1. 1 Indian Coal Sector Reforms More Change is Necessary? Presentation at 9 th Coal Trans India 2010 9 March 2010 By T.L SANKAR Administrative Staff College of India

2. 2 Energy has been an important issue in all discussions on economic and social development. For several decades, energy discussions in India revolved mainly around: a.The role of indigenous coal as the primary source of supply of commercial energy and its sustainability b.The limited resources of hydro-carbon resources and the accessibility and affordability of hydrocarbon imports. After the Stockholm discussions the environmental impacts of energy consumption were added to the agenda. TO DAY: After Copenhagen discussion, climate change consequences have become the core of energy discussions. Will the new context call for a review of India’s coal policy and long-term coal development plans? The New Context

3. 3 The role assigned to coal in India’s Energy Future in the IEP. Measures designed to enable India’s coal sector fulfill the assigned role. Action Taken Report on the Coal Sector reform measures so far. An evaluation of the Action Taken so far What further action needs to be taken and what new measures have to be added to the Reform Agenda The Agenda for Discussion today:

4. 4 To sustain the recently achieved high rates of GDP growth India has to ensure energy security. Energy security in India’ s is defined: o there should be adequate quantity of energy to meet all the legitimate demands of “all people”. o “All people” should include the poor and the remote area residents. o The supply of energy should of appropriate quality and in the desired fuel form. o The supply should be at prices affordable by all. o The production, transport and utilization of energy should be achieved at all times with minimum adverse impact on environment and with minimum addition to GHG emission. Energy Security Plans should be harmonious with the National Security plans. India’s Concern for Energy Security

5. 5 India set up a High Power Committee to evolve an Integrated Energy Policy (IEP) for the country with a 25 year time horizon. IEP (2006) on the basis of rational consideration of the relative availability, accessibility and affordability of all sources of commercial energy, concluded that Coal is and will continue to be the primary source of supply of commercial energy in India. In the changed context today, does this view need re-examination? The issues for examination are: a.Does the forecast of demand for different fuels need change? b.Even if it needs no change, are reform measures proposed so far adequate and efficiently implemented? c.If on re-examination coal is to be continued as the dominant source of supply of commercial energy, what further policy measures and programme initiatives would need to avoid/mitigate the adverse impact of large coal use on environment and the climate change consequences? Energy Security – Reliance on Coal

6. 6 Energy Consumption Pattern (1980 – 2005) Total PCES In Mtoe Coal Mtoe / (% Share) Oil Mtoe NG Mtoe Primary Electricity Mtoe Imports Mtoe As % of TPCES Total Electricity Generation BkWh \ Mtoe 1980-8198.058.5 (59.7) 34.0 (34.7) 1.3 (1.3) 4.2 (4.3) 23.7 (24.2) 119.2 (10.2) 1990-91191.5114.4 (59.7) 59.7 (31.2) 10.9 (5.7) 6.5 (3.4) 32.1 (16.8) 289.4 (24.9) 2000-01314.1175.2 (55.8) 107.4 (34.2) 23.9 (7.6) 7.6 (2.4) 93.6 (29.8) 560.8 (48.2) 2003-04351.9200.5 (57.0) 117.1 (33.3) 26.5 (7.5) 7.8 (2.2) 109.0 (31.0) 633.3 (54.5) 2005-06387.6229.2 (59.1) 121.8 (31.4) 26.8 (6.9) 9.8 (2.6) 129.9730.0 (62.8) Growth Rate % per year 1980- 2005 5.75.65.2---7.5 Figures in bracket in the table represents percentage share of the fuel in TPCES Total Primary Commercial Energy Supply of the year. The share of coal has remained around 60% and oil between 30-35%, natural gas share has increased. In the total electricity generation the contribution from primary electricity has declined steadily on account of the rapid increase in Thermal Power Generation.

