Summer Project On COAL INDIA
Summer Project On COAL INDIA
On
“Bridging the Coal Demand – Supply Gap through Imports & Roadmap to
Coal Logistics”
&
Submitted by:
Shriniwas Sunkewar,
___________________ ______________________
Countersigned
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CERTIFICATE
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ACKNOWLEDGEMENT
I also thank Mr. J S S Rao (Principal Director), Mr. S.K. Choudhary (Principal
Director), Mrs. Manju Mam (Dy. Director), Mrs. Indu Maheshwari (Dy. Director), for
providing me such a nice opportunity to work with an esteemed organization. My internal
project guide Ms. Karishma Verma (Senior Fellow) helped me in structuring this project
report and also on various other aspects of the study. I am very much thankful to her for her
support. I thank all members of CAMPS rendering kind help during the project work.
I owe our special gratitude to Mr. Santosh Kumar (AGM - Coal), Mr. Praveen
Shukla (Associate Manager- Coal), Mr. Krishna Deo Narayan (Associate Manager- Coal),
Mr. Mahendra Sahu (Associate Manager, Railway Liaising), Mr. Saptarsi Das (Associate
Manager – Coal) for his painstaking efforts and enthusiastic cooperation to make my training
successful. My Special thanks to Mr. Shrikant Naik, Mr. Subha Sahu and Mr. Saugat
Das for providing me valuable time and inputs on the various aspects of the project. Special
thanks are due to all other staff members of Sterlite Energy Limited who helped me
directly or indirectly in completion of the project.
Last but not the least; I am grateful to my friends & seniors at CAMPS, NPTI who
gave me the moral support in my times of difficulties. Last but not the least I would like
to express my special thanks to my family for their continuous motivation and support.
Thank you all for being there for me always.
SHRINIWAS SUNKEWAR
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EXECUTIVE SUMMARY
Coal is the most abundant fossil fuel resources in World. According to world coal
institute over 860 billion tonnes of coal reserves are available in the world. In other words the
economically recoverable reserves will last 130 years whereas Oil and Natural gas reserves
will last up to 42 years and 60 years respectively.
Coal is the predominant source of energy in India and it has significant contribution in the
rapid industrialization of the country. A cumulative total of 285862.21 Million Tonnes of
Geological Resources of Coal have so far been estimated in the country. Coal India ltd.
(CIL), world’s biggest coal producing company, produces 77% of All India production.
Power sector is biggest consumer of coal in India almost 67%.
As there is a gap in demand of coal and supply by Indian coal companies, so the power
companies has to look for imported coal to fulfil their demand. Besides this the Indian coal is
of poor quality having high ash content also suggests for a blend with high grade low ash
coal. Transportation facilities also suffer a lot as demand and source stations are far situated.
So for the western demand centres it is preferred to imported coal at ports.
The objective of the Project is to study about the various sourcing of coal (domestic +
international) which is feasible for thermal power plant. The study focuses on the existing
linkage of coal from CIL and also the implication to get fuel linkage. A thorough study of E-
Auction done by CIL is analyzed in detail. As the demand for coal is increasing, consumers
to meet their demand by Mining & Acquisition abroad or through import from countries like
Indonesia, South Africa, Australia and evolving options for importing countries like
Mozambique.
The present (30th June 2013) installed capacity of Indian power plant is over 225793.10 MW,
of which around 132288.39 MW is from coal based thermal power plant. Nearly around
58.58 % of the generated power is from coal based power plant. The main source of the coal
for the TPP is domestic coal. But due to various reasons the availability of domestic coal and
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their linkages to power plant is been critical nowadays. So, study on availability of coal is a
must in the coming scenario.
The second part of the project deals with the detail study of Supply chain challenges and
present infrastructure of the coal logistics. The study tells about the complexity of the
logistics and the demand projection of infrastructure needed for coal transportation. An
analysis is done to estimate the requirement of the logistics and steps taken to strengthen the
infrastructure.
The Internship project is to study and explore the coal sourcing and infrastructure required for
handling coal in plant. Seeing the present and future coal supply and demand gap, it has
become mandatory for power generation Company to analyze its coal sourcing option to meet
its present and future requirement.
For this purpose company has to rethink on coal sourcing option and have to utilize a right
mix of various options, so that cost of production will be minimum catering to its business.
Various coal sourcing options are as follows:
Linkage coal
Imported coal
E-Auction Coal
Washeries & Rejects coal
Along with this, project will provide the detailed study of coal handling infrastructure
keeping in view the future infra required for sustainable plant operations and to deal with coal
logistics challenges and opportunities. As the plant operation mainly depends on fuel supply,
so making fuel available to plant is utmost important task. To receive and handle this volume
of coal, infrastructure development outside plant and inside plant is required. So, our focus in
this project is on the infrastructure required for coal handling in plant. This project will find
out the bottlenecks of the present coal handling Infrastructure and additional infra
development required for future’s sustainable plant operations.
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LIST OF FIGURES
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LIST OF TABLES
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LIST OF ABBREVIATIONS:
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Table of Contents
DECLARATION ................................................................................................................. ii
CERTIFICATE .................................................................................................................. iii
ACKNOWLEDGEMENT ................................................................................................. iii
EXECUTIVE SUMMARY ................................................................................................. v
LIST OF FIGURES .......................................................................................................... vii
LIST OF TABLES ........................................................................................................... viii
LIST OF ABBREVIATIONS: ........................................................................................... ix
1. INTRODUCTION: ...................................................................................................... 1
1.1 REVIEW OF INDIAN POWER SECTOR: ........................................................ 1
1.1.1 POWER GENRATION IN INDIA: .............................................................. 2
1.1.2 COAL REQUIREMENTS OF INDIA: ......................................................... 3
1.1.3 COAL RESERVES: ....................................................................................... 4
1.1.4 COAL PRODUCTION .................................................................................. 7
1.1.5 COAL – DEMAND & SUPPLY GAP:.......................................................... 8
1.1.6 REASONS BEHIND COAL DEMAND & SUPPLY GAP: ......................... 8
1.2 PROBLEM STATEMENT ................................................................................. 10
1.3 SIGNIFICANCE OF THE PROJECT: ............................................................. 10
1.4 OBJECTIVE OF THE PROJECT:.................................................................... 10
1.5 SCOPE OF THE PROJECT: ............................................................................. 11
2. ORGANIZATION PROFILE: ................................................................................. 12
2.1 ABOUT THE GROUP: ...................................................................................... 13
2.2 ABOUT THE COMPANY: ................................................................................ 14
2.2.1 ABOUT STERLITE ENERGY LTD.: ........................................................ 14
2.3 BUSINESS OF THE COMPANY: ..................................................................... 16
3. INTRODUCTION TO LITERATURE .................................................................... 17
3.1 REGULATORY & POLICY FRAMEWORK IN INDIA: ............................... 18
3.2 RESEARCH METHODOLOGY: ...................................................................... 21
3.3 SOURCES OF RESEARCH: ............................................................................. 23
4. INTRODUCTION TO COAL SOURING: .............................................................. 24
4.1 COAL LINKAGES: ............................................................................................ 24
4.1.1 COAL INDIA LIMITED:............................................................................ 24
4.1.2 FUEL SUPPLY AGREEMENT: ................................................................. 26
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4.1.3 SWOT ANALYSIS OF COAL LINKAGES: ............................................. 29
4.2 COAL E-AUCTIONS: ........................................................................................ 30
4.2.1 E-AUCTION TYPES: .................................................................................. 30
4.2.2 BIDDING PROCESS: ................................................................................. 31
COMPARATIVE ANALYSIS CIL SUBSIDIARIES:............................................. 31
4.3 WASHERIES & REJECTS: .............................................................................. 33
4.4 IMPORTS: .......................................................................................................... 34
4.4.1 GEOGRAPHICAL LOCATION: ............................................................... 35
4.4.2 SWOT ANALYSIS FOR INDONESIAN COAL: ...................................... 36
4.4.3 ANALYSIS OF COAL MIX ON THE PER UNIT FUEL COST:............. 36
4.4.4 INDIA’S COAL IMPORT TRENDS: ......................................................... 38
4.4.5 WORLD COAL TRADE MARKET: ........................................................ 38
4.4.6 GLOBAL PRICE TREND FOR DIFFERENT COUNTRIES: ................. 39
4.4.7 COUNTRYWISE COAL IMPORT TREND OVER THE DECADE: ...... 39
4.4.8 FACTORS DRIVING FOR COAL ACQUISITION ABROAD:............... 40
4.4.9 SWOT ANALYSIS OF COAL RICH NATIONS: ..................................... 41
4.4.10 POTENTIALATTRACTIVENESS OF COAL RICH NATIONS: ........... 42
4.4.11 CONCLUSION: ........................................................................................... 43
5. COAL TRANSPORT INFRASTRUCTURE: .......................................................... 44
5.1 ROADWAYS: ..................................................................................................... 45
5.1.1 ROAD LOGISTICS INFRASTRUTURE IN THE PLANT: ..................... 45
5.2 RAILWAYS: ....................................................................................................... 46
5.2.1 WAGON TYPES: ........................................................................................ 46
5.2.2 RAILWAY LOGISTICS INFRASTURCTURE: ....................................... 47
5.3 PORT INFRASTRUCTURE:............................................................................. 57
5.3.1 TYPES OF VESSELS: ................................................................................ 58
5.3.2 CHALLENGES IN PORT INFRASTUCTURE: ....................................... 60
6. RESULTS: ................................................................................................................. 61
6.1 CONCLUSION & RECOMMENDATIONS: .................................................... 62
6.2 LIMITATIONS OF REPORT: .......................................................................... 63
6.3 FUTURE SCOPE OF PROJECT: ..................................................................... 64
BIBLIOGRAPHY…………………………………………………………………………..75
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CHAPTER 1
ABOUT TO PROJECT
1. INTRODUCTION:
1.1 REVIEW OF INDIAN POWER SECTOR:
Over the years, the Electricity Industry has made significant progress, Installed
capacity increased from 1,700MW (1950) to 225793.10 MW (30th June 2013) annual
per capita electrical energy consumption is increased from 16 kWh/annum (1950) to
over 778 kWh/annum (2012).
