Coal constitutes 56 per cent of India’s primary energy, which is crucial for electricity generation, accounting for 76 per cent of the total consumption. Despite efforts to increase renewable energy production to reduce fossil fuel dependence, the Central Electricity Authority (CEA) reports that coal will still be the major fuel for electricity generation, maintaining a 55 per cent share till FY 2030. Notably, the power sector is the single largest major consumer of coal in the country. The estimated coal requirement of the power sector during FY 2030 is 1,059 metric tonnes (mt). Coal consumption in the power sector is expected to grow at around 4–6 per cent. The present trend in the power sector shows that around 10 per cent of the coal consumed is imported coal.
In this context, the MoC has released the “Strategy Paper on Coal Import Substitution”, which examines the current energy mix, domestic coal production and import trends in the power sector. The paper, prepared by an inter-ministerial committee, highlights the measures already taken by the government to reduce coal imports and presents future strategies and recommendations to decrease import dependency and increase domestic coal production. The report provides detailed insights and actionable plans to enhance the country’s self-reliance in coal.
Coal imports
India, the second-largest importer of coal, accounts for about 18 per cent of the global non-coking coal imports. In 2022-23, India imported 237 mt of coal (181 mt non-coking, 56 mt coking) costing Rs 3,830 billion. Import dependency is due to smaller, lower-quality coking coal reserves in India, limited high gross calorific value (GCV) coal, land acquisition issues, statutory clearance delays and logistical constraints. Domestic coal production amounts to about 893 mt in FY 2023, while demand grew to 1,131 mt, necessitating imports. The Ministry of Coal (MoC) is implementing various measures to reduce the import dependency.
Coal import substitution measures
The government has implemented reforms to promote coal import substitution by ensuring both the quality and quantity from domestic coal companies.
Vision 2030
By FY 2030, India’s coal output is projected to reach about 1.51 billion tonnes (bt). Coal India Limited (CIL), currently the largest coal producer globally and responsible for over 80 per cent of India’s coal production, produced 703.2 mt in 2022-23. Although CIL will remain the major coal supplier, its share is expected to decrease to 74 per cent by FY 2030 due to increased production from captive and commercial coal blocks. By 2030, Singareni Collieries Company Limited is projected to contribute around 100 mt, with captive and commercial blocks adding about 291 mt.
Auction of coal blocks/private sector participation
To reduce coal imports and boost domestic production, the MoC introduced an auction-based regime in 2014 and opened commercial coal mining to private players in 2020. By 2022-23, coal mine development and production agreements were signed for 77 mines with a peak rated capacity (PRC) of 159.4 mtpa and in 2023-24, agreements for six mines with a PRC of 7 mtpa were finalised.
Mining developers-cum-operators
The MoC has engaged reputable mine developers and operators (MDOs) through open global tenders to boost the domestic coal output and reduce imports. These MDOs are responsible for coal excavation and delivery, using advanced technology and cost-effective methods. CIL oversees 30 greenfield projects through MDOs, investing Rs 350 billion mainly in land acquisition, rehabilitation and rail sidings. These projects have a total rated capacity of 262 mt, with 13 projects (140 mt per year) already accepted and four projects (57.37 mt) in production.
Utilisation of abandoned mines: Revenue sharing model
The MoC plans to revive abandoned mines with significant reserves, previously closed due to unprofitability. To address this, a revenue sharing model invites private sector participation to reintroduce efficiency through reduced costs and advanced technology. Private operators will reopen, develop and operate these mines, choosing their methods and technology. So far, CIL has offered 34 mines in various tranches to optimise coal resources in alignment with national interests.
Coal Logistics Policy
The MoC has developed an Integrated Coal Logistics Policy to enhance India’s energy security and reduce coal imports. Key components include developing railway sidings near coal mines for better connectivity, expanding the coalfield rail network, mechanising 90 per cent of coal handling and enhancing rail infrastructure with new and upgraded lines. Additionally, the policy targets increasing coastal shipping capacity to 120 mt and inland waterways transportation to 8 mt by FY 2030, as well as procuring an additional 100,000 wagons by FY 2030 for efficient coal evacuation.
Mission coking coal
The objectives of the mission include increasing domestic coking coal blending for steelmaking from 10 per cent to 30 per cent and ramping up raw coking coal production to 140 mt by 2030. Additionally, the mission aims to enhance the nation’s washing capacity to 61 mt by FY 2030, producing 23 mt of washed coal with an ash content of 18 per cent. The initiative focuses on critical areas such as new exploration initiatives, enhancing production capacities, augmenting washing facilities and auctioning new coking coal mines to achieve these goals.
