies international best practice of
trading of thermal coals on GCV basis has
been introduced in place of UHV w.e from
1.1.2012;
• A policy for coal beneficiation is in the pipe
line for regulating washing aspects and to
address rejects disposal;
17
Policy Shift
• Emphasis is laid on enhancing coal
exploration such that only explored blocks
could be offered through bidding;
• Proposal for Setting up an Independent
regulatory authority for coal is under
consideration of a GoM;
• Stringent guidelines for mine closure issued
for proper reclamation and rehabilitation of
mined out areas;
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Way Forward
• Coal will continue to play an important role in
meeting our energy requirements;
• Widening gap between demand and domestic
supply implies quickly implementing new
capacities as well as sourcing supplies from
outside;
• Our coal imports are about 15% of the overall
consumption and should not be a issue to
make up from domestic production but for
coking coal; however it is subject to timely
availability of statutory permissions, land
acquisition etc.;
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Way Forward
• Revisiting the environmental and forestry
clearance procedures critical for envisaged
growth in the sector;
• Port and rail Infrastructure development for
coal movement needs to be strengthened;
• Coal mining and coal use needs to be made
more environment friendly through adopting
international best practices and CCTs;
• Competitive markets for long term
sustainability of the sector is critical;
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Thank You
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