MW
250000
207006
200000
137936
150000
100000
39291 34444.12
50000
24998
4780
0
Thermal Nuclear Hydro RES Total Captive
India experienced unprecedented economic growth of 8% [1] for the last several years.
Even after factoring recent developments in global economy & local scenario, India is likely
to maintain 9% [2] economic growth over 12th FYP. These growth rates are fairly higher than
the economic growths observed in developed world and they are likely to increase our energy
requirement at even higher rate.
1
Report of the working group on power for 12th plan
2
Report of the working group on power for 12th plan
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[3]
India is currently facing energy shortage of 8.5% and peak shortage of 10.3% . As
per the 12th FYP, India’s energy demand will grow 6% per annum and we would require
installed power generation capacity of about 100 GigaWatts (GW). The power requirement,
besides economic growth, is also driven by Government’s aim to provide “power for all”.
Given the above scenario, it is becoming increasingly important for India to operate existing
generation assets at peak of their capacity besides new capacity additions. A number of plants
today are running at sub-optimal plant load factor (PLF)4 levels due to various issues like fuel
shortages, unplanned shut-down due to poor maintenance and time taken to rectify the
problems. While, we have observed improvements in (PLF) of generating plants (from 57.1%
in year 1992-93 to 75.1% in year 2010-11) [5], still there is significant improvement possible.
The capacity addition during the 11th five year plan FYP has been the highest till date
in any FYP. As on 31st March 2012 the total generation stood at 199877.03 MW[6] as per the
CEA report. The details of this generation capacity based on type of generation capacity and
ownership of generation capacity is outlined in the following diagram
3
National Electricity Plan (volume 1) Generation Report, January 2012
4
CEA: Definition of PLF = [ (Energy generated during the period x 100) / (C x H)]
Where, C = Total capacity (MW) & H = Total Hours in the period under review.
5
CEA: Operation performance of generating stations in the country during the year 2010-11.
6
CEA: Growth of installed capacity since 6th FYP.
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The total energy consumption/availability in India was 837 BU (LGBR Report-2011-
12-CEA) making India the sixt h largest energy consumer in the world. The per capita
electricit y consumpt ion has also increased to about 767 kWh. The graph shows the
increase in per capita energy consumption in India in the past two decades.
1000 879
734.5 778
800 671.9 717.1
540 592 612.5 631.5
600 450 500
350 400
400 290
200
0
1991 1995 1997 1999 2001 2003 2004 2005 2006 2007 2008 2009 2010 2012
India is the fourth largest consumer of energy in the world after USA, China and Russia
but it is not endowed with abundant energy resources. It must, therefore, meet its
development needs by using all available domestic resources of coal, uranium, oil, hydro and
other renewable resources, and supplementing domestic production by imports. High reliance
on imported energy is costly given the prevailing energy prices which are not likely to soften;
it also impinges adversely on energy security. Meeting the energy needs of achieving 8 per
cent– 9 per cent economic growth while also meeting energy requirements of the population
at affordable prices therefore presents a major challenge. It calls for a sustained effort at
increasing energy efficiency to contain the growth in demand for energy while increasing
domestic production as much as possible to keep import dependence at a reasonable level.
Energy is one of the most critical components of infrastructure that determines the economic
development of a country. The growth rate of demand for power is generally higher than the
GDP (Gross Domestic Product) growth rate.
In order to achieve economic growth of 8-9%7 in terms of GDP, country's total coal
demand, even after allowing for the slippages that have occurred in the current plan period,
has been projected to increase from the present ~ 730 million tons in 2010-11 to ~ 2,000
7
Planning Commission Report
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million tons in 2031-32. Of this, about 75 % of coal would go to power plants. Given the
projected increase in coal requirement, the domestic coal industry alone cannot fully meet the
demand. Present demand–supply gap is around 85 million tons and it is expected to increase
gradually to nearly 140 million tons by 2017.
Total (A) + (B) 426 460 731 1125 1390 1743 2221
Figures for 2011-12 and 2016-17 are of the Working Group for 11th FYP estimate and for 2031-32
are of the Integrated Energy Policy Report. Figures for intervening years have been extrapolated.
Coal is the most common used fossil fuel used in the power plant to generate
electricity. Next to oil and gas the conventional resource which is available is coal. But oil &
gas is a costly product and India is rich in coal. So, for most of the primary energy purpose
coal is used. Coal fired generation in India accounts for 56%8 of the total installed generation
capacity and all future estimates of capacity addition show that coal will continue to be the
dominant fuel source despite the recent short supply in the domestic coal. The Coal reserves
of India up to the depth of 1200 meters have been estimated by the geological survey of India
at 293.497 billion tonnes as on 01.04.2012. Coal deposits are chiefly located in Jharkhand,
Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Andhra Pradesh and Maharashtra. The
envisaged coal based capacity for the 12th plan period is 62,695 MW i.e. 82.7% of the
8
Coal India Limited & Ministry of Coal
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total proposed capacity addition (75,785 MW).India has the total coal reserve of 293 billion
tonne as on April, 2012 against 285.86 billion tonne on April, 2011.
As a result of Regional, Promotional and Detailed Exploration by GSI, CMPDI and SCCL
etc, the estimation of coal resources of India has reached to 2,93,497 Million Tonnes. The
estimates of coal resources in the country during last 5 years are given below: (in Million
Tonnes)
Table 1-3: Status of Coal Resources in India during Last Five Years:
Non Coking
84%
The coal reserve in India is unevenly distributed in the country. The central and the eastern
part of the country is rich source of coal, while the consumption of coal is equally distributed
throughout the country. In electricity generation the share of coal is highest with more than
55% of electricity production depend on coal.
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CIL, Maharatna Company with 8 subsidiaries9 has the maximum coal reserve in India The
other company in coal production is Singraeni Collieries Co. Ltd and Neyveli lignite
Corporation.
Figure 1-4: Coal Reserve in India Coalfield wise
9
Coal India Limited Subsidiaries
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1.1.4 COAL PRODUCTION
Coal reserves have been distributed worldwide. In India we are having a very
huge resource of around 250 billion tonnes. In spite of this huge reserve, still our Indian
power plants and coal consumers are starving for coal. As per CEA the power plant has to
maintain a minimum stock level of 15 days for Pithead10 based TPP (Thermal Power
Plant) and for other TPP it varies from 20 to 30 days depends upon their distance from the
power plant. But still out of the 85 operational coal based TPP, ten TPP are running at a
critical stock level of less than 7 days and nine TPPs are running at a super critical stock
level of less than 4 days in FY2011.
So, there is a need to optimize the various coal sourcing option that are available
to coal consumers both domestic and international based for the demand and need of the
end users. Coal consumers have to opt for the different combination that suit best for
them. The need for logistics for transportation of coal from mine to end use plant is also
play a crucial role while going for different sourcing option and need of investment in
infrastructure for expansion is a demand of the market.
