April 3, 2015 4:00 pm JST
India's energy battle

Modi looks to double coal production by 2020

ROSEMARY MARANDI and KIRAN SHARMA, Nikkei staff writers

NEW DELHI -- Prime Minister Narendra Modi's government aims to double Indian coal production to 1.5 billion tons by 2020. India needs more fuel to meet rapidly growing demand for electricity.

     The Coal Ministry plans to auction 204 coal blocks that the Supreme Court canceled last year. These blocks have the potential to produce 800 million to 900 million tons of coal and generate revenue of about 7 trillion rupees ($121 billion).

     Coal Secretary Anil Swarup is leading the auctions, which started in January. "In the first two rounds, 67 out of the 204 coal blocks have been dealt with."

     The 67 blocks are expected to generate about 3.35 trillion rupees in revenue for state governments over the next 30 years. "Besides, there will be 690 billion rupees worth of reverse benefits in the form of [electricity] tariffs," Swarup told the Nikkei Asian Review.

     "So far, we have had two rounds of bidding and one round of allotment," he said. "The third round will commence in the third week of April for another 16 blocks." In the previous rounds, he added, 38 blocks were allocated to state-run companies, including energy enterprise NTPC and the Steel Authority of India.

     Private companies such as Jaypee Cement, Usha Martin and Aditya Birla group-led Hindalco Industries have also been allocated mines.

     "We are looking at 500 million tons [from these 204 blocks] by 2020 and another 1 billion tons from Coal India [the state-run mining company] to meet the target of 1.5 billion tons in five years," Swarup said.

     The Modi government, which came to power in May last year, is desperate to increase coal production to facilitate economic growth. Coal is primarily used in India for electricity generation, though sectors such as the steel industry use the resource at their factories. Coal accounts for 67% of India's total power generation. The International Energy Agency projects annual coal consumption in India to grow by 177 million tons, or an average 5% a year, through 2019.  

     India's planning authority estimates additional capacity of 75,785 megawatts will be needed by 2017.

Work needed

Swarup believes coal availability has never been a problem in India, but production has. The government has therefore put in place a four-pronged strategy to make the 1.5 billion ton target a possibility.

     It will ensure the private sector utilizes the coal blocks allocated to them transparently and productively. In addition, the Coal Ministry is also working to strengthen Coal India, the country's largest producer of the fossil fuel. 

     Out of the 565 million tons of coal produced domestically each year, Coal India produces 490 million. Excavation and labor problems, however, have meant the company has missed production targets.

     Swarup says the scenario is changing, though. Coal India grew 7.2% this year against a usual growth rate of about 2-3%.

     The Coal Ministry has also formulated a new strategy for excavating coal. Joint ventures in coal-producing states will build rail links to transport the resource from mines to production centers.

     "The first memorandum of understanding in this regard will be signed next week [for coal linkage]. Coal India is contributing 64%, [engineering and construction company] Ircon 26% and the state government 10% in the joint ventures," said Swarup. 

     "A total of 121 railway projects have been identified," he said.

     Coal India is also buying more rakes to transport the coal. It currently uses 200 rakes for 490 million tons.

     The federal government will ensure state governments resolve land acquisition issues for mining and setting up rail links.

     Coal rationalization is another priority area, Swarup said. Consultancy KPMG says rationalization will save Coal India 60 billion rupees a year.

     India's total energy output for 2013-14 was 130 gigawatts, with coal-based power generation making up two-thirds. The country's electricity generation capacity is 243GW.

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