2. Introduction to Energy Sector
• India is the fourth largest consumer of energy in the world after USA, China and Russia and
its need for energy supply continues to climb as a result of the country’s dynamic economic
growth and modernization over the past several years.
• This sector includes information about resources and status of sub-sectors like
Petroleum
Natural gas
Coal
Power (including thermal, hydro, nuclear, as well as transmission and distribution)
3. Institutional Structure of Energy Administration in India
Government of
India
Ministry of power Ministry of petroleum
and natural gas
Ministry of new and
renewable energy
Ministry of coal
Department of
atomic energy
1) 6 P.S.Us
2) Central Electricity
authority
3)Bureau of energy
efficiency
1) 15 P.S.Us
2) Directorate general
of hydrocarbon
3)Petroleum planning
and analysis cell
4) Petroleum
conservation research
association
3 P.S.U.s 1) 5 P.S.Us
2) Several research
institute
1) Indian
Renewable Energy
development agency
2) Several research
institute
Note: PSU = Public Sector Undertaking refers to state-owned enterprises in India.
4. Energy intensity
Period Energy
Intensity*
(kgoe/US$**)
1981 1.09
1991 0.99
2001 0.85
2011 0.62
Sr.
no
Country Energy
intensity
(kgoe/US$)
1 United
kingdom
0.102
2 Germany 0.121
3 Japan 0.125
4 Brazil 0.134
5 USA 0.173
6 China 0.283
7 South Korea 0.189
8 India 0.191
* Energy intensity indicated is energy
required to produce a unit of GDP.
** kgoe: Kilograms of oil equivalent.
Source: Planning Commission
Energy intensity for total primary energy Energy intensities
Source- World Energy Outlook 2011.
• Energy intensity, defined as the energy
input associated with a unit of Gross
Domestic Product (GDP), is a measure of
the energy efficiency of a nation’s
economy.
• The decline in energy intensity over past
decades could be attributed to increased
availability of clean fuels and replacing
traditional fuels such as wood and cow
dung cakes to meet household energy
needs.
• Table shows energy intensity of some
select countries for the year 2010, with
GDP measured in terms of 2010 USD
Purchasing Power Parity (PPP). India’s
energy intensity using PPP GDP is 0.191,
which is on par with the world average but
higher than most of the European
countries. China’s energy intensity is
roughly 1.5 times that of India.
Source:12th Five Year Plan
5. 66.38
70.65
68.53
67.52
66.82
16.18
12.91
11.55
8.87
6.7
12.14
10.52
12.6
15.8 16.04
3.1
3.71 3.3
2.68 2.65
2.14 1.86
2.48
3.52
4.67
0.06 0.33
1.55
2.23
3.12
0
2
4
6
8
10
12
14
16
18
64
65
66
67
68
69
70
71
2000-01 2006-07 2011-12 2016-17(P) 2021-22(P)
Percentage Share in Energy Production
Coal and Lignite Crude Oil Natural Gas Hydro Power Nuclear Power Renewable Power
68.53
11.55
12.6
3.32.481.55
Energy Production Share 2011-12
Coal and
Lignite
Crude Oil
Naural Gas
Hydro
Power
Nuclear
Power
Renewable
Power
Source:12th Five Year Plan
Govt. intends to promote renewable power and nuclear power
against coal and crude oil.
Coal is major source of
energy production currently.
6. Introduction to Coal Sector
• Coal is India’s primary source of energy, and the country was the third-largest global consumer in 2012.
• The Indian coal industry was nationalized in the early 1970s. While the production of coal increased
from 70 MT at the time of nationalization to 556.402 MT in 2012-13.
• To take care energy requirements central government nationalized the coal industry in 1970s and
within 2 years it acquired almost all the coal reserves in India from BCCL(Bharat coking coal limited)
and CMAL(coal mines authority limited) and a single holding company was formed i.e. CIL(Coal India
Limited).
• The objectives of re-organizing and restructuring of coal mines were to eradicate:
– existing unsatisfactory mining conditions,
– violation of mine safety norms,
– industrial unrest,
– inadequate capital investments in mine development,
– reluctance to mechanize the mining, etc.
• It also aimed at meeting the long range coal requirements of the country.