350
308.55
300
250
222.16 Coal
200
177.24 150 Lignite
150 Coal Imports
130.61
90
100
54
50 11.76 24.92
8.76 16.8 29
6.43 10.64
0
2000-01 2006-07 2011-12 2016-17 2021-22
(Actual) (Actual) (Provisional) (Projected) (Projected)
10
A pit-head plant means a plant at the coalmine itself so that there is no need to transfer the coal to the plant
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1.1.5 COAL – DEMAND & SUPPLY GAP:
It is estimated that at the beginning year of 12th Five Year Plan (2012-13), the
demand is projected to increase to about 778 Million Tonnes, Where as the indigenous
availability be about 580.30 Million Tonnes. Therefore, there is likely to be a gap of
192.54 Million Tonnes, Which is required to be met through imports.
Table 1-4: Coal Supply & Demand Gap (in Million Tonnes)
Source 2008-09 2009-10 2010-11 2011-12 2012-13 12th Five year
Plan Projected
(2016-17)
Supply 343.00 514.56 524.09 535.15 580.30 795.00
Demand 378.00 597.98 656.31 696.03 772.84 980.50
Gap to be met 35.00 83.43 132.22 160.88 192.54 185.50
through imports
Total Imports 16.10 73.26 68.92 102.85 192.54 185.50
Source: Ministry of Coal
The availability may increase to 795 Million Tonnes at the maximum, subject to
availability of requisite land for coal mining and all clearances in time. Therefore, the gap
between the demand and indigenous availability is projected to be in the range of 185.5
Million Tonnes in the minimum to 265.5 Million Tonnes in the maximum. This gap is to be
bridged by import of coal, The report predicts likely power demand of 1392 Billion Units in
2016-17 and if coal based thermal power plants continue to meet 70% of the power
requirement of the country, coal based generation would be around 974 Billion Units, for
which requirement of coal would be around 682 Million Tonnes if specific coal consumption
remains at 0.70 Kg/Unit. As per the revised estimate, the demand of coal in the country in the
terminal year (TY) of XI plan (2011-12) will be around 650 Million Tonnes against which
indigenous availability would be around 545 Million Tonnes, leaving a gap of 105 Million
Tonnes to be met through import.
The main problem in the supply demand gap in the domestic coal is due to:
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Most of the coal mining areas are announced as No-go areas by Ministry of
Environment & Forest.
Insufficient Rail wagons and Rail infrastructure.
Poor Loading/unloading infrastructure.
Operational Inefficiencies & coordination issues.
Sudden increase in demand.
Reasons for the Delay in Exploration & Transportation of Coal from mine to End User:
Sr. Reasons Indicators
1 Delay in Land Under the 11th five year plan, the envisaged land acquisition
Acquisition was greater than 6,000 Ha, against it, CIL was able to acquire
only 25,000 Ha i.e. 40% of the target
2 Embargo imposed in Pollutant concentration, expedience factors, impact on human
view of comprehensive health and level of exposure have been taken into
environmental pollution consideration for the calculation of pollution indices for air,
index (CEPI) water and land (ground water) all these factors affect the coal
movement.
3 Delay in Forestry & Average time for stage I forestry clearance is about 4 years.
Environmental Average time for stage II clearance is 3 years. Thus the total
Clearances time for Forestry Clearance is 7 years against the normative
time of 2-3 years.
4 Mismatch between In the last 8 years coal stock has been increased by approx 53
production & Transport MT dye to non-availability of sufficient railway rakes.
Capacities
5 Delay in Construction Strikes and Natural calamities also effect the construction of
of New Railway Lines New Railway Lines in Expanding Coalfields
6 Law & Order Problems Naxal problems and Curfews also affect the Coal Movement.
in Jharkhand & Odisha.
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1.2 PROBLEM STATEMENT
The demand for the coal has increase exponentially and reached to 696MT in
FY12. It is estimated that at the beginning year of 12th Five Year Plan (2012-13), the
demand is projected to increase to about 778 Million Tonnes, Where as the
indigenous availability be about 580.30 Million Tonnes. Therefore, there is likely to
be a gap of 192.54 Million Tonnes, Which is required to be met through imports. The
sourcing demand of coal as primary fuel creates a huge demand supply gap and left
various plant to run below their rated capacity. The constraints in the coal logistics
also create a barrier as 17% of total coal production by CIL can’t be supplied to coal
consumers due to non-availability of rakes and infrastructure. In addition to that
regulatory framework, financial risk as well as various technical risks due to which
there is always a dilemma in choosing among various sourcing option. No
coordination or mismatch between the development of infrastructure and required as
per demand create a bottleneck in the whole coal transportation system.
This report is produced to study challenges facing by the power producers due
to coal demand-supply gap and to provide best possible option to bridge this gap and
also to analyze roadmap to coal logistics.
The project has been carried out after observing the current scenario of coal
for various power plants including Sterlite Energy Limited. A new thermal power
plant needs to have out of box thinking thereby to survive in this competitive power
sector. Thus, a basic research report has been prepared keeping in view the various
pros and cons of the import options to Sterlite Energy Limited.
The objective of the project is to find out the best coal sourcing option
(Domestic + International) in India to bridge the coal demand- supply gap. As the
demand for coal is increasing day by day so, the primary fuel coal reliability is a
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major concern for various coal consuming sectors. The project will give the detailed
feasibility analysis of various coals sourcing option available to coal consumers and
comparative analysis of the different sourcing option. As the problems in the domestic
coal are increasing day by day, so dependency on imported coal by the Indian thermal
power plant is an unavoidable factor.
Not only implication and complexity in choosing the best coal sourcing option
but also the bottlenecks in the logistics part for transportation of coal from coal mines
to consuming area is also studied in detail. Main area of analysis deals with study of
challenges faced by the power producers due to coal demand-supply gap and to
provide best possible option to bridge this gap and also to analyze roadmap to coal
logistics.
The project is to find out viable coal resources for importing coal to India.
There are number of countries available for importing coal to India, but all countries
are not economically viable for India. As India has a vast coastal line of 7517 km, so
coal transport through sea will be the cheapest mode of transportation. Coal sourcing
countries should also have good port connectivity. So a survey of all eligible countries
like Australia, South Africa, Indonesia, and Mozambique has been done. The detail
study of the present scenario and future projection of the different coal sourcing
option is done.
The transportation cost also play a major part in the landed cost of coal from
the mine to power plant. The scope of study is Total Quantity Management of
Imported Coal from port to site. The future projection of coal demand and correlation
development require in the coal logistics infrastructure to sustain the projected
demand.
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CHAPTER 2
ABOUT THE ORGANIZATION
2. ORGANIZATION PROFILE:
It has over 31,000 employees worldwide. The majority of its operations are certified to the
International Management Systems Standard ISO 14001[11]. It has also won numerous awards
for safety and environment: we won the 2005 Recognition of Commitment Award from the
Institute of Internal Auditors, USA, for our demonstrated strengths and continued focus on
achieving operational efficiencies and process.
11
SOURCE: www.iso.org - ISO 14001:2004 and ISO 14004:2004 focus on environmental management
systems. The other Using ISO 14001 can provide assurance to company management and employees as well as
external stakeholders that environmental impact is being measured and improved.
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Figure 2-2: Vedanta’s Global Footprint & Operations.
12
( FTSE - Financial Times Stock Exchange) Group is a British provider of stock market indices and associated
data services, wholly owned by the London Stock Exchange. FTSE helps investors worldwide make informed
investment decisions and benchmark the performance of their investments.
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VAL has invested in a 0.5 mtpa13 aluminium smelter and 1215 MW captive power
plant supported by highly modern infrastructure at Jharsuguda, Orissa. In addition to this,
construction of 1.1 mtpa aluminium smelter expansion project at Jharsuguda is under process.
The company intends to expand the fully integrated aluminium smelting capacity to around
2.6 mtpa in near future.
SEL is well positioned to capitalize on India’s economic growth, power deficit and large coal
reserves to develop a commercial power generation business. It shall benefit from Vedanta
group’s experienced and focused management with strong project execution skills,
experience in building and operating captive power plants, substantial experience in mining
activities and the capacity to finance world-class projects.
Sterlite Energy Ltd has taken a major initiative towards the advancement of the power
infrastructure in Orissa through its 4 x 600 MW coal-based independent power plant (IPP) in
Jharsuguda district. The IPP project envisages a total capital outlay of Rs. 8,200 crores. The
two units have commenced commercial operation since Nov 2010 & April 2011 respectively.
The project is expected to be fully commissioned in the third quarter of Fiscal 2012.
The power plant entails a number of pioneering achievements in the Indian power sector.
Each of its four units has a capacity of 600 MW, which makes the units the largest
commissioned in India till date. One of the largest coal handling plants to handle 44,000 MT
of coal per day, which is equivalent to 14 rakes of coal a day and a power generation capacity
13
Mtpa - Million Tons Per Annum
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to produce 57 million units/ day. The plant also has a dual LP-flow steam turbine and four
160 meters high natural draft cooling towers. Other important features of the plant include
two 275 meters high multi-flue stacks and a high concentration slurry disposal (HCSD)
system for dry ash and highly concentrated slurry.
The company has made extensive arrangements to source raw materials for the power plant.
The Hirakud Reservoir is being used as a water source and coal- the chief raw material, is
being derived from the IB Valley coalfield.
Jharsuguda is the site for our Aluminium Smelter, Captive Power Plant and an
Independent Power Plant (Sterlite Energy Ltd.). Jharsuguda is situated in the western part of
Orissa on the State Highway No-10, at a distance of 335 K.M. from Bhubaneswar and 310
K.M. from Raipur. The details of these projects are given below.