7. 7 Total Energy Requirement in Different forms in Original Units YEARHydro BKwhr Nuclear BKwhr Coal MT Oil MT Natural Gas BCM 2011-121406569016653 2016-1720911891421471 2021-222671721270278108 2026-273372721722365150 2031-324073752285486219 Growth Rates 2011-2031 (%) per year 5.911.26.35.67.2 Source: IEP Report Forecast Estimates based on 9% growth of GDP during 2011-31 period

8. 8 Misgivings Regarding Coal Forecast 1. The basis of energy demand forecast is 9% growth of GDP for next 25 years. Is this realizable in the context of global recession? 2. The forecast implies a total coal requirement of 2285 Million Tonnes. Is this achievable with our present knowledge of our minable coal resources? 3. The forecast production will call for underground mining of deep mines, below 600 meters. Do we have the technology for UG mining,particularly deep UG mining ? 4. Such high coal production targets would lead to very large legal and institutional challenges. Can we over come these? 5. Will this rapid increase, raise the level of contribution by India to climate change impacts. What measures are to be taken to mitigate these impacts? How can we avoid global protest against increased use of coal?

9. 9 IEP Forecast Needs No Change as of now India’s GDP growth continues is 7-8% even in the recession period The forecast rate of growth of coal production is 6.3% per year as compared to 5.6% achieved over the past 25 years(1980-2005) when only two PUs were engaged in coal production; now number of producers has increased. India’ s desired of coal production in 2031-32 is less than China’s production today and likely to be close to USA’s production in the next few years. The ranking of important countries who produce large quantities of coal;. Country/ Year19952004 USA10331112 China15372156 India321444 In Million Tonnes The relative price of coal and other fossil fuels has remained in favour of coal with the steep increases and continuing volatility of hydro carbon prices. The demand of coal in 2031-32 as forecast needs no change. The questions which remain are  Is our knowledge of coal resources are adequate?  How do we ensure the acceleration of coal production and productivity?

10. 10 Coal Resources of India As onGeological Resources of Coal ProvedIndicatedInferredTotal 1.1.20049163111617437888245693 1.1.20059296011709037797247847 1.1.20069586611976937666253301 1.1.20079792011899238260255172 1.4.20079906012017738144257381 1.4.2008 10182912421638490264535 1.4.2009 10582012347037920267210 Geological Resources in-situ are finite. But the total minable quantity of a resource like coal known to each country will depend on the extent of exploration, the state of technology and price of coal relative to other alternate fuel resources. The known coal resources in India has been increasing in last decade due to accelerated exploration activity. In 2005 the total known resources were 248 Billion Tonnes of with the proved resources were 93 Billion Tonnes. As of 01-04-2009 it has increased 267 Billion Tonnes and the proved resources are 106 Billion Tonnes.

11. 11 Extractable Reserves of Coal The Quantity of Coal that can be extracted is always lower than the proved reserves. An authoritative estimate of the extractable reserves made as part of the National Coal Inventory in 2005 upto 1200 mtrs depth is. In Billion Tonnes AreaGeological Reserves as on 1.1.2005*Extractable Reserves* ProvedIndicatedInferredTotal CIL Blocks67.7119.424.5691.6930.03** Rest25.2597.6633.24156.1522.21@ Total92.96117.0837.80247.8452.24 * Includes reserves standing on pillars. ** Based on 2004 CMPDI study of 287 blocks @ Based on CMPDI study of 114 blocks Can extractable reserves sustain the production targets upto 2031?

12. 12 How Long Will Coal Last Plan Period Upto Demand in end year-mt Total Demand in five years-mt Cumulative consumption mt 2011-126902693 2016-1791440106703 2021-221270546012613 2026-271722748020093 2031-3222851001730110  As seen from slide 12 the extractable / usable reserves is about 52 bt of which the extractable coal from “Proved Blocks” estimated to be 30 bt.  The reserve requirement upto 2031-2032 is only 30.11 bt. At 2031-32 level of production the extractable coal can sustain production for a few more years. Meanwhile the extractable coal limits might increase due to technology and further exploration.

13. 13 Institutional & Managerial Reform in the Coal Sector An Expert Committee headed by T.L. Sankar was set up to design the Road Map for Coal Sector development has suggested (in 2007) several measures: 1.Captive coal mining provisions should liberalized to create competitive conditions. 2.Special incentives should be given to encourage Under Ground (UG) coal mining. 3.Modern Technologies like long-wall face mining, continuous mining etc, should be adopted towards productivity and quality improvement. 4.Methods to reduce pollution should be adopted at every stage of the supply chain. 5. Coal sector should evolve ways of introducing ultra mega coal mines on the lines of ultra mega power projects, especially develop under ground mines. 6. Management should be restructure to give greater autonomy through Navaratna status. 7. Procedures for approval of Environmental Impact Analyses (EIA) and Environment Management Plan (EMP) and for giving clearance for forest lands conversion to mining should be simplified and should be made time bound. 8.Seller – Buyer Relationship should be rationalized. 9.A regulator should be appointed for the coal sector. 10. R&D in Coal Technologies should be deepened and widened. 11.Coal Policy should be harmonized with National Security Concerns. Many of the Institutional & Managerial Challenges are being faced effectively