7. Growth of Indian coal Sector
Year Coal
(Million
Tonnes)
Growth(%)
Over Previous
Year
2003-04 361.25 5.9
2004-05 382.62 5.9
2005-06 407.04 6.4
2006-07 430.83 5.8
2007-08 457.08 6.1
2008-09 492.76 7.8
2009-10 530.04 8.0
2010-11 532.69 0.1
2011-12 539.95 1.4
2012-13 556.40 3.0
CAGR 2003-04
to 2012-13 (%)
4.6
0
100
200
300
400
500
600
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Coal (Million Tonnes)
Coal (Million Tonnes)
Source: Ministry of Coal, Ministry of Statistics and Programme Implementation
8. Key Players in Coal Sector
Policy
Production
Central
MOC
CMPDIL
Coal controller
State
State
Government
Private
MOC
CIL NCL
SCCL JVs
State Government
SCCL GMDC
Captive producers
Power Iron
Cement Others
Source : Ministry of Coal
10. 1.) Mines and mineral act 1957:The act aims at regulation of mines and development of minerals under control of central
government. Moreover, the Act empowers the Central Government to make rules for regulating the grant of reconnaissance
permits, prospecting licenses and mining leases with respect to Coal and Lignite.
2.) Coal mines act 1973: The purpose of the legislation was to acquire the existing mines at the time and the provisions relate to
taking over the management, accounts, and compensating the owners of the mines. The key provision of the Act which is still
relevant today is Section 3(3)(a) of the Act. The said provision prohibits any person other than –
(a) the central government, government company, or corporation,
(b) a sub-lessee of the government, or
(c) a company engaged in (i) production of iron and steel, (ii) generation of power, (iii) washing of coal, (iv) such other uses as may
be specified,
from carrying on coal mining operations in any form.
3.) Coal bearing areas act 1957: It intends to establish grater control over coal mining industry and its development by providing for
the acquisition by government of unworked land containing or likely to contain coal deposits or right over such lands by modifying or
extinguishing current agreement ,lease, license etc..
4.) Colliery control act 2000:The Colliery Control Order and the Colliery Control Rules contains identical provisions save for a penalty
provision and exemptions for acts in good faith which are included in the Rules.
Acts relating to coal sector
Source: Report on Competitiveness of the Coal Sector For Ministry of Affairs
11. 5.) Land acquisition act 2013:The Government is empowered to use the provisions of this Act to acquire private land for a
public purpose. Under the provisions of the Land Acquisition Act, the following procedure is required to be followed:
- identification of land
- notification of land
- declaration of land
- acquisition of land
- payment and ownership of land.
6.) Environment protection act 1986 : The Act has been formulated by the Central Government for the protection and
improvement of the environment in India and for matters connected there with. The Act also prohibits any person carrying on
any industry, operation or process from discharging or emitting or permitting to be discharged or emitted any environmental
pollutants in excess of such standards as may be prescribed.
7.) Forest conservation act 1980: In case forest lands are involved, the mining lease can be executed only after obtaining the
forest clearances. The Act provides that no State Government or any other authority shall authorize, without the prior
approval of the Central Government.
Source: Report on Competitiveness of the Coal Sector For Ministry of Affairs
12. (i) Blocks already identified for development by CIL/ SCCL/ NLC where adequate funding is on hand/in sight should not be offered to
private sector.
(ii) The blocks offered to private sector should be at a reasonable distance from existing mines and projects of CIL/ SCCL/ NLC in
order to avoid operational problems.
(iii)The areas where CIL/ SCCL/ NLC have invested in creating infrastructure for opening new mines should not be handed over to the
private sector, except on reimbursement of costs.
(iv) Blocks that are explored in detail and where Geological Report with assessment of extractable reserves is available should
normally be put in the offer list. Public/private sector company to whom the block is allotted shall bear the full cost of exploration
in blocks. However, now regionally explored blocks are also offered for captive mining.
(v) For identifying blocks, the requirement of coal for about 30 years or such other period as may be decided in the Ministry would be
considered.
(vi) The other requirements were:-
a)Approval of mining plan as required under the Mines and Minerals(Regulation and Development) Act, 1957.
b)Inspection for an appropriate enforcement of conservation measures by the Coal Controller under the Coal Mines(Conservation
and Development) Act, 1974 with a view to ensuring scientific mining.
c)Enforcement of safety regulations by the Directorate General of Mines Safety.”
Guidelines for Allocation of Coal Blocks
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
13. • In respect of fully explored blocks, geological data may be obtained from CMPDIL, NLC or the State agency concerned, as the case
may be, on nominal charges. However, full cost of exploration and geological reports would be reimbursed to the agency concerned
within six (6) weeks of date of issue of allotment letter.
• Where only regionally explored blocks are offered for allocation, the detailed exploration/prospecting in the said blocks shall be done
by the allocattee company under the supervision of CMPDIL.
• Replacement of linkage with coal to be produced from the allocated captive coal block can be permitted by the Screening Committee
subject to safeguarding the interest of CIL and its subsidiaries.