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Figure 2-4: Showing details of 4X600MW Jharsuguda Power Plant
At Jharsuguda, Odisha VAL operates 500 ktpa aluminium smelter and an associated
1,215MW captive power plant. VAL also has a 1.25 mtpa14 aluminium smelter project at
Jharsuguda.
14
Mtpa - Million Tons Per Annum
15
Aluminium Smelter - Aluminium smelting is the process of extracting aluminium from its oxide alumina,
generally by the Hall-Héroult process. Alumina is extracted from the ore Bauxite by means of the Bayer process
at an alumina refinery.
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CHAPTER 3
REVIEW OF LITERATURE
3. INTRODUCTION TO LITERATURE
Page | 17
investigate the interaction of the national and international steam coal markets under various
energy and climate policy scenarios until 2030.
Page | 18
Coal India Ltd on 31st January 2012 finalized the wage agreement for its 3.63Lakh
strong non-executive work force by giving a 25% increase on gross wages as of 30 June
2011.
Pays Highest Interim Dividend to Government of India on 23 March 2012 of Rs.5400.49
Crores for the fiscal 2011-12.
16
Source:http://mines.nic.in/writereaddata/filelinks/37746cbd_Mines_and_Minerals_(Development_and_
Regulation)_Amendment_Act,_2010.pdf
17
Source: Colliery Control Rules,2004 - http://www.coal.nic.in/ccr2004.pdf
Source: Colliery Control Order, 2000 - http://www.coal.nic.in/ccoact.htm
Page | 19
Import Policy18:
As per the present Import Policy, coal can be freely imported (under Open General Licence)
by the consumers. Currently while import duty on coking coal is nil, import duty on non
coking coal and coke is 5%. Presumably realizing the lack of good quality coking coal
required by the iron and steel sector, the import duty on coking coal has been kept at nil.
However, there is a 5% duty on non-coking coal and coke. While marginal, given the demand
supply gap and the objective of making the domestic coal producers more competitive, this
may need revision.
18
Source: Import Policy - http://coal.nic.in/eximp.html
19
Source: Coal Mines (Nationalization) Act 1973 - http://www.coal.nic.in/ca7.pdf
Page | 20
3.2 RESEARCH METHODOLOGY:
Figure 3-1: Model-1 for Bridging the Coal Demand- Supply gap through Imports
Need to Find
Optimal Coal
Import
Coal Reserves
in world
Regulations &
Coal Export
Scenario
Viable
Countries for
Coal Sourcing
Analysis &
Conclusion
COAL Mod Model is a most prominent model that is being referred for coal sourcing from
various countries. Some of the key aspects about the COAL Mod model are as described
below:
Need to Find Optimal Coal Import Location: Indian Thermal plant needs to find
the prospective locations for coal sourcing to India. There are a number of countries
like Australia, South Africa, Indonesia, Columbia, Mozambique etc.
Coal Reserves in world: An analysis will be done about the various coal reserves that
can be deployed by Indian thermal power plants companies like CLP.
Page | 21
Regulations & Coal Export Scenario: Regulatory framework is studied in each of
the country that will be chosen for coal sourcing to India. Moreover, coal export
scenario during the past years are also given due importance.
Viable Countries for Coal Sourcing: Australia, Mozambique, Indonesia,
Mozambique, Colombia seems to be viable options for sourcing of coal for India
based on the various deciding factors like regulatory aspects, price of coal etc.
Port &Railway Infrastructure: Ports and railways infrastructure plays a very crucial
role in ceding out the most viable options in order to import coal from various
countries. Number of days in transit taken by the cargo ship is also calculated in order
to get the more accurate picture.
Conclusion: Finally conclusion is calculated after studying various underlying
prospects associated with the coal sourcing for Indian thermal power plants like India.
To carry out the research, I have collected data from various associations with various
information organizations. Coal India Limited, Ministry of Power, Central Electricity
Authority, Central Electricity Regulatory Commission is few to name. Most of the research
inputs are obtained from Secondary sources such as Journals, Reports, Literature
Review, R.T.I., Publications and from primary sources like Conferences and
telephonic conversation with many power project developers.
Major Challenges with Coal Logistics is coal quantity loss during transportation of
Imported Coal from port to site. Research Methodology includes analysis of coal shortage
analysis during transportation. Methods used is to prepare fishbone diagram 20 as shown
below to list all the possible causes for the effect i.e. quantity shortages.
20
Fishbone Diagram - Developed by Kaoru Ishikawa (in 1968) - To break down (in successive layers of
detail) root causes that potentially contribute to a particular effect.
Page | 22
Figure 3-2: Fishbone Diagram:
The inputs received and the data collected from the various sources is utilized
in the formulation of business solutions and models, to determine the best fuel
sourcing option based on the plant and their end use and capacity portfolio and to
identify the demand pockets. The comparison is done between various coals sourcing
option based of various parameters. The second part of report analysis the prevailing
current scenario of coal logistics and estimate the required infrastructure based on the
market survey and scenario and at last, risk mitigating solutions are offered.
Page | 23
CHAPTER 4
COAL SOURCING
Fullfillment of
Coal for Sterlite
energy limited
Washeries &
Linkages E-Auctions Imports
Rejects
Page | 24
CIL having fulfilled the financial and other prerequisites was granted the
“Maharatna” 21 recognition in April 2011. It is a privileged status conferred by
Government of India to select state owned enterprises in order to empower them to
expand their operations and emerge as global giants. So far, the select club has only five
members out of 217 Central Public Sector Enterprises in the country.
21
Maharatna–A company with average annual turnover of more than Rs. 20,000 crore during the last 3 years.
Page | 25
4.1.2 FUEL SUPPLY AGREEMENT:
FSA stands for Fuel supply Agreement. As per New Coal Distribution Policy
(NCDP)22 Coal supplies are governed by legally enforceable agreements between the sellers
(coal Companies) and the consumer under specific terms and conditions. As far as Sterlite
Energy Limited (SEL) is concerned, it signed its Fuel Supply Agreement (FSA) with
Mahanadi Coalfields Limited i.e. MCL.
Procedure for Coal Linkage:
To have coal linkage with CIL, the consumer has to submit the letter of issue to the
standing committee. The Standing Linkage Committee will recommend CIL for the issuance
of letter of assurance (LOA). The coal company will give the notice to the consumers for
having the issuance of LOA. The consumers should submit the commitment Guarantee (CG)
as per the new NDCP policy. The standing committee will give LOA to coal consumers on
condition that the milestones to be achieved within deadline to convert the LOA to FSA.
The normal time specified to convert LOAs to FSAs is 2-3 years but due to various
clearances issues, it generally take 4-5 years to have the fuel supply agreement.
Figure 4-1: Procedure for Coal Linkage with CIL
Standing Linkage Committee recommends CIL for
issuance of LoA to coal consumers
Page | 26
FSA Aspects w.r.t Sterlite Energy Limited (SEL), Jharsuguda, Odisha.
Period of Agreement:
FSA was signed between SEL and MCL, Mahanadi Coalfields Limited (Subsidiary of
CIL Ltd.) on 20th Sept, 2011.
The Agreement has been signed for a period of 20 years and after completion of 5
years, either party can approach for review of the agreement.
Quality:
Seller should make adequate facilities not to supply coal less than 3200Kcal/Kg
(GCV). In case seller supplies such quantity of coal, purchaser should limit price of
coal to Re 1/tonne.
F Grade coal is to be supplied to SEL with GCV Values.
Table 4-1: Grades of Non-coking Coal
Grade Useful Heat Value Corresponding Gross Calorific Value GCV
(UHV) (Kcal/Kg) Ash% + Moisture % (Kcal/ Kg) (at 5% moisture
UHV= 8900- at (60% RH & level)
O
138(A+M) 40 C)
A Exceeding 6200 Not exceeding 19.5 Exceeding 6454
B Exceeding 5600 but not 19.6 to 23.8 Exceeding 6049 but not
exceeding 6200 exceeding 6454
C Exceeding 4940 but not 23.9 to 28.6 Exceeding 5597 but not
exceeding 5600 exceeding. 6049
D Exceeding 4200 but not 28.7 to 34.0 Exceeding 5089 but not
exceeding 4940 Exceeding 5597
E Exceeding 3360 but not 34.1 to 40.0 Exceeding 4324 but not
exceeding 4200 exceeding 5089
F Exceeding 2400 but not 40.1 to 47.0 Exceeding 3865 but not
exceeding 3360 exceeding. 4324
G Exceeding 1300 but not 47.1 to 55.0 Exceeding 3113 but not
exceeding 2400 exceeding 3865
Source: Coal India Limited
Quantity:
The Annual Contracted Quantity of coal to be supplied will be 42.75 lakhs per tonne
from the seller mines.