14. 14 Liberalising Captive Coal Mining to Create Competitive Conditions 1.On the Expert Committee’s recommendation, all coal blocks which are not planned to be exploited till 12 th plan end were released from CIL and allotted to private captive coal mining applicants. 2. Now beside 2 large PU coal mining companies there are over 30 captive coal mines operatives. 3.The definition of captive coal mines extended to group captive coal mines. 4.Coal mine allottees could do mining through a joint venture partner with at least 26% of the equity. Result: 1 Large companies including giant power companies like NTPC and other Private Sector Companies are into captive coal mining. 2The coal users are enthusiastic to take up captive coal mining. The new applications are likely to be decided by public auction.

15. 15 Challenges that Remain for the Coal Sector Challenge 1:Speeding up the efforts to increase competitiveness in coal exploration and mining by opening it to private sector. Challenge 2:Increasing productivity in OC and UG mines and improving the share of coal production in UG mines. Even JV with foreign coal companies permitted. Challenge 3:Creating facilities for washing and transportation of larger quantities of coal. Challenge 4:Enhancing the capability of the officialdom dealing with approval of mine plans and environmental management in coal mines to speed up the issue of permission & approvals. Challenge 5:Introducing regulation and more effective governance in coal sector. Challenge 6:Designing and Implementing an effective programme for reducing the climate change consequences of coal production and usage.

16. 16 Response to Challenges in Coal Production The competition between CIL & Private Captive Coal Mines has led to the acceleration of the mine development work by most agencies. 1.Coal India (CIL) has Identified 134 new mines and Implementation started in many of them. 2.CIL has abundant restarted 18 abandoned mines with the appropriate New Technology. 3.Seven (7) large under ground mines identified for development by CIL with International Technology. 4.Acquisition of coal properties abroad through Coal Videsh and also by Private Industries. 5.CIL as well as private players are introducing larger size dumpers, more modern, heavy earth moving machines (HEMM). 6.Measures have been initiated for importing more coal from Abroad during the next 5 years till our production could match the requirements. 7.A regulator for the coal sector will be appointed in early 2010-11. But the challenge still remains: How to Expedite the Coal Mine Plans Approval & Issue of Environmental Clearances.

17. 17 India’s Position on Climate Change Questions 1.All Countries are responsible for the GHG Emissions over time. The action plan and its financing future action to mitigate GHG Emissions should be based on the “Common but Differentiated Responsibilities of the Countries” accepted in the Stockholm resolution 1992, and under UN Framework Convention on Climate Change (UNFCC). 2.The level of responsibility would depend on the current level of emission, the efficiency of use of energy resources (Energy Intensity of the Economy), current emission levels and the total addition to the accumulated global CO 2 and the consequent contribution to temperature increase. 3.Analysis of the relevant data clearly shows that India has responsibility far lower as compared to the developing countries and China. In terms of energy efficiency India has a much lower Energy Intensity than other countries. 4.This position and the data which determine the relative responsibilities have not changed since 1992 and later reiterated in Kyoto discussions. 5.Unfortunately the Copenhagen discussions of 2009 have diluted the principles of “common but differentiated responsibilities”. The relevant data is in the next few slides

18. 18 Name of the Country Total Emission in Million Tonnes / Year Per Capita Emission in Tonnes / Year 19902002200520061990200220052006 USA224132765323560619.019.619.519.0 China50015763596756972.12.94.34.6 India5751015116312500.81.21.31.2 Emission Levels in India, China & USA Country% of World(Rank) United States29.3(1) China7.6(2) India2.2(3) Cumulative CO2 Emission 1850-2002

