Firing the future
Coal India is the biggest coal production company in the world and one of the largest companies in India, with annual revenues in excess of $10 billion and more than 400,000 employees. John OÔÇÖHanlon talked to executive chairman Partha Sarathi Bhattacharyya.
IndiaÔÇÖs energy problems are somewhat different from those of other countries. It is already the worldÔÇÖs sixth largest consumer of electricity but there are still a lot of people who donÔÇÖt have powerÔÇöinevitably the rural poor. But India has set itself the target of extending the power supply network to everyone. The national shortage of power is a major obstacle to development: more than 400 million Indians lack access to electricity and 60 per cent of Indian businesses have at best an intermittent supply.
The initial target was to achieve power for all by 2012, which is now acknowledged to be unrealistic, though the executive chairman of Coal India Limited (CIL) Partha Bhattacharyya thinks that the rate of addition to power capacity has increased considerably. Even so, the power generation capacity of the country needs to be expanded very quickly over the coming years. Though nuclear and hydroelectric generation will have their place, 80 per cent of the countryÔÇÖs power is still being supplied from coal fired power stations. Naturally, the demand for coal is increasing. ÔÇ£We find the demand for thermal coal (the grade supplied to power stations) is increasing by about 10 per cent per annum,ÔÇØ says Bhattacharyya.
Coal accounts for 55 per cent of prime energy consumption in India, and though it hasnÔÇÖt a monopoly, CIL meets 82 per cent of that. Or to put it another way, it directly provides 45 per cent of the countryÔÇÖs entire energy needs. As a national institution as well as a commercial entity, CILÔÇÖs mission is to provide coal to its customers at a competitive and stable price, and this it does by discounting thermal coal by up to 60 per cent compared with global prices. ÔÇ£This also protects our domestic customers from the large price fluctuations seen on the international markets. We help them to stay competitive by cutting the element of volatility.ÔÇØ This has been achieved without government subsidies of any sort. ÔÇ£On the contrary, we make substantial profits and share them with the government, which is our sole equity holder, to the extent of $1.2 billion annually by way of taxes and dividends.ÔÇØ
In 2008, in recognition of this contribution, increased productivity, good management and to provide more empowerment, CIL was admitted to the select club of Navratna public sector companies, followed by the SCOPE Award for Excellence in Public Sector Management in the Institutional category, which was awarded by Prime Minister Manmohan Singh to Bhattacharyya on October 15, 2009. The company was also a finalist in the Platts Award Energy Producer of the Year category, 2009.
Still, India does not have enough coal for its needs. The figures say it all. Last year the country consumed about 552 million tons of coal, of which 59 million was imported. Of these imports, about half are thermal coal and half metallurgical coal (specifically for the steel plants). The steel companies, however, have their own sources of coal internationally and CIL does not involve itself in importing metallurgical coal, though it is able to supply some 30 per cent of the steelmakersÔÇÖ requirements from its mines in India.
There is, however, a growing shortfall in thermal coal. Only about five per cent of thermal coal was imported last year, but despite plans to execute 134 coal projects with aggregate capacity of more than 300 million tonnes, reopen 18 old abandoned underground mines and start seven new ones, only so much of the increased needs can come from within India, Bhattacharyya explains. ÔÇ£I think there is a limit to the growth the Indian coal industry can achieve. The current growth rate is a little over seven per cent per annum and that is probably about the best that can be achieved under present circumstances.ÔÇØ
The difference will have to be met by imports. ÔÇ£The import component of 59 million tons last year will gradually grow, as near as we can calculate, to something like a level of 180 million tons by 2016/17.ÔÇØ This will be contained at this level provided the private captive operators, some 14 of which currently produce just 30 million tons a year between them, increase production to 80 million tons by 2012 and 330 million by 2017. This looks ambitious, but the Government is bidding out substantial holdings and the number of private players is expected to increase to more than 200. ÔÇ£If these people can address the important issues of environmental and social sustainability, that target may not be unachievable,ÔÇØ says Bhattacharyya.
The shortfall in thermal coal supply will still be considerable, so CIL is looking for strategic alliances with coal mining companies that will maintain its existing advantages of price competitiveness and stabilityÔÇöin other words, more favourable terms than simply buying on the spot market. ÔÇ£A couple of months ago we floated an expression of interest to the global coal mining companies, and they have shown themselves prepared to form strategic alliances of the kind we propose. We have shortlisted 12 companies that have the right scale and strategic fit; these have been invited to make presentations during December.ÔÇØ
Meanwhile the company is doing everything it can to maximise its efficiency and productivity as well as reducing the industryÔÇÖs environmental impact. Logistics present a challenge that will grow as imports increase, so CIL is in discussions with the port authorities, mainly on the eastern side of the country, to develop coal berths. Once off the ship, the coal has to be transported across India and though they have investment plans, there could be some mismatch in the transport capacity of the railways. ÔÇ£We are trying to work out a strategy with IWAI (Inland Waterways Authority of India) to move some coal through the waterways to our consumers in northern India.ÔÇØ
And to reduce the overall bulk carried, CIL intends to introduce a large scale programme of coal beneficiation. This means washing the coal to remove ash and impurities, he explains. ÔÇ£Eventually we have decided that coal will only be sold in a washed form to every consumer who is not taking it direct at the pithead. We are keen above all to improve the environmental aspects of mining and the quality of our coal.ÔÇØ
Technology is IndiaÔÇÖs great strength and CIL is placing it at the forefront of its environmental policy. Satellite surveillance reports of 35 open cast mines are freely available on the internet to demonstrate the achievement in land restoration and reclamation; 70 million trees have been planted; and 29 large open cast mines have secured ISO 14001 certification for adopting environmentally friendly practices. Mine planning has benefited from technology too. ÔÇ£Using software like Minex has helped us get more reliable geological and geophysical information, and the database we generated in-house for CBM blocks has enabled the Ministry of Petroleum and Natural Gas to carry out successful bidding of the blocks. In other words, in the areas of geological exploration, geophysical data collection and the like, we have taken a quantum leap!ÔÇØ
Introducing state-of-the-art practices in the underground mines and transforming open cast by introducing heavy machinery like 42-cubic metre shovels and 240-ton dumpers, added to its international procurement strategy, should ensure that Coal India emerges substantially stronger over the years, not only in terms of its strategic relevance and financial prowess, but also as a global energy company, Bhattacharyya believes.