Monthly scheduled quantity will be 1/3rd of the quarterly quantity.
Page | 27
Coal Quantity greater than 80% but less than 100 % has to be supplied by the supplier
to the purchased. Failing to provide the aforesaid quantity will acquire a
compensation of 0.01 % of the failed quantity of the coal.
Adjustments for Coal Quality/Grade: Analysis of Coal Quality should be supported with
relevant documents related to
In case of Force Majeure conditions, affected party has a time limit of giving 90 days
prior to the termination of the agreement.
In case there is any change in the material, then purchaser has the power to terminate
the agreement within 30 days.
1. Assured market for the coal due to loyal 1. Assured supply of Contracted quantity of
customers. coal uniformly as per agreed dispatch
schedules enforced by bonuses and penalties.
3. Scope for maximizing sales revenue by 3. Customer can avoid the repetitive
earning bonuses due to better performance processes, delays and costs involved in
procurement of coal.
23
Force Majeure-An event that is a result of the elements of nature, as opposed to one caused by human.
Page | 28
4.1.3 SWOT ANALYSIS OF COAL LINKAGES:
Page | 29
4.2 COAL E-AUCTIONS24:
Another source of coal option provide by CIL is e-auction. The CIL has the authority
given by the ministry to sell 10% of total coal production by e-auction. Coal distribution
through e-Auction is governed to provide access to coal for such coal consumers who wish to
have an assured supply over a long period through e-auction mode so as to plan their
operation. The quality & quantity offered from CIL-Subsidiary is declared earlier than 7
days, so the buyers can plan accordingly. The reserve price is fixed by CIL and the buyer has
to bid for the price above the reserve price. The MSTC India and Coal Junction is the service
provider for the e-auction. The detail of the spot e-auction and the forward e-auction is
provided on CIL website as well as the MSTC India and Coal Junction.
1. Forward E-Auction
2. Spot E-Auction
The methodology used in both the type of auction is same; the only difference between them
is the duration for which the e-auction. The spot e-auction is done for coal supply for short
duration while comparing to forward e-auction.
Figure 4-2: Coal E-Auction by CIL
24
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and
then selling the item to the highest bidder
Page | 30
4.2.2 BIDDING PROCESS:
Prospective Bidders are entitled to Bid for quantity to the extent of amount of EMD.
The Buyers while bidding shall quote their “Bid price” per tonne in Indian Rupee as
base coal price on FOR/FOB colliery basis equal or above the reserve price.
The other charges like statutory levies, surface transportation charges, sizing/
beneficiation charges, taxes, cess, royalty, & any other shall be beard by Buyer’s.
The Bidder shall offer his Bid price (per tonne) in the increment of Rs.10/- (Rupees
ten) during the Normal e-Auction period.
During the extended period of first two (2) hours, the Bidder shall offer his Bid price
in the increment of Rs.20/-. Beyond this extended period of two hours the bid price
increment would be Rs. 50/- (Rs. Fifty) only.
Preference will be given to highest bid price in descending order.
In case two parties bid the same price, preference to higher quantity.
In case two parties bid the same price & quantity, preference will be given to party
bid first with reference with the time.
78.30% 79.30%
71.30%
56.90% 66.60%
58.60%
WCL, 14.88%
MCL, 14.93%
SECL, 11.20%
BCCL, 11.49%
31.20%
CCL, 10.59%
33.60%
ECL, 15.65%
NCL, 2.33%
CIL, 11.41%
NEC, 47.17%
Page | 31
ECL mine rich in coking coal offered 15.6% of total production for auction with average of
33.6% price above the normal price. BCCL; offered 11.49% of coal with price variation of
maximum 121% above the normative price. Overall CIL in all together offered 11.4% of with
average of 66% above the normative price.
Figure 4-4: Flowchart of E-Auction Coal Movement:
Page | 32
4.3 WASHERIES & REJECTS:
Coal India Limited has planned to set up 20 nos. of coal washeries (Coking and Non-
Coking) having total capacity of 111.1 Mt of raw coal throughput in the first phase. Out of
the total capacity mentioned above, 105.1 Mt capacity of washery will come up under "Build,
Operate & Maintain (BOM)" concept whereas 6.0 Mt capacity of washery will come up on
turnkey basis with a view to supply washed metallurgical and washed thermal coal to steel
sector and power stations other than those located at pit head. CIL would provide capital for
construction of these washeries. Details of subsidiary wise, number of washeries to be set up
& their capacities are listed below:
Page | 33
4.4 IMPORTS:
Indonesia is having a resource of 104.16 billion tonnes, out of which the economically
recoverable reserves are around 18.78 billion tonnes.
The major coal fields in Indonesia have been distributed in two Islands which are:
VERY HIGH
HIGH QUALITY > 7100
QUALITY(6100- Kcal/kg
7100 Kcal/kg 1%
13%
LOW QUALITY MEDIUM
<5100 Kcal/kg QUALITY(5100-
62% 6100) kcal/kg
24%
Source: www.worldcoal.org
Page | 34
4.4.1 GEOGRAPHICAL LOCATION:
Compared to other coal importing countries, Indonesia is the closest one to our Indian
ports both in east coast as well as west coast.This distance from Indonesian port to various
ports in India is given below:
And the approximate travelling time from Indonesian ports to our Indian ports is:
Table 4-4: Travelling time from Indonesian ports to our Indian ports
INDONESI HALDIA PARADIP VISHAK ENNORE COCHI MORMA MUNDR
A APATNA N GOA A
M
Page | 35
4.4.2 SWOT ANALYSIS FOR INDONESIAN COAL:
STRENGTHS WEAKNESS
OPPORTUNITIES THREATS
Import from the coal rich country is now considered as a reliable source as the coal
production in India can’t able to meet the total demand. The import is considered as reliable
with other complexity and risk is still attached to it like Regulatory changes in the Indonesia
has impacted the cost of the imported coal from the Indonesia.
As per FSA, CIL is deemed to supply 80% of the coal to CLP India group but due to various
complications arising out of this, CIL will not be able to supply more than 50-55% of the coal
as per the recent notification released by CIL. Owing to this various cases have been taken
for fulfilling the shortfall requirement.
Methodology Used:
Landed Cost
of Coal
Page | 36
Components of Coal Cost are:
Base Price of Coal: The price of Coal as disclosed by CIL on its website
Clean Energy Cess: The Tenth Schedule to the Finance Act, 2010 prescribes a
statutory rate of cess of Rs.100 per tonne for all three categories, namely, coal, lignite
and peat. As per Annexure 2A its Rs 50/MT.
Stowing Excise Duty: Every owner, agent or manager of a coal mine is supposed to
provisionally assess the duties of excise levied on the total raw coal dispatched in a
given month and pay the same into the treasury. The remittance is credited to the
Central Govt. in a special account; As per Annexure 2A its Rs 10/MT.
Surface Transportation Charge(STC): As per Annexure 2A,its Rs 77/MT
Crushing and Sizing Charge.
Loading Charge
Fixed Royalty
Excise Duty of Basic Price, Sizing charge and Surface Transportation Charge.
CSE of 2 % is also added on the Coal Cost
Basic Freight: Indian Railways has divided various commodities under various classes
like Class 100,110,120,130,140,150,160,170,180,190.For Coal Freight rates, under
class 150 is taken into consideration.
Busy Seasonal Charge: Indian Railways has increased the Busy Seasonal Charge in
March 2011 notification from 7% to 10 % in lieu of heavy traffic during some
particular time of the year.
Development Surcharge: Accordingly Indian Railways has also increased the
Development Surcharge from 3% to 5%.
Sampling and Analysis Cost: This is the cost involved in carrying out various sample
tests of coal and thus adding A+B+C will give the total Landed cost of coal.
Various Different Mixes of Coal has been taken like 70 % from CCL (FSA Linkage),
10-15% from imported coal market like South Africa, Indonesia, and remaining %age
from E-Auction and open Market.
Then Weighted Average Cost has been calculated owing to the corresponding GCV
value available after mixing with all qualities of coal.
Per Unit Fuel Cost has been calculated accordingly with different mixes of Coal as
shown in the sheets below.(Please Refer Annexure -2)
As we know that Imported coal has high GCV value so that particular coal cannot be
mixed directly with the other available quality coal, so in order to cope with this
problem blending of coal will done to reduce the effective GCV of coal to a
acceptable level.
Page | 37
4.4.4 INDIA’S COAL IMPORT TRENDS:
Coal Imports
160
150
140
120
100
90
80
60
54
40
20 24.92
11.76
0
2000-01 (Actual) 2006-07 (Actual) 2011-12 2016-17 2021-22
(Provisional) (Projected) (Projected)
Page | 38
4.4.6 GLOBAL PRICE TREND FOR DIFFERENT COUNTRIES:
The price of coal in the global market is driven by the demand and supply scenario
prevailing in the market. The graphs show the price of the Indonesian coal and the Australian
coal during the past 3 years.