Underground coal mining
To boost the coal production from underground coal mining that is high GCV coal in the country, the MoC has set a target of achieving 100 mt by FY 2030. It has planned to introduce mass production technology in underground coal mines recognising the significance of underground mining in enhancing production capabilities, while CIL has introduced 25 continuous miners across 18 underground mines.
Technology upgradation
Digitalisation is pivotal, integrating advanced data analytics, automation and internet of things to enhance productivity, safety and environmental sustainability in mining operations. The measures include developing a smart coal analytics dashboard for real-time reporting and analytics, deploying drones, geographic information system and remote sensing for efficient mining operations, optimising drill and blast processes for improved efficiency and environmental impact. These initiatives aim to modernise the mining sector and support sustainable growth in India’s mineral resources sector.
Business case and the way forward
The MoC has outlined a comprehensive strategy to significantly decrease India’s dependency on imported coal through strategic recommendations.
Logistics constraints removal
The committee recommends that coal companies and railways develop adequate infrastructure, including rail networks, first-mile connectivity, merry go round, conveyors and roads, to supply 1.5 bt of coal by FY 2030. This aims to prevent coal imports due to logistics constraints. Implementing the Coal Logistics Plan is advised as a high-priority, time-bound initiative.
Rationalisation of coal linkages
The MoC’s coal linkage rationalisation policy aims to reduce transportation distances from mines to consumers, lowering costs and improving coal-based power generation efficiency. This initiative eases transportation infrastructure load and reduces the landed cost of coal, encouraging domestic procurement and import substitution. The committee recommends that coal companies regularly continue this exercise with active stakeholder participation.
Reducing coking coal imports
Efforts to reduce coking coal imports focus on enhancing domestic utilisation and technological upgrades in India’s steel sector. Recommendations include supplying more domestically washed coking coal to steel plants, adopting Stamp Charging Technology to increase domestic coal blending to 30 per cent, and expanding washing capacity from 61 mt to 140 mt by 2030. The high-level committee advises auctioning long-term coal linkages and privatising old washery facilities to boost the washing capacity. Additionally, promoting pulverised coal injection and coal gasification for direct reduced iron aims to reduce dependence on imported metallurgical coal and enhance competitiveness in steel production.
Reducing non-coking coal imports
To reduce non-coking coal imports, initiatives include integrating integrating coal import monitoring system with Indian customs EDI gateway for real time.. for real-time import tracking and creating HS codes for better planning. Import coal-based power plants may retrofit boilers for domestic coal use, aligning with the SHAKTI policy provisions to stabilise power costs. Guidelines allow exporting electricity generated from imported or auctioned coal; incentivising domestic coal use in these plants could curb imports. Domestic coal-based power plants should be mandated to use local coal with improved supply and logistics support, aligned with MoC’s 2030 production goals. Further, administrative ministries of coal-consuming sectors should determine coal requirements to facilitate import substitution. Financial incentives for coastal shipping and installation of pit-head power plants are also proposed to lower transportation costs and enhance domestic coal utilisation efficiency. Further, gross service tax compensation cess may be imposed on ad-valorem basis wherein the cess would be directly related to the price and quantity of the coal, instead of the present levy of a fixed amount of Rs 400 per tonne.
To achieve the target coal production of 1.51 bt in country by FY 2030, operationalisation of coal blocks plays a critical role as it has a 20 per cent share. Hence, it is recommended to monitor the early operationalisation of captive/commercial coal blocks in the country.
Conclusion
In conclusion, India’s strategic efforts to reduce coal imports and enhance domestic production are pivotal for energy security and economic sustainability. With coal constituting a significant portion of primary energy consumption and electricity generation, achieving the Vision 2030 target of 1.51 bt coal production is crucial. The comprehensive measures outlined, including auctioning coal blocks, promoting MDO engagements, and revitalising abandoned mines under a revenue-sharing model, aim to bolster production capacities. Furthermore, initiatives to improve logistics, rationalise coal linkages and enhance technological adoption across sectors underscore a concerted effort to minimise import dependency. These strategies align with national interests, fostering self-reliance while optimising resources for sustainable growth in the coal sector.
