MOEF proposes to limit mining area, dependence on imported coal will increase

Acknowledging ecological concerns, the ministry of environment and forests (MoEF) has suggested a ban on mining in almost half the area under nine major coalfields, a move that could dent supplies in an energy-hungry economy struggling to meet burgeoning demand for the fuel and increase its dependence on imported coal. A preliminary assessment of the coalfields shows that 48% of the area, which is densely forested, will likely be designated a “no-go” area, minister of state for environment and forests Jairam Ramesh said. Mining will be allowed only in the remaining 52% of the area.To generate 1MW of power, the country requires around 5,000 tonnes of coal a year. Coal accounts for at least 50% of India’s commercial energy consumption and around 78% of domestic coal production is dedicated to power generation. Domestic coal is priced around 30-40% cheaper than imports, depending on the quality.

If implemented, the move will also impact the mining plans of India’s largest coal miner, state-run Coal India Ltd (CIL), which is targeting production of 435 million tonnes (mt) this year, against 403.73 mt in 2008-09.

The chief executive officer of a company involved in coal imports said the move to restrict coal mining would “severely impact” proposed power generation projects.“They will have to be given alternative blocks or linkages (of coal) or they will have to resort to coal imports,” said the chief executive, who didn’t want to be named because of the sensitive nature of the issue.“However, these are MoEF’s recommendations, let us see what view does the PM (Prime Minister) take on this,” the chief executive added.

The size of the market for imported coal that goes into power generation in India is around 50 mt a year, and is expected to double by 2012 as more thermal power projects come up.Any such restriction on coal mining will benefit firms involved in coal imports. Some of these firms include Adani Enterprises Ltd, Dubai-based Coal and Oil Group, BHP Billiton Ltd and Rio Tinto Plc.

“Such a move will have huge impact. This essentially means that we are moving from a domestic coal-based power sector to an imported coal-based one,” said Shubhranshu Patnaik, executive director at audit and consultancy firm PricewaterhouseCoopers.

Coal demand in the country is around 600 mt and is set to touch 2,340 mt per annum by 2030. India has a known coal resource base of 264,000 mt, the fourth largest in the world, of which proven reserves are around 101,000 mt.