Figure 4-10: Global Price Trend for Indonesian & Australian Coal (in US $/Ton)
Indoneisan coal Reference Price(HBA)
Australia Coal Index
160
140
120
100
80
60
40
20
0
Jul-11
Jan-09
Jul-09
Sep-09
Jan-12
Jan-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Sep-11
Nov-11
Mar-09
May-09
Nov-09
Mar-12
May-12
Mar-10
The majority of coal is priced using OTC contracts with negotiations between the
involved parties. Physical spot market and derivatives are traded on exchanges around the
world. Standardized coal trading agreements are also available and generally preferred by
participants based on benchmark prices. Various benchmark prices index are currently
operating in global coal market. These indexes quotes prices for internationally traded
bulk coal on the spot market according to the specifications. The consumer in India has
the edge as the price of coal in India is generally low as compared to global of the same
calorific value
The table below shows the import of coal from the different countries on yearly basis;
to meet the surging demand of coal from the sector like power; steel and cement.
Page | 39
Table 4-5: Coal import trend in India country wise for the last 10 year (in MT)
Country FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Australia 10.84 12.7 13.3 12.3 14.36 15.88 20.7 19.59 22.83 15.944
USA .043 0 .019 .714 1.022 .877 .53 1.215 1.401 1.771
South 3.10 3.59 .64 .53 3.24 2.38 6.97 7.09 14.49 11.214
Africa
New .173 .148 .093 .248 .606 .69 .76 .84 1.05 .795
Zealand
Indonesia 3.42 3.99 5.67 9.12 16.05 18.74 19.51 28.76 32.16 35.94
China PRP 2.55 1.99 1.70 2.31 3.08 4.09 .553 .52 .044 .242
Others .119 .861 .239 3.475 .165 .35 .65 .53 1.11 2.58
Source: Dedicated Freight Corridor Corp of India (DFCCIL) & Infraline Research
There are various factors that drive the coal consumers to go for the Coal mining acquisition
abroad. Some of them are:
Reliability
of the Coal
Supply
Good
Quality
of Coal
Stagnant
Domestic Coal
Supply
Based on the facts that price in the international market is much higher than indigenous coal
price. So, totally based on imported coal is highly risky till you have high capacity portfolio.
Page | 40
4.4.9 SWOT ANALYSIS OF COAL RICH NATIONS:
Countries Australia Indonesia South Africa Mozambique
Reserves 39. 2 bt (2009-10) 18.7 bt (2007 study 55. 3 bt (2001-02) 16 bt (2009-10 study
(bt = Economic done by New Energy economic by Mozambique
Billion recoverable Development recoverable Ministry of Mineral
Tonnes) reserves. Organization & reserves. Exact Resources)
Government of current figures are economic
Indonesia) economic not known as no recoverable reserves.
recoverable reserves. serious geological
Accuracy of the figure study conducted
is subject to in this regard.
controversy.
Coal Queensland (overly Sumatra (overly Highveld (overly Tete and Niassa.
Regions exploited), New exploited), exploited), All regions are open
South Kalimantan Witbank, Ermelo, for exploration.
Wales (overly (overly exploited), Waterberg,
exploited), Papua, Java, Maluku Vereeniging
Surat Basin & & Sulawesi (partly South Rand,
Galilee Basin exploited). Utrechet and
(open for Klip River. All
exploration) regions are open
for exploration.
Page | 41
Tax Not very complex. Not very promising as Does not have Conducive but they
Regime But new Carbon Government of any explicit coal are ranked (139)
tax and Mineral Indonesia is policy in place. very low in Business
Resource Rent tax frequently changing But the situation environment by the
is clouding the their mining laws. is not alarming World Bank. Apart
mining sector. Apart from the above, like Indonesia. from the above,
Though it is not coal contract policy Mozambique does
implemented yet favours domestic not have any local
but possibility of companies. ownership or equity
introducing the requirement for the
same cannot be miners.
ruled out. If
implemented, it
will further
increase the cost of
mining.
Reserves 5 6 5 4 4
(bt = Billion
Tonnes)
Coal Regions 5 6 5 4 4
Cost of Mining 6 4 4 4 4
Coal Quality 3 4 4 4 4
Infrastructure 4 4 5 5 5
Tax Regime 5 7 5 5 3
Political 4 4 4 5 5
Stability
Proximity to 6 4 5 4.5 7
Indian Ports
Total 38 39 37 35.5 36
Aggregate 4.22 4.33 4.11 3.94 4
Ranking
Remarks Good for Not looking Good option. Here Best. Because Very good.
acquiring very companies must see of lower As coal plays
Coking promising how they will tackle shipping cost a small part in
coal for the the presence of big and Indian electricity
mines not future companies who companies generation in
for Because of already have got have already the country
thermal frequently good foothold in the got a good foot & most of the
coal. changing coal mining sector & hold in the coal produced
mining are securing export country. is meant for
laws. entitlements. export
purpose
Note: Greater the rank, less preferable is the destination (1= Best; 10 = Worst)
Rankings are based on the objective personal assessment of the author from secondary information
Page | 42
4.4.11 CONCLUSION:
The growth of the Indian economy has led to a robust rise in demand for
power. The government, in turn, has promised to unleash a 'revolution' in the energy
sector; it vowed to produce thousands of megawatts of power by increasing private
participation in the coal sector and allowing other Public Sector Units to get into the
business. Although there have been many voices in various conferences in New Delhi
pushing for a gradual move to other energy alternatives, reality suggests otherwise. A
bulk of the planned capacity additions for the near future is still coal-based. On a day-
to-day basis when coal supply is interrupted by bureaucratic regulations or social
unrest-as was the case in July 2012-the nation goes literally dark. Other sources fail to
fill the gap. Given that India has created a system of electricity generation and
distribution that is based on the economics of poorly paid miners inefficiently digging
out coal in open cast mines, it is unlikely that it will adopt radical alternatives unless it
invests substantial sums. India's continued use of coal is justified on the basis of the
surrounding socio-political economy. Importing coal will certainly be of help.
However, given that Indian domestic coal is sold at government controlled prices, the
import option will pump up the power costs and both companies and consumers will
have to pay more. Rising costs of imported coal, along with high power tariff, are
forcing many companies to surrender their supply contracts. Despite the problems,
overseas acquisition need not become the answer to problems in developing Indian
domestic coal blocks25. Domestic issues must be addressed on a war footing while
imports serve as a temporary solution in the interim.
25
A Coal block is an area from which the government has granted permission in the form of a mining
license to mine coal.
Page | 43
CHAPTER 5
ROADMAP TO COAL LOGISTICS
Hitherto, the development of new coal mines was taking place wherever transport
infrastructure for evacuation of coal and its further transportation to various designated
destinations could be managed without much of a problem. With the increased demand, more
and more new and far-flung coalfields are being taken up for development to meet the
increasing demand of coal in the country. Initially such developments can go along with road
transport. But road haulage is not easy due to lack of road infrastructure of adequate strength.
This highlights the need for development of railway facilities for all such locations. Similarly,
for handling and transportation of increasing volumes of imported coal, integrated port and
railway infrastructure has to be established.
Railways are the main stay for the coal transportation and account for about 50% and
will be the most desirable in the future. Roadways contribute 27.06% of movement of coal
and generally used for small amount within 300 km range. The captive source like MGR, belt
and ropeways also contribute for 22%, generally used for pithead plant.
Since CIL accounts for more than 85% of indigenous coal production, a reasonably fair
picture of transport logistics of total indigenous coal sector may be extrapolated from the
facts and figures pertaining to CIL. Hence, we will analysis the transportation and logistics
part of coal by CIL and assure the same pattern for the rest of coal producing company or
parties.
Table 5-1: Characteristics of Coal Logistics
MGR Best suitable for pithead power plant and for 793.53 MT
bulk amount
Belt/Ropeways Useful for plant near mines and for small amount 78.5 MT/33.19 MT
Source: CIL
Page | 44
Figure 5-1: Mode-wise distribution of Coal by CIL in FY12
Belt, 1.90% Ropeway, 0.80
%
MGR, 19.20%
Railways, 51.04
%
Roadways,27.0
6%
Source: CIL
The distribution of coal by different mode of transportation for IX; X and XI Plan is been
tabulated below. The below table clearly demarcate that railways will account for 50% of
coal logistics and rest will be taken care with road; merry go round and for pit head plants
rope ways; belt will be most effective and economical.
Table 5-2: %age contribution of Different modes of Transport in Coal Dispatch
Period Rail Road MGR Belt/Others
2001-12(IX Plan) 53.3 18.2 22.7 5.8
2006-07(X Plan) 47.1 25 23.2 4.6
2007-08(X Plan) 49.2 26.5 18.7 5.6
2011-12(XI Plan) 49 27.2 19.1 4.7
Source: Coal India Ltd.
