The truth about India's coal

VISWANATH KULKARNI | Updated on March 08, 2011 Published on March 07, 2011

A scene of a open coal mine in Ledu area, Tinsukia district of Upper Assam. (file photo)   -  THE HINDU


India's coal reserves are vastly overstated, says a policy paper by The Energy Research Institute, casting doubts on the estimates of the extractable resources.

Demolishing the myth that the country has plenty of coal, a TERI (The Energy Research Institute) Policy Brief says that India may be living in a fool's world. It has less coal than it thinks. The coal that can be extracted — taking into account the geological, technical and economic aspects — is only a small per cent of the total coal inventory, without considering the no-go areas where mining may not be permitted, according to Mr R.K. Batra and Mr S.K. Chand, authors of the paper titled “India's coal reserves are vastly overstated”.

The issue of coal availability assumes significance because the commodity accounts for more than half of the country's energy mix. To sustain the growth rate of 8-9 per cent over the next few decades, the country has invariably to depend on coal. Demand for coal from the power sector is set to grow by a tenth, driven by new capacity additions, while the supply through domestic production is seen around 7-8 per cent.

Delay in clearances for Coal India Ltd (CIL) and tightening of environmental norms for existing projects have already caused considerable chaos in recent months, leading to a widening demand-supply gap.

The country has increasingly to rely on imports, which are set to grow to 142 million tonnes next fiscal, from 83 million tonnes this year.

Amidst tight global supplies and price rise, the ability to import large quantities could be restricted, thereby impacting energy security. In this context, it becomes imperative to take a re-look at the way reserves are assessed to get a realistic picture of coal resources so that the growth is not jeopardised.  

Assessment methodology

Traditionally, India has followed the Indian Standard Procedure (ISP) Code to assess coal inventory.

The ISP Code is based on the geological evaluation of resources without assessing the quality, mineablility or extractability of deposits. Based on the data from the spacing between two boreholes drilled to explore the minerals, coal reserves are assessed and classified into categories such as inferred, indicated and proven.   At a broader level, the Geological Survey of India through regional exploration, locates the coal-bearing areas and indicates the resources. It is then the task of the Central Mine Planning and Design Institute to convert such ‘indicated' reserves into ‘proven' category through detailed exploration.

Of the total coal inventory of 276.81 billion tonnes, only 40 per cent, or 110 billion tonnes, falls into the proven category. Of this, around 55 billion tonnes is considered extractable, which the Coal Ministry says would last for about 100 years at the current production rate of 550 million tonnes.

Further, the Ministry believes that extractable reserves would increase as more coal reserves become proven reserves with continued detailed exploration.

CIL has a total inventory of 65 billion tonnes and feasibility studies have been done for 30.4 billion tonnes of its resources, while studies for more than half of its resources are pending. The extractable reserves are pegged at 21.8 billion tonnes. CIL, which follows the ISP code for resource estimation, intends to continue to follow them.

TERI's projections

Ahead of its recent IPO, Coal India, through an independent study, got its resource and reserve estimation practices validated by SRK Consulting. Tighter environmental regulations forced the world's largest coal producer to revise downward its output target twice during this fiscal.

TERI says that CIL's reported inability to make coal available for power plants commissioned after 2010 has raised questions on the authenticity of its reserves.  

TERI says total inventory is not important; what matters is how technically feasible and economical the mining of that coal is “If the coal that exists cannot be reached or technically or legally mined out, then obviously that coal is not available. Similarly, if the coal can be mined out, but the cost is such that consumers are not prepared to pay the  corresponding high price, then again the coal should be considered as  ‘not available', it argues.  

UNFC norms

The TERI paper suggests that India should adopt the universally applicable scheme of classifying mineral resources and reserves — the United Nations Framework Classification (UNFC).

Considered a more objective method of calculating reserves, the UNFC, apart from using the geological parameters, uses other such criteria as economic and commercial viability, field project status and feasibility in arriving at the inventory.

UNFC denotes coal reserves as the part of remaining resources that is economically mineable, technically feasible or extractable and geologically proven.  

Though the Government decided to implement the UNFC scheme for classifying minerals way back in 2001, not much progress has been made in the case of coal since then. One of the reasons attributed is that classification of data is a time-consuming process.  

TERI advocates that not just CIL, but all coal producers should adopt the UNFC system as quickly as possible.

“Failure to do so is to shut one's eyes to what may turn into a grim reality — India does not have adequate extractable coal reserves required either to meet current incremental demand or to make long-term supply commitments. If we remain in a state of denial, we will not take the urgent and necessary steps to augment these reserves”.  

Further, adopting the UNFC system on estimating resource may improve investor confidence in the sector as the Government gears up for allocating newer coal blocks.

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Published on March 07, 2011
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