Coal Overview

Though the world would like to wish it away, coal continues to be the primary fuel in cement and many other industries. With cement it accounts for half the production cost. However, being a fossil fuel gives it one certainty – it will become a fossil soon.

While the industry has been meeting the gap in demand with a combination of imported coal, petcoke and alternative fuels, the government has been particularly forthcoming with options that could benefit the industry.

India has the fifth largest coal reserves in the world; 306.6 billion metric tons of domestic reserves of coal mostly in the states of Jharkhand, Odisha, West Bengal, Bihar, Chhattisgarh, Telangana and Madhya Pradesh.

Coal supply to the cement industry has been on a slide; supply through linkages has dropped like a stone to 35% in FY13, from 75% in FY03.

Coal India Limited (CIL) is the state-owned miner for the country and accounts for over 80% of domestic coal production. CIL coal production target for India is set to 1 billion ton by FY2020. However, the cement industry gets about 5% of coal production in the country and the rest of its coal demand is met through imports.

India imported 13.5 million tonnes of coal from the US in the first 10 months of 2018, according to Refinitiv data, up 36% from the 9.9 million tonnes in the same period in 2017. In comparison, Japan, Asia’s third-biggest coal importer behind China and India, bought 7.1 million tonnes from the US during the same period, up from 6.2 million tonnes in the same period in 2017.

The government, this year, allocated coal mines for the cement sector directed at meeting demand arising from captive power plants for cement.

India imported 13.5 million tonnes of coal from the US in the first 10 months of 2018

Types of Coal

Of the four types of coal available in India – Peat, Lignite, Bituminous Coal & Anthracite Coal – the most commonly available are bituminous and lignite.

Bituminous coal, which is available in West Bengal, Jharkhand and Orissa, has carbon content varying from 40–80% and has high calorific value. In Jharkhand, it is found in the Jharia Coal Field region and the Raniganj Coal Field Belt in West Bengal.

Lignite coal, also known as brown coal, is available in some regions of Tamil Nadu (Nevli), Lakihmpur in Assam, Palna in Rajasthan and in some parts of Jammu and Kashmir. It offers carbon percentage varying from 35–50%. Peat is the lowest grade of coal with carbon content less than 35%.

The cement industry mainly uses non coking bituminous coal and lignite in small quantities in plants in Tamil Nadu and Rajasthan. Specifically, the coal used by the Cement Industry is of grade G4, G5, G6, G7, G8 and G9.

Low carbon content typically means more smoke and more fly-ash, which is often used by cement plants as an ingredient to make cement.

Coal substitutes

While coal has been a primary requirement, the impact it leaves on the environment has been a constant area of concern for the Indian cement industry. The industry has been working overtime on reducing its carbon footprint by adopting the Best Available Technologies (BAT) and environmental practices to reduce CO2 emissions.

The initiatives taken up by the industry are reflected in the achievement of an industrial average of 0.719 tCO2/t cement in 2010 from a substantially higher level (as was estimated by CMA for NATCOM) of 1.12 tCO2/t cement in 1996.

One of the methods that have been particularly useful is the use of alternative fuels. Not only do they offer considerable energy cost reduction, they also bring with them significant ecological benefits of conserving non-renewable resources, the reduction of waste disposal requirements and reduction of emissions. Use of low-grade alternative fuels in some kiln systems reduces NOx emissions due to reburn reactions.

In addition, installation of High Efficiency Low Emission (HELE) technologies in coal-fired power plants has been found to be quite successful in meeting the emission agenda to an extent. HELE technologies offer reduction in greenhouse gas emissions by around 20%. They work on the simple logic that improving efficiency increases the amount of energy that can be extracted from a single unit of coal.

A one percentage point improvement in the efficiency of a conventional pulverised coal combustion plant results in a 2-3% reduction in CO2 emissions.

Clearly, replacing a fuel that makes up 55% share in the energy mix of the country is not going to be quick. Though there has been substantial growth in renewable energy sources, the share of coal in the fuel mix will remain large as coal is not only economical but also available easily in India. The industry has begun working on its carbon mitigation strategies has begun to address the replacement issue and hopes to have a 25% thermal substitution rate by 2025.

Use of low-grade alternative fuels in some kiln systems reduces NOx emissions due to reburn reactions.

Trends

CIL announced a major joint venture agreement with the India Railways to co-develop a number of railway projects to extract coal. Creation of mega-infrastructure, for which about 50 separate projects across the country were identified.

CIL to invest INR 500 crore in India Railways to procure 2000 high-capacity wagons for coal transportation.

Improved efficiencies in CIL coal mining operations and technology overhaul

US coal exporters have effectively lost a promising market in China since the imposition of tariffs as part of the ongoing trade dispute, but so far they have managed to find other buyers in Asia, chiefly India. China imposed a 25% tariff on imports of US coal in August as part of its retaliation against tariffs on its exports implemented by the administration of President Donald Trump.

Policy Updates

The Supreme Court cancelled 214 of the 218 coal blocks allocated since 1993.

Updation of the Coal Mines (Special Provisions) Ordinance to allow commercial mining. This brought in market competition for CIL

Re-allocation of cancelled clocks from December 2014 onwards, with 36 of the 98 viable coal blocks allocated. Auction process for 62 of the cancelled blocks for end-usage in power, cement and iron production.