19. 19 GDP-PPP per capita (thousand 2000 $) Energy use per capita (toe) Energy intensity (toe per million 2000 $) CO 2 emissions (percentage of global total) CO 2 per capita (tC) CO 2 Emissions Contributi on to temp increase, 1850-2003 (percentage of global total_ World77431.68217100.01.13100.0 USA353737.8422222.35.4228.9 Japan262704.051544.902.694.20 China53851.0920317.30.957.80 India27310.521904.400.292.20 The GDP – Energy – Emission Nexus in Different Countries Source: Collected WRI CAIT Tool Courtesy : Ananth Chikkatur, KSG Harvard University Cambridge, USA 1. The CO 2 per capita emission in India is only 0.29 tonnes as compared to USA 5.42 & China 0.95. 2. In terms of the percentage of contribution of India to the total global CO 2 emission is only 4.4% compare to 22.3% by USA and 17.3% of China. 3. India has contributed only 2.2% to the global temperature increase in over 50 years, while USA is over 28.9% and China 7.8%.

20. 20 India’s efforts to meet climate change challenges Though India has consistently rejected the demand for fixing limits to emission with date - lines as in the case of developed economies, it has taken several important measures to mitigate the climate change impact. India has setup has announced National Action Plan on Climate Change. As per the plan 8 National Mission has been set up 1.National Solar Mission 2.National Mission for Enhanced Energy Efficiency 3.National Mission on Sustainable Habitat 4.National Water Mission 5.National Mission Coastal Regions 6.National Mission for Himalayan Ecosystems 7.National Mission for a “Green India” 8.National Mission on Strategic Knowledge for Climate Change

21. 21 National Solar Mission Among the 8 Missions the two which are directly related to the issue of fuel resource utilisation on National Solar Mission and the National Mission for Enhanced Energy Efficiency. o National Solar Mission has outlined a policy to -Installed 20,000 MW of Solar PV Power Generation Capacity by 2022. -Deploying at least 1000 MW of solar thermal power generation. -Increase production of photo voltaic cells to 1000 MW / year. o National Solar Mission needs reconsideration on certain aspects; -Proposal is to add additional solar PV power generation of 20000 MW would have benefits equivalent to adding about 6500 Mw of thermal power capacity when the total power generation capacity would be over 2.5 lakhs of power utility capacity. -Achieving this would involve a subsidy of 40,000 crores -While encouraging PV panel manufacturing capacity panel should first be used for decentralized power generation to electrify the still known electrified villages and the 60 million households which do not have grid connection electricity due to the poverty of such families. -Whatever deployment of strategy is adopted it will be a great contribution to the development of global green power generation

22. 22 National Mission for Enhanced Energy Efficiency The mission builds on the efforts already initiated under the Energy Conservation Act 2001 and through programmes which have been initiated and actively pursued by the Bureau of Energy Efficiency (BEE) This mission set a target of saving 10000 MW of power through energy efficiency improvements through; -Mandating specific energy consumption decreases in large energy- consuming industries, with a system for companies to trade energy- savings certificates. -Energy incentives, including reduced taxes on energy-efficient appliances. -Financing for public-private partnerships to reduce energy consumption through demand-side management programs in the municipal, buildings and agricultural sectors.

23. 23 Harmonising Coal Policy with National Security Concerns 1.India’s Nation Security rests on maintaining good relationship with all countries, especially the neighboring countries in South Asia and South East Asia. 2.Only element in our coal programme impacting other countries is GHG emission. India would therefore play a leading and responsible role on behalf of the developing countries in all discussions on climate change. 3.All neighbors like Sri Lanka, Bangladesh and Pakistan are now interested in coal based power generation. Providing material and technical assistance would strengthen our relationship with such countries. 4.India can set-up Technical Institutes to train technicians and engineers in coal related subjects from all the countries of the region. 5.The coal trade and technical assistance could pave the way of South Asian Power Grid, South Asia Gas Grid etc and enable the development of regional energy market. 6.All these measures are under consideration and implementation at some level

24. 24 Summing Up On the basis of available information and current knowledge of Indian and global fuel situation. We have to conclude that coal will continue as the primary supplier of commercial energy to India for the next 25 years. A number of measures to realise this possibility and to enable the Coal Industry to retain this primary role, has already been initiated under different programmes of the Government of India and the State Governments. While increasing the role of coal India’s enormous increasing in energy demand calls for the greater utilisation of renewable energy and greater attention to the climate change implications. India is quite capable of balancing the divergent claims of using more coal and taking measures to mitigate climate change impacts. Policies and Programmes have been well delineated already. If these are implemented efficiently, energy security as well as national security could be enhanced with coal continuing to play a crucial role in the energy sector.