OUTLOOK OF COAL DEMAND/SUPPLY AND POLICY IN INDIA 2009 APEC CLEAN FOSSIL ENERGY TECHNICAL AND POLICY SEMINAR 12 TH - 14 TH OCTOBER 2009 INCHEON, KOREA

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1 OUTLOOK OF COAL DEMAND/SUPPLY AND POLICY IN INDIA 2009 APEC CLEAN FOSSIL ENERGY TECHNICAL AND POLICY SEMINAR 12 TH - 14 TH OCTOBER 2009 INCHEON, KOREA 1

2 Presentation Sturcture Coal Sector Overview Demand profile Production Profile Strategic Initiatives Policy Challenges 2

3 Coal Sector Overview 3

4 Coal: World s Fastest Growing Fuel Coal has been the world s fastest growing fuel and coal use is expected to grow faster than any other fuel far into the future Steep demand growth in China and India 7 Year Change in Global Energy Consumption CAGR Coal 41% 5.0% Natural Gas 23% 3.0% Change Hydro 22% 2.9% Oil 10% 1.4% Nuclear 3% 0.4% 0% 10% 20% 30% 40% 50% Source: International Energy Outlook 2009, BP World Energy Report

5 Asia s Most Important Fuel Coal remains a key source of energy in the world Provides ~29% of global primary energy needs Generates ~41% of world s electricity Primarily used for power generation and metallurgy Cheapest source of energy on a heat adjusted basis Long term secular factors to drive global growth in coal demand Growth driven by China and India ~50% of global demand Global demand driven by steel and power industries and higher cost of competing fuels Asian growth driven primarily by power generation needs Infrastructure and regulatory constraints, access to low-cost reserves and higher cost structures impacting supply Energy Consumption 1 (2008) Hydro electric 6.4% Natural Gas 24.1% Coal 29.2% Nuclear Energy 5.5% Oil 34.8% World 11,295 Mtoe Hydro electric 5.3% Natural Gas 11.0% Oil 29.7% Nuclear Energy 3.0% Coal 51.0% Asia 3,982 Mtoe Source: BP World Energy Report Mtoe= Million tonnes of oil equivalent= 1.5 metric tonnes of hard coal 5

6 Coal Industry in India Total resources ~267bn tonnes: 106bn proved, 124bn indicated and 37bn inferred 81% of production from opencast mines; 19% from underground mines Coal present in 14 out of 28 states [Indian coal is generally high ash, ~4500 GCV, low Sulfur] Coalfields Coal Reserves in India China Pakistan Nepal Bhutan India Sri Lanka Myanmar Types of Coal Produced in India Coal Production and Imports Tertiary Coking 0.4% Coking 12.6% Non Coking 87.1% Source: Ministry of Coal, India; Coal India Management Coal Others Imports 6

7 Unparalleled Strategic Relevance The Indian economy expected to grow at 7.5% p.a. over the next 5 years Access to electricity a core element to achieving this growth Energy demand growing at 7% per year Additional generation capacity of 79 GW 1 by of which 72% coal-fired Over 50% of Indians currently do not have access to electricity Coal contributes ~54% of commercial energy in India Growth in GW in India Coal Consumption as % of Energy Consumption in India 2 Installed Capacity (GW) CAGR: 6% E Natural Gas 9% Hydro Electric 6% Oil 31% Coal 53% Total = Mtoe Nuclear Energy 1% Source: External Research, Ministry of Coal, Planning Commission of India 1 Excludes Wind and Renewable Energy 2 Mtoe= Million tonnes of oil equivalent= 1.5 metric tonnes of hard coal 7

8 Indian Coal Industry in Context Per Capita Electricity Consumption Growth in India (units per capita) Global Coal Production by Country ,000 3,000 2, , % Growth in XIth Plan Million Tonnes 1 2,000 1,500 1, ,455 1, USA Russia China India Australia Electricity Consumption per Capita Global Coal Reserves by Country US 13,515(2007) Australia 10,347 (2007) France 7,493 (2007) China 2,444 (2007) Billion Tonnes Brazil India Indonesia 2, (2006) 504 (2007) (2007) 50 0 USA Russia China India Australia Ukraine Kazakhstan South Africa 4 South Africa Source: International Energy Outlook 8

9 Coal Reserves (as on ) Estimated Coal Resources Bt Coking Bt; Non-coking Bt Proved Reserves Bt or 39.6% Coking Bt; Non-coking coal Bt Remaining Bt or 60.4% of resources to be brought in to proved category Extractable reserves of about 55 Bt may last for 50 years with projected level of production. Estimated Lignite resources Bt Proved Reserves Bt (12%)

10 IMPORTANCE OF COAL RESOURCES IN INDIA In power generation coal contributes 75%. Power sector consumes 78% of total country s coal production. Industries such as steel, cement, fertilizer, chemical, paper and a host of other industries also dependent on coal. 10

11 Actual and Projected Coal Demand during XI Plan Sectors (IX Plan) (X Plan) (Actual) (RE) (BE) (XI Plan) Power (Utility) Power (Captive) Steel & Coke Oven Cement Sponge Iron BRK & Others Total

12 Actual & Projected Coal production targets for XI Plan Company (IX Plan ) (X Plan ) Actual Actual (BE) (XI Plan) ECL BCCL CCL NCL WCL SECL MCL NEC CIL-Total SCCL Others Total

13 Emerging Demand Supply Gap in XI Plan Actual production from domestic sources - not likely to reach the envisaged level by the terminal year of XI Plan. Estimated demand based on existing linkages/ FSAs and LOAs - outstrips estimated supply projections. Ggap likely to be wider than the gap projected by Working Group. 13

14 IMPORT OF COAL Year Coking coal Non-coking coal (Qty in million tonnes) Total of coking and Non-coking coal

15 Blocks allotted to New Players Sector / End Use No of blocks Geological Reserves (MT) A. Public Sector Undertakings I Power II Commercial Mining III Iron and Steel Total (I + II+ III) B. Private Companies (a) Power (b) Iron and Steel (c) Small and Isolated (d) Cement (e) Ultra Mega Power Project (f) Coal-to-Liquid Project Sub-total Grant total

16 Key Strategic Initiatives Enhancing Availability of Resources Ensuring Accessibility of Resources Increasing Acceptability of Mining Practices Improving Profitability and Efficiency Targeting