• In order to promote scientific and proper mining the larger blocks shall not be sub blocked into smaller ones. Only natural sub-blocks
will be formed.
• Allotment of Captive blocks to consortium of group of companies
(i) If requirement of coal by an applicant does not match with the reserves in a natural block then clubbing of requirements may be resorted to and in
case a number of applicant companies form a consortium for utilization of a block for their captive use, the same may be considered for allocation under a
legally tenable arrangement.
(ii) More than one eligible and deserving companies will be allowed to do captive mining of coal by forming a joint venture coal mining company. The
constituent applicant companies would hold equity in the joint venture company in proportion to their assessed requirement of coal and the coal produced
would be exclusively consumed in their respective end use projects. Distribution of coal would be in proportion to their respective assessed requirements.
(iii) One or more companies (to be called leader companies) from amongst the selected, could be allowed to do mining of coal in one or more captive
blocks and the other companies (to be called associate companies) would get coal from the captive block in proportion to their assessed
requirements. The local Coal India subsidiary could facilitate this arrangement by taking a nominal service charge. Leader companies will deliver coal to
associate companies at a transfer prices to be determined by the Central Government.
• The Company shall obtain the geological report (in respect of fully explored blocks), on payment of requisite charges, from
CMPDIL, NLC or the State Government agency concerned, as the case may be, within six weeks of the date of issue of allotment
letter.
• In respect of a fully explored block, the company shall submit a mining plan for approval by the competent authority under the
Central Government within six months from the date of issue of the letter of allocation.
Guidelines for Allocation of Coal Blocks
14. Allocation of Coal Blocks
• Coal blocks are allocated based on coals and mines act,1973 through competitive bidding to public as well as to the private
companies
• Out of 218 coal blocks 138 blocks has reserves of 30.77billion tonnes.
S.
No
Sector To Govt.
Companies
To Private
Companies
To UMPPs/
Tariff
based
bidding
Total
block s
No. of Blocks No. of Blocks No. of Blocks
1 Power 55 28 12 95
2 Commercial
Minings
41 - - 41
3 Iron and steel 4 65 - 69
4 Cement - 8 - 8
5 Small and
isolated
- 3 - 3
6 CTL - 2 - 2
Total 100 106 12 218
Source: Annual Report 2013-14, Ministry of Coal
15. Coal Pricing History
• Coal pricing has huge impact because it serves large number of end-users, prime industries like steel
and cement, also major source of electricity in India.
• Prior to 1996 coal prices were fixed grade wise and colliery wise by complete authority of Central
government only under colliery control order 1945.
• After deregulation from 1966 coal prices are fixed by CIL and it’s subsidiary companies after consulting
Ministry of Coal
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
16. Coal Pricing in Deregulated Regime
• The basic pricing objective of CIL and subsidiary companies is to ensure generation of sufficient surplus after
meeting its revenue requirement to facilitate financing fresh investments with reasonable return.
• CIL also aims to keep coal prices within general inflation level and competitive to international market rates.
• From 2000 to 2012, coal prices have been revised six times and annualized rise in coal price in 4.64% as
compared to average inflation rate of 5.89% during this period.
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
17. • CIL and subsidiaries have been failing in producing coal enough to meet the demand, thus due to shortage of
coal, in order to fulfill Fuel Supply and Transport Agreements(FSTA’s) the supply Imported coal on cost plus
basis.
• 20% of total coal produced by CIL is to be sold by e-auction in order that small industries can also get a fair
chance.
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
18. Consumers of Coal Sector
• Consumers of coal has been classified by CIL in two
categories:
– Regulated Sector(Power, Fertilizer, Defense)
– Unregulated Sector(Steel, Cement)
• Here as major economy driving sectors are dependent on
coal, great care is taken in coal price hike as it leads to
inflationary pressure on economy.
Coal
Power Sector-
66% of power
plants are
coal based
Defense
Sector
Steel and
Cement
Industries-
Basis of
infrastructure
sector
Fertilizer
Industries-
Coal is prime
fuel in this
industries
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
19. • CIL has changed the price distribution from 7 grades of Useful heat value(UHV) basis to 17 grades
of Gross calorific value (GCV).
• Analytically, GCV is computed from the heat value released by coaly matter present in coal and
therefore, can be ascertained for all varieties of coal, irrespective of high ash and high moisture or
low ash and low moisture.
• On the contrary, UHV is computed by applying penalties on Ash & Moisture on to the Heat Value of
the coaly matter and cannot be determined analytically.
