AIR Spotlight: Coal Mine Auction- Assuring Energy Security and Aatmanirbharta in the energy sector

AIR Spotlight is an insightful program featured daily on the All India Radio Newsonair. In this program, many eminent panellists discuss issues of importance which can be quite helpful in IAS exam preparation. 

This article is about the discussion on Coal Mine Auction – Assuring Energy Security and Aatmanirbharta in the energy sector.

Participants: 

1. Anil Razdan, Former Energy Secretary, Ministry of Power
2. Arjun J Chaudhary, AIR Correspondent

Context: Auction of coal mines.

Introduction:

• Ministry of Coal, Government of India has undertaken rationalization of existing policy and the auctioning of coal to ensure that we are able to meet our production targets and reduce our import bills with respect to coal.
• It is an important step in the right direction, as India, unfortunately, became a captive of its own ideology for several decades. The ideology adopted was that everything should be under the control of public sector. The reasons for such policy decisions at that time were:
  • Coal mining is a dangerous operation.
  • It was imperative at that stage that government should take responsibility for safe mining operations.
  • It was also linked to employment and labour exploitation.
• Coal India Limited(CIL) and Neyveli Lignite Corporation Limited handled the coal and consolidated the operations associated with its production over the years in a very efficient manner.
• According to reports, there are 141 coal mines under the six tranche that will be auctioned. These mines are spread across 12 states with maximum blocks in Madhya Pradesh, Chhattisgarh, and Odisha. The presence of maximu blocks in these three states is quiet natural as the share of coal reserves is more in central India.

Background Details:

• Coal is used largely for electricity generation and as the demand flared up in the country in the backdrop of development and industrialization, the production of coal increased.
• Power generation, which was largely controlled by the public sector also started moving towards the private sector and so measures were taken to make coal mining available for commercial business.
• The recent measure of the government to auction the mines and allocate new mines to private players in a transparent manner is a good approach for bringing Aatmanirbharta in the coal sector. It also reflects that India is no longer a prisoner of its own ideology.
• It should be noted that if there are more players in the field producing coal, then prices would be competitive and monopolies can be avoided.

Challenges associated with the coal sector:

• Sixty to Seventy percent of power generation is dependent on coal. Though India is gradually moving towards renewable sources of energy, the equipment for renewable energy largely depends on imports. Moreover, the transition to renewable energy will take some time.
• Coal will continue to play a vital role in India atleast for a couple of decades, as India is largely dependent on the thermal power supply.
• The thermal power supply can come from coal or gas. Since gas is largely imported (more than 50%), coal generation should be maximized.
• There are also environmental concerns related with coal generation and its usage. 
• There is a need for efficient coal mining operations and other associated activities like the washing of coal.
• Coal mining operations in India are largely open-cast mining.
• A huge share of coal is lying underground at greater depths. More expensive techniques will be required to mine it, impacting both the environment as well as cost efficiency.
• There is a huge wastage of coal of coal due its storage, transportation and conventional methods of mining.

Technology leverage in the Coal sector:

• Coal gasification is a clean coal technology that is more efficient than the combustion of coal. It produces several gases which can be utilized in other industries not only as heat but also as a chemical process. Moreover, in due course of time, it can also produce some chemicals which are commercially attractive.
• As India moves towards Renewable sources of energy for power generation, having other appropriate uses of these byproducts of coal gasification will be more beneficial because India has large reserves of coal.
• Government of India has also proposed a Production Linked incentive scheme to ensure the efficient rollout of coal gasification.
• If the coal has to be put to the right commercial use then it should be used to produce useful gases and chemicals, which can be further used to produce commodities that are being largely imported into the country.
• Companies should also go for underground mining beyond open-cast mining to produce more coal and diversify its usage. The private players will have a crucial role in diversifying the utilization of coal and bringing in competition.
• Technology can be used to eliminate leakages and wastages. For instance:
  • Coal should be better stacked in silo storage. In a silo system, the first-in-first-out approach is followed in contrast to the conventional mount approach, where coal stays buried underneath for a very long time.
  • Conveyor belt approach can be used for efficient transportation of coal.
• Satellite tracking is another breakthrough technology to find areas rich in coal and track its transportation from the source to the destination
• Modern techniques and satellite tracking will result in the modernization of the coal sector and better commercial operations.

For more information on coal gasification, read here: History, Process, Underground Coal Gasification, Carbon Capture Technology, By-products, Environmental Impacts, Latest News, and FAQs

Imports of coal:

• The imports of coal and its cost is dependent on the international prices of coal.
• It is also dependent on the Dollar-Rupee exchange rate. 
• The freight cost from the source is also an important factor in the imports of coal
• If there is some specialized category of coal like coking coal for making steel which is not adequately produced in India, then it can also impact the foreign reserves of the country.

Significance of rationalization of coal policy:

• A transparent procedure of auction would result in better competition enhancing public confidence with reduced litigation and lesser scandals. This will further ensure that businesses get their due profit and the consumers get commodities at the best available prices.
• It provides employment opportunities, particularly in central and eastern India.
• Transport industry will certainly stand to gain as the railway lines will be extended to new mines.

Future Course of Action:

• India has done a great job by opening the industry to the private sector, as it will end monopolies and ensure more competition. However, efforts should also be made to open the market, where the consumers will have a choice of supplier.
• Producers should also be given the option to sell a certain amount of coal in open markets.
• Coal ministry should come out with a detailed process on legal implications and make the coal industry more transparent, fair, and non-discriminatory.
• Employment generation should be conducted in a manner with full safety, precautions, modern techniques, and enhanced opportunities.
• The usage of coal should be diversified.
• The policy design should also consider the environmental aspects and ensure higher productivity with better safety of the workers.

Read previous AIR Spotlight articles in the link.

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