9. Coal

Key IEA data

(2017*)

Coal production: 726 Mt, up 48% since 2007

Coal imports: 209 Mt imported (125 Mt hard coal, 84 Mt brown coal), up 320% since 2007 Share of coal: 44% of TPES and 74% of electricity generation

Consumption by sector: 937 Mt (power and heat generation 73.7%, industry 17.6%, other energy industry** 5.8%, residential and service 3.3%)

*India collects data based on its fiscal year, which runs from 1 April to 31 March. To align with other countries, the IEA data on India in this report are presented as calendar years. So, the statement: “In 2017 consumption was 937 Mt” refers to the data India has collected (and supplied to the IEA) from 1 April 2017 to 31 March 2018.

**Coke ovens and blast furnaces.

Overview

India is the world’s second largest producer of coal after the People’s Republic of China. The share of coal in both the energy mix and the power mix in India has been increasing since the 1970s (Figure 9.1), and in 2017 coal provided 44% of the total primary energy supply (TPES) and 74% of electricity generation. Coal is the most abundant fossil fuel resource in India, although Indian coal is generally of poor quality, with high ash content and low calorific value.

Figure 9.1 Role of coal in energy supply and power generation, 1971-2017

Note: Includes hard coal (anthracite and other bituminous coal) and lignite.

Source: IEA (2019), World Energy Balances 2019, www.iea.org/statistics/.

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9. COAL

With the nationalisation of India’s coal industry in 1975, Coal India Limited (CIL) was set up as a monopoly to market coal and to manage the coal mines.1 This decision reflected the need to have energy for economic growth, and a new appreciation of energy security after the first oil shock. Being the most abundant fossil fuel in India, coal was identified as the foundation of its energy supply. The nationalisation aimed to foster safety, mitigate frequent mining accidents and stimulate investment in the country.

In 1993 the coal production monopoly of CIL was partially broken with the allocation of captive blocks for power, iron and steel and, later on for cement, coal gasification and coal liquefaction. A decade later, in 2003, power sector reform triggered coal demand to rise rapidly in this sector. Over the years, however, coal production was not able to catch up with demand and CIL faced difficulties ramping up production, not only because of insufficient investment and productivity, but also because of barriers to production caused by delays in statutory clearance, notably to use land that was dedicated to afforestation. The coal demand–supply gap started increasing year by year, which was met through imports. With a view to developing and increasing domestic coal production, the Government of India (GoI) allocated 218 coal blocks to captive use. However, in 2014 the Supreme Court declared that the majority (204 out of 218) of the captive block allocation from 1993 was arbitrary and illegal, which brought production at those blocks to a halt. To auction these cancelled coal blocks through competitive bidding and to allocate the same to public-sector companies, in 2015 the GoI enacted the Coal Mines (Special Provision) Act and amended the Mines and Minerals (Development and Regulation) Act of 1957 and the Coal Mines (Nationalisation) Act of 1973.

Considerable progress has been made in building coal power plants and in ramping up coal production. Since May 2014, 52 new mines have been opened, adding over 160 Mt of mining capacity per year. Coal power generation has increased continuously in India since 1973, which has reinforced the role of coal in electrification and economic development, and explains why addressing the negative impacts of coal was not a priority, given the focus on increasing the supply of energy, in particular electricity generation.

Most of the coal consumed in India is domestic and a large share of it is transported throughout the country, sometimes over long distances. As coal supply has been scarce, the allocation of coal is regulated by the government to ensure supply is prioritised while reducing transport and logistics costs. Given that demand is scattered throughout India, this means that coal is mostly transported by the rail system. Transport of increasing amounts of coal over long distances has put pressure on the rail system.

Coal mining supports direct employment of around 500 000 workers. Considering direct and indirect employment, several million jobs are dependent on the coal industry. However, India has to deal with the environmental externalities linked to production and use of coal, which are equally abundant – its ecosystems are affected by mining, there is air pollution from coal use, impact on water at different stages of the production and consumption process, and the CO2 emissions associated with coal burning. India’s coal dependence is unlikely to disappear in the medium term and it is therefore a must for policy makers, industry and, more generally, Indian society, to minimise its negative impacts by using state-of-the-art technology in a cost-efficient way.

1 The monopoly is not total anymore, as some public companies and private captive and commercial mines are allowed.

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