5.1 ROADWAYS:
Page | 45
Gross Weight bridge •The Gross Weight bridge measure the weight of loaded trucks
•The Proclain machine is used to unload coal from truck into the
Proclain Machine
hopper
Tare Weight Bridge •It will measure the weight of unloaded trucks
Truck Tippler •This tipples or unload coal into the truck hopper
5.2 RAILWAYS:
5.2.1 WAGON TYPES:
Constraint:-
Presently we can handle 7-8 BOBRN rakes in a day, at given full system
availability due to railway constraints, of connectivity of plant. But we are receiving
presently 4 to 5 rakes per day. Traffic handling capacity of Indian Railway on this
route is limited due congestion b/w Sambhalpur to Burandamal.
Problem faced in completion of undergoing project of MGR26 (Merry Go Round).
Recommendation:-
Present Railway infra can handle 7 BOBRN rakes which can be increased to 10
rakes with proper management.
Try to complete the undergoing project of MGR at maximum pace, as the delay in
project would also lead to increment in project cost.
26
Merry Go Round is a block train of hopper wagons which both loads and unloads its cargo while moving.
Page | 46
5.2.1.2 BOXN RAKES:
BOXN Rakes has the higher capacity than the BOBRN rakes, but it
doesn’t have the facility of bottom opening to unload the Rakes so it requires the
wagon tippler to unload the rake. Each wagon of the BOXN rake has capacity of
around 67Ton. Unlike BOBRN rakes it has 59 wagons. The ideal TAT for the
BOXN rake is 6hrs, and 5 hours is free period time provided by railway for
unloading BOXN rakes, without any demurrage charges. While, in plant unloading
time is approx. 6-7 hrs. Total capacity of the BOXN rakes is around 3894Ton.
Constraint:-
System installed for unloading BOXN rakes is not performing as it was designed
for. So, due to this rakes take more time than estimated. And for that company
has to pay demurrage charges. Since the TAT for the BOXN is more than 8hrs
so, we can handle at most 6 BOXN rakes in a day.
Recommendation:-
If we are able to reduce the TAT for rakes, we can save demurrage charges. Fast
unloading will be the key for this.
2. Wagon Tippler
3. Track hopper
4. Diesel loco
5. Track length
Two way in-motion weighbridges are used for weighing the rakes.
Rakes coming from the mines are weighed in motion weighbridge in motion.
It takes around 10 minutes for this purpose. The Load cell can weigh the rake
when its speed is less than 10 km/hr.
Page | 47
Constraint:-
When rake moves at a speed higher than 10km/hr then there are chances of
either skipping of wagons or weighing errors.
Load cell and digitalizer problem can led to the skipping of rake weighing and
power problem failure problem sometime leads to manual restarting of system,
during that period rake can escape from weighing.
Recommendation:-
Rakes speed must be between 8-10 km/hr. for proper weighing of wagons.
Backup power and checkups of load cell is required. So that no manual start-
ups is required and no rake could escape.
There are two Wagon Tipplers in SEL. The capacity of the wagon
tippler is 20 wagons per hr. Each takes around 3-4 minutes to unload a BOXN
rake. At max it can handle four rakes in a day.
Constraint:-
Recommendations:-
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• Its hydraulic pressure should be checked & maintained regularly.
• Proper inspection and maintenance of belt be done.
• Before rake arrival it should be checked for proper functioning by trial run
and if there is any problem it should be sorted out before arrival of rakes.
• Hopper may also get jammed due to over feeding of coal in hopper. This
may be avoided by running conveyor continuously when unloading rack.
Track Hopper Track Hoppers are mainly used for coal storage &
handling in power plants. The coal is generally transported from coal mines
either by BOBR wagons (Bottom Open Bottom Discharge), or by Top open
wagons & rarely by trucks. A standard Track hopper is approximately 210m
long. Hopper is a big funnel to unload and store the coal. There are two
hoppers for BOBRN rake, two for BOXN rake and four for truck tippler. The
capacity of each BOBRN track hopper is around 4500 Tons, whereas the
BOXN hopper has the capacity of 240 Tons each. Since the capacity of the
hopper is large so it can hold one rake coal in it. In BOBRN hopper at a time
23 wagons can be unloaded.
Constraint:-
The major problem occurring in the hopper jam due to the wet coal or due
to coal boulders.
Frequent belt breakdown, due to which, unloading stops.
Sometimes due to the fault in the motor, the movement of the belt stops.
Problem of specific hopper jam arises due to some technical issue.
Recommendation:-
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Proper maintenance and pre checking of belt is required for its proper
functioning.
It is better to use nylon belt having high mechanical strength.
Similarly, for motors regular bearing heat and other technical
specifications should be checked.
In case of hopper jam, system should be stopped immediately and hopper
jam be cleared manually.
For the purpose of internal movement of rakes from unloading point to the
holding point, formation of BOXN rake sit is used.
Take off from Brundamal Station of East Coast Railways; 18.6 Km. Take off
from Jharsuguda Yard. Track Length 37 Km. Interconnections of CPP and IPP
Railway.
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Track Length: 12 Km
Under construction
Railways provides coal transportation in large quantity and in less costly compare to
road transportation and expenses for unloading a rake27 of quantity 3717MT is far lower than
unloading same quantity of coal by trucks.
The coal for the IPP plant is received through the Mumbai-Howrah line from IB valley area
and Talcher region. The rakes are coming to the BRUNDAMAL station. Brundamal is
serving station for CPP & IPP both; it has the two ends: Sambhalpur end and the Jharsuguda
end. There is Y-connection made in BRUNDAMAL line to handle more rakes and to avoid
engine reversal. Because of the Y-connection rakes from both the ends can come directly to
the plant. Rakes take around 30-45min to reach plant from the station.
The rakes coming from Sambhalpur end come to plant through Y-connection line and the
drawn out is through same line. While the rakes arriving from JSG end arrive and t exit
through same JSG to Sambhalpur line.
27
A Rake a line of Railway wagons coupled together as one unit. Usually 59-60 wagons are there in a typical
rake.
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Figure 5-3: Monthly Rake Break-up
5%
13%
11%
Linkage rake
E-auction Rake
Import Rake
71%
Others Rake
1. The SEL railway network presently can handle 10 rakes at max (7 BOBRN, 3
BOXN), given all system working properly, but on average the presently
system is handling 6 rakes a day.
2. For rake to be drawn out it takes half an hour, soundless the rake is drawn out
another rake cannot be taken in.
3. Secondly, when there is rake on Brundamal station rake cannot be drawn out
or placed on the CPP line before station, as this will block the IPP track line.
4. Out of two holding line only one line can be used for rake holding while the
other one is for engine reversal or rake formation.
5. For rakes drawn out engine reversal takes much time. There is no provision for
direct rake drawn out without engine reversal.
6. Since, for BOXN rake engine provided by the railways so it usually takes
more times depending upon the availability of engine by railway.
Recommendation:-
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3. Construction of five more lines at Brundamal station for movement of rakes is
going on, which would increase the traffic movement capacity of Indian
Railway. Then number of rakes to be moved towards SEL per day will
increase, as lane would be available for movement. If BOXN unloading time
reduced 3-4hours then power would be available inside the plant, as per Indian
Railway engine unloads standards.
4. Track length should be made more than rake length in case of holding line,
which is less in case of BOBRN hopper
5. Length of Brundamal-Sambhalpur end line to Y- connection crossing should
be increased to full rake length, so that a rake can be placed in case of train at
Brundamal station during drawn out.
6. Without engine reversal, direct drawn out line is required for handling future
coal requirement of plant.
7. Proper co-ordination with the railways is required for smooth rake movement.
a) AT PLANNING LEVEL
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b) AT PRODUCTION POINT
c) IN Railways Routes
Movement of Freight and passenger traffic through same track – transit delay
All trunk routes including Golden quadrilateral and its diagonals saturated or
super saturated – constraint for throughput handling
Multi-commodity handling rolling stocks –prioritized movement of food
grains, fertilizers affects wagon supply for coal in peak production months.
Limited yard availability – restricting load and empty rakes handling capacity
Smaller rake size, higher dead load – restricting haulage quantity
Absence of electrification in coal moving tracks – delay for changing
locomotives
Bifurcations of Zone Railways – indulging intra-zone wagon movement,
particularly in peak season
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No time schedule available for arrivals of loads– idling infrastructure &
restricting planned maintenance
Monthly requirement of coal not equitably distributed --- bunching of rakes at
unloading points
Delay in cross-over, exchange-yard --bunching of rakes often creating
problems even in main operational lines
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Table 5-3: Railways Expansion & Future Vision 2020 for Freight Traffic
S.
Name of sections Features KMs
No
The freight carrying capacity of India is around 3364 tonnes per rake. While in Canada;
Australia and America freight carrying capacity is 8000; 9600 and 12500 tonnes per rake.
