By Steel 360 Bureau

The long-term challenge before State-owned Coal India Limited (CIL) is two-pronged: One, to reduce India’s non-coking coal import dependence, and, two, to lessen the country’s dependence on quality coking coal imports. The coal behemoth has chalked out a short-term plan to address these twin objectives.

The challenges, however, are formidable.

Despite the growing clamour in favour of renewable energy and climate concerns triggering widespread alarm at continued burning of fossil fuels, India has to depend on fossils for the next couple of decades or so to meet its ever-growing demand for power, especially thermal power. Sans thermal coal imports it is well-nigh impossible to satisfy that demand at present.

Similarly, the National Steel Policy, 2017 targets hiking crude steel production to 300 million tonnes (MnT) per annum by 2030. Unfortunately, India is heavily reliant on quality coking coal imports to sustain its huge steel industry and the scenario is unlikely to change in the foreseeable future.

However, CIL is working according to a well-knit plan and aims to address the twin challenges listed above in small, steady steps – through incremental measures over a period of time.

Offshore Investments

Addressing a select gathering of analysts at Coal Bhawan in Kolkata post the declaration of the PSU’s first quarter (Q1) results, CIL Chairman Anil Kumar Jha said that with a view to reducing the country’s dependence on imports for coking coal, CIL is working to develop good coking coal properties abroad. “Offshore investments in mining are inevitable to reduce the import burden. CIL’s technical director and his team are in Far East Russia at present to investigate the possibility of opening a new mine there. Our teams have also toured two locations in Australia and Canada each and we have decided to start operations at these sites in the near future,” he informed.

Target: I BT By 2025
Jha said although India has resources to the tune of 320 BT, production in the last fiscal was 730 MnT of which CIL contributed 607 MnT – almost 83%. Private miners chipped in with 40-45 MnT. So there is a clear deficit of 250 MnT or so. India imported 230 MnT last year. Coking coal imports amounted to 55 MnT whereas non-coking coal imports touched 190 MnT in the last fiscal. This shows that the scenario is indeed grim. CIL is seeking to bridge this gap. CIL provided 1.5 MnT of washed coking coal last year to the domestic steel industry and targets to provide 2 MnT this year. “Our target is to produce 1 BT per annum by 2025-26. My perception is that the situation will stabilise around 2030 with demand reaching a plateau of 1.4 BT,” he said.

Stiff Challenges

Achieving the 2025 target implies an annual production growth of about 8.7% for the next six years. Will the coal miner be able to achieve that? CIL had initially set the 1 BT for financial year 2022-23 (FY23). However, due to production and despatch bottlenecks, such as lack of rakes availability, this has now been reset to FY25. It took the company three years to increase production from around 500 MnT in FY16 to 606 MnT in FY19. To meet its FY25 target, annual incremental production would need to be almost twice that rate at 66 MnT a year.

The company’s management has hinted at producing 660 MnT in FY20, implying an 8.9% y-o-y growth. Production in May has, however, dipped and the full-year production target appears stiff. The sluggish start was attributed to the cyclone in Odisha and the weakness in the economy, post the general elections.

Moreover, achieving 8.9% y-o-y growth could be challenging as four of the seven subsidiaries of CIL, including the biggest, South Eastern Coalfields (SECL), are lagging and evacuation infrastructure in key subsidiaries like SECL, Mahanadi Coalfields (MCL) and Central Coalfields (CCL), which contribute 70% to the additional production, are still being ramped up.