Why in the News?

In an effort to bolster its revenue stream, national miner Coal India Ltd (CIL) has awarded its abandoned coal mines to private players on a revenue-sharing model.

CIL had identified 23 coal mines — most of them underground ones — which were closed or discontinued for technical or financial reasons.

What’s in Today’s Article?

• About Coal (Distribution across World & India)
• Coal in India (Types, Problems, India’s Dependence on Coal, Revenue Sharing Model, etc.)
• News Summary

Distribution of Coal Across the World:

• Coal is a widespread resource for energy and chemicals.
• The quantities of proven coal reserves in the world are typically shown in Millions of Tons of Coal Equivalent (MTCE).
• Nearly 75 per cent of the world’s recoverable coal resources are controlled by five countries:
  • United States (~22 per cent)
  • Russia (~15 per cent)
  • Australia (~14 per cent)
  • China (~13 per cent)
  • India (~10 per cent)

India’s Coal Reserves:

• Commercial coal-mining industry has been in operation since 1774, launched by the East India Company along the Damodar River in West Bengal.
• 70 per cent of India’s coal supply comes from the states of Jharkhand, Chhattisgarh, Odisha, West Bengal and Madhya Pradesh.
• State-owned Coal India Limited has a virtual monopoly on coal mines in India, which produce roughly 75 per cent of the coal burned in India’s coal-fired power stations.

Types of Coal in India:

• India has four primary types of coal based on their carbon content and energy potential. Each type of coal varies in its properties and uses.
• Here are the types of coal found in India:
  • 

Problems With Coal Found in India:

• High Ash Content:
  • Issue: Indian coal generally has high ash content, ranging from 20% to 45%.
  • Impact: High ash content reduces the calorific value, increasing the cost of coal handling and transportation, and results in more waste and pollution.
• Lower Calorific Value:
  • Issue: Indian coal has a lower calorific value compared to imported coal.
  • Impact: This necessitates burning more coal to produce the same amount of energy, leading to higher emissions and inefficiencies in power generation.
• Limited Coking Coal:
  • Issue: India has a shortage of high-quality coking coal, which is essential for steel production.
  • Impact: This necessitates the import of coking coal, increasing costs and dependence on foreign sources.
• Environmental Concerns:
  • Issue: Coal mining and combustion contribute significantly to air pollution, water contamination, and deforestation.
  • Impact: These environmental issues have severe health implications and contribute to climate change, making coal less sustainable in the long term.

India’s Dependence on Coal for Energy Supply: 

• While renewable energy capacity is dramatically increasing, coal still provides around 70 per cent of the country’s electricity.
• Coal is expected to account for at least 21 per cent of India’s electricity requirements even by 2050.
• Easily Available Source of Power:
  • Alternatives like nuclear energy have been hampered by high costs and safety concerns.
• India’s Developmental Needs:
  • The International Energy Agency (IEA) predicts that between 2020 and 2040, India will have the largest growth in energy demand of any country in the world.
  • To meet this demand, India will need to rely on a variety of energy sources—both conventional and renewable.
• Source of Employment:
  • Around 4 million people in India are employed either directly or indirectly in the coal sector.
  • Other than active workers, another 500,000 Indians rely on the coal sector for their pensions.
• Source of Revenue for the Government:
  • Coal India Limited is the largest coal mining company in the world.
  • The coal sector is a major source of revenue for States and the Central Government.

Revenue Sharing Model for Coal Plants:

• The revenue sharing model involves collaboration between Coal India Ltd (CIL) and private players.
• Revenue Sharing Framework:
  • Structure: Private players are awarded contracts to operate abandoned or underutilized coal mines on a revenue-sharing basis with Coal India Ltd (CIL).
  • Revenue Split: The revenue generated from coal sales is shared between CIL and the private operators based on agreed terms.
• Identification of Mines:
  • Selected Mines: CIL identified 23 abandoned or discontinued mines, mostly underground, with a cumulative peak-rated capacity of 34.14 million tonnes per annum (MTPA) and estimated reserves of 635 million tonnes (MT).
• Operational Mechanism:
  • Mine Developer and Operator (MDO): Private operators, also known as Mine Developer and Operators (MDOs), are responsible for the coal extraction and production process.
  • Freedom in Operations: MDOs have the autonomy to choose their technology, methods, and machinery for coal extraction.
• Auction Process:
  • Market-Driven Pricing: Coal mined from these sites is sold at market-driven prices through an auction process managed by the operators on behalf of the authority.

News Summary:

• Coal India Ltd (CIL) has assigned its abandoned coal mines to private players on a revenue-sharing model to boost domestic production and reduce imports.
• Out of 23 identified mines, which have a combined capacity of 34.14 MTPA and reserves of 635 MT, most were closed for technical or financial reasons.
• This initiative, aimed at increasing industry participation, will see 75% of coal excavation outsourced to private operators, with a goal to reach 90% in five years.
• While the revenue impact is modest (10-12%), the focus is on quicker production turnaround and environmental benefits.
• These mines will sell coal at market prices through auctions and support coal gasification projects.
• CIL reported a 7.28% increase in coal production, reaching 160.25MT, and a 27% growth in production from captive and commercial mines.