Comparing with other counties like Canada, America and Australia is about 2.37; 2.85 and
3.17 times less respectively. In simple words, in India it will take 2.37 rounds to transport
same amount of commodity than what is done in 1 round in America.
Figure 5-4: Comparison of Freight carrying capacity per rake (in Tonnes)
12500
9600
8000
3364
Indian railways traffic increases to 969.8MT in FY12 from minimal 73.5MT in FY51. Coal
account for 455.8MT of freight in FY12 compared to 420.37MT in FY11. To achieve the
1GW target for XII Plan, the railways have to play a crucial role in the logistic part. Coal
account for 46% of total freight of Indian railways in FY11.
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5.2.3.5 Technology Innovation in Coal Transportation Logistics
The technological step and innovation d taken by CIL for
transportation of coal from mine to end use plant. The different method or
technological steps taken are explained in detail below:
1. Coal-by-wire -Power-grid networking, over the years, has immensely helped in
curbing requirement of physical movement of coal, particularly in long haul.
Instead of coal movement, the electricity produced by coal is transmitted to the
user end.
4. Coal-by-slurry -In coal by slurry methodology, the coal is formed in the slurry
form by mixing with the water and at the receiving end it is extracted and coal is
dried to removal the excess water. The coal by slurry metrology is prevailing in
vogue in USA.
• Major Ports fall under operational & financial control of Ministry of shipping &
subject to tariff regulation by Law
• Minor ports: under State Maritime Boards & free from formal tariff regulation
India has a vast coastline measuring about 7517 km. India has a rich heritage of about 200
ports. It has 12 major ports, and 187 non-major ports and one major corporate port. The cargo
Page | 57
increase during the next decade is estimated to grow at a CAGR of 7 percent. Imported coal
has contributed a significant percentage (8-9 %) in the total cargos handled at ports.
Figure 5-5: Ports marked on Indian map
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Cape size Nil Mundra , Gangavaram and Krishnapatanam
New
Is connected by broad gauge line to Southern India and through
Mangalore 32.1
Konkan Railway to northern part of the country.
Port
Mormugao
Is connected by broad gauge line to Konkan Railways. 50
Port
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Jawaharlal
Port is connected to Panvel by Railway. 64.3
Nehru Port
The challenges and the bottlenecks at the ports infrastructure slow down the trade with ports.
Connectivity
IT Implementation
Dredging
Poor efficiency caused by slow evacuation of cargo from ports or slow turnaround of
ships. For container handling, adequate electronic environment with Enterprise Resource
Planning (ERP), which enables the resources of ports to be used in an even and efficient
manner, is yet to be established in a full-fledged manner. During the Xth Plan only 11 percent
of the target for dredging could be achieved. The XIth Plan target is more than two times. It is
observed that the port’s role in the entire logistics chain is barest minimum to provide the
infrastructure facilities for handling of vessels and other cargo. It revealed that the total time
taken by the port authority, cumulatively, is 3.5 to 5.5 hrs for import and 3.3 to 5.3 hrs for
export. Thus it can be observed that the rest of the time the container dwells in the port is on
the account of other stakeholders like shipping agents, customs, Clearing agents / transporters
etc .The average dwell time in major container terminals is 1.88 (import) and 3.78 (export)
days. These are some of the challenges and bottlenecks that the port infrastructure is facing
now a days.
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CHAPTER-6
RESULTS & CONCLUSION & RECOMMENDATIONS
6. RESULTS:
The growth of the Indian economy has led to a robust rise in demand for power. The
government, in turn, has promised to unleash a 'revolution' in the energy sector; it vowed to
produce thousands of megawatts of power by increasing private participation in the coal
sector and allowing other Public Sector Units to get into the business. A bulk of the planned
capacity additions for the near future is still coal-based. Demand for coal is increasing
drastically and Coal India Limited unable to fulfil the increased demand.
As there is a gap in demand of coal and supply by Indian coal companies, so the power
companies has to look for imported coal to fulfil their demand. Besides this the Indian coal is
of poor quality having high ash content also suggests for a blend with high grade low ash
coal. Transportation facilities also suffer a lot as demand and source stations are far situated.
Importing coal will certainly be of help. However, given that Indian domestic coal is sold at
government controlled prices, the import option will pump up the power costs and both
companies and consumers will have to pay more. Rising costs of imported coal, along with
high power tariff, are forcing many companies to surrender their supply contracts. Despite the
problems, overseas acquisition need not become the answer to problems Domestic issues
must be addressed on a war footing while imports serve as a temporary solution in the
interim. So, based on the study a mix of all this various coal sourcing option based on the
requirement is the optimal solution for coal.
Coal Logistics plays an imported role in importing coal. Challenges to coal logistics include
Port Infrastructures, Railway Infrastructures, and Total Quantity & Quality management and
also Cost factor related. As a result of this study we have done, the sourcing of coal from
Indonesia is found to be most suitable and the infrastructural development inside the plant are
found to be sufficient to handle coal, with some necessary additions for uninterrupted
movement of coal and improvement in railway connectivity & congestion. Infrastructural
project taken up by the regional railway should be completed at it earliest, which is essential
for materializing more coal by rail.
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6.1 CONCLUSION & RECOMMENDATIONS:
To sum up, in a heavily coal dependent economy like India continuously widening
demand - supply gap of coal is a matter of serious concern and steps should be taken for
increasing domestic coal production for long term energy security. Solution inter alia lies in
accelerated development of captive coal block and for this, outstanding issues must be
resolved early. A strong domestic coal production and delivery system would be imperative if
the country has to achieve the goal of energy self-sufficiency and long term energy security.
An independent coal regulator is required to create confidence in the mind of private
investors and to provide them a level playing field. Coal imports are set to increase. This calls
for securing coal prospects abroad and development of port capacity with matching inland
transport infrastructure.
The coal can be procured from different sources that include domestic as well as
international market. E-Auction can meet the demand of smaller plant were demand for coal
is small and also in plant were coal is mixed with other source of energy like biogas plant and
other fuel based power plant but reliability and cost of E-Auction coal is market driven and
required a lot of study of market. The shortage supply of coal from CIL and mining company
made fuel linkage; a most reliable sourcing option a risky option now-a-days and also the
quantity, quality and timely delivery are some of the concern with fuel linkage.
Mining & Acquisition abroad and import is more a regulatory and polices concern. The price
of coal from abroad is more or less depend on rules and regulation prevailing in that country
and logistics constrains also play a vital and crucial role while opting countries for import of
coal from different coal surplus countries. Coal can be procured in three ways from the
international market which are
Spot Market
Long term bilateral Contract
Acquisition of own mine
As the spot market prices are fluctuating every month and we won’t have the assurance of
quantity, so spot market is suitable for small volume, and it suits for the small power plant.
Long term bilateral contract will give the assurance about the quantity and quality, but the
prices have to be renegotiated, when there is a huge difference in the market price.
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After studying the bottlenecks and challenges of the Railways & Port infrastructure in India,
the following recommendation and remedies were written down to curb the shortfall of the
Railways & Port infrastructure.
Recommendations for Railway Infrastructure
Conectivity facilites
There can be some limitations of the research report that can come as a hindrance on the
securing the aforesaid target of securing fuel supply. These are:
A detailed cost analysis of the coal prices can be cited as a limitation because landed
cost of coal and various pricing heads affect the final price of coal.
African countries like Botswana, Mozambique are considered as under-developed
countries and thus the regulations as well policies are not clear.
Socio Economic and Political factors have not been discussed in detail in the report
which can affect coal imports from these countries.
Availability of big size coal carrying ships can also affect the coal trade.
Natural calamities like earthquake, floods etc can affect coal production in these
countries.
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6.3 FUTURE SCOPE OF PROJECT:
As per analysis, Coal will be the main stay of energy for India for the next to 15-20 years. So
securing the coal supply is the most crucial factor at this point of time. If one thinks on a long
term scenario, this project has a wider scope of fulfilling the fuel shortage especially coal for any
Indian Thermal Power Plant. This project can be further used to do a detailed analysis for various
countries of the world having sufficient amount of coal reserves.
Moreover this report can be extended in studying the effect of coal import on the company’s
financial condition and thereby making it more competitive in the current power sector scenario.
As Indian railway is taking up many projects to increase its goods carrying capacity the
movement of goods and passenger trains will increase. Odisha being the hub of power
industry with around 65billon tons of coal reserve is going to be the hub for other heavy
industries. These industries require raw materials in large volumes, which could be
transported by high capacity vehicles or other means of transportation like railways and the
inland waterways. But for rapid growth and development railway is the only mean. So
railway is investing on many projects in this area.
Some of the projects which would prove fruitful For Sterlite Energy and Vedanta Aluminium
Ltd and would enhance connectivity of the plant and would help logistic department to
handle more rakes and would provide delivery of available material to plant for sustainable
plant operation are:-
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