• Bandwidth under GCV classification has been reduced to 300 Kcal/kg to incentivize the
improvement in supply quality.
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
20. • The Union Cabinet in June, 2013 gave its approval to the proposal for setting up of an independent
regulatory authority for the coal sector and also approved the introduction of the Coal Regulatory Authority
Bill, 2013 in Parliament aiming to help in the regulation and conservation of coal resources.
• The Authority shall specify methods of testing for declaration of grades or quality of coal, monitor and
enforce closure of mines, specify principles and methodologies for price determination of raw coal and
washed coal and any other by-produce generated during the process of coal washing, adjudicate upon
disputes between parties and discharge other functions as the Central Government may entrust to it.
21. Coal Royalty
• Royalty is an amount payable by a lessee to the lessor for removing or consuming a mineral. Coal royalty is paid by
coal companies to coal producing states.
• For fixing the rate of royalty on coal/lignite, The Ministry of Coal constitutes a study group headed by the Additional
Secretary for fixing the rate of royalty on coal.
• R = a + bP
– Where R = Royalty (Rs./Ton).
– a = Specific (Fixed) component (Rs./Ton).
– b = ad valorem (variable) component (Rate of royalty).
– P = Price of Coal (Rs./Ton).
• Here Ad valorem component provides benefit of price rise in coal to coal producing states
Countries Royalty Rates
Australia 5% to 8.2%
South Africa 1% to 3%
India 11% to 13%
Indonesia Upto 13.5%
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
22. • Royalty rates are fixed by Central government, and thus there is always a Central-state dispute over it.
Many states have thus started levying cess on coal thus leading to non-uniformity in prices of coal
across the india.
• The major coal producing States are only seven i.e. State of Jharkhand, Orissa, West Bengal,
Maharashtra, Madhya Pradesh, Uttar Pradesh and Chhattisgarh, whereas all the States in the country
are coal consuming States, directly or indirectly. The cost of coal is a major input in the energy cost. As
the royalty is paid by the consumers directly to the coal producing States, an upward revision in royalty
rates would affect all the coal consuming States in terms of increase in cost of power.
Source: Standing Committee on Coal and Steel,(2013-14) ,MoC
23. • stagnating domestic production and inadequate infrastructure for coal have caused serious bottlenecks in
India’s energy supply
• The near monopoly of two public enterprises has blocked the needed increase of coal production, causing
a serious fuel shortage in the power sector
• Private companies that are currently allowed only in captive production should be able to engage in
commercial mining, and bring technical improvements and more efficient management to the coal sector.
Issues in coal sector
24. • There is a possibility of converting various units of Coal India into independent companies, and making respective state
governments equity holders to help speed up land acquisition and other such processes, a top Coal India official said. 24th
sept 2014
• recently announced the nationalized coal industry would be opened up to allow private firms to compete with Coal India,
which accounts for 80 percent of the country's output.24 sept 2014
• For state requirements, coal mines will be allocated to state-owned organizations like NTPC and state electricity boards.
However, for private consumption a pool of mines will be thrown open to auction. "E-auction of coal mines will be for
actual users of steel, cement and power for private sector firms," he said i.e arun jaitley-20th oct 2014,economic times
• "The proceeds of these auctions will go entirely to the state government where the mines are located. State governments
will benefit from the revenue generation through e-auctions, the central government will not get any share from the
proceeds," Jaitley said. oct 2014,economic times
• Jaitley went on to clarify that the process of offering mines to private players will not impact the structure of Coal India.
"All mining requirements of Coal India both for present and future will be adequately protected," he said. "This is not de-
nationalisation of coal mining, the original 1973 Coal Nationalisation Act remains," Jaitley clarified. oct 2014,economic
times.
Press Releases
25. • CIL blames delayed environment and forest clearances for the slow growth in production. aug 27 2014
• "The government has decided to set up a Coal Regulatory Authority. Apart from determining the pricing
methodology, the objectives and functions of the Authority are to specify regulation methods of testing
for declaration of grades or quality of coal; to monitor and enforce closure of mines as per approved
mine project plan towards closure of mine; to ensure adherence of approved mining plans; to call for
information, record or other documents from the entities and publish statistics and other data in relation
to the coal industry," the minister said in a statement.12th aug 2013
• The CAG HAS COME TO CONCLUSION the gov decision to not to auction coal blocks from 2004 to
2011 the country lost a huge amount of revenue. India today
• Actually if the procedure of the auction of the coal blocks would have been figured out by 2006 then
this loss could have been avoided…moreover the large company like essar, tata steel etc got the block
on the nomination basis instead of competitive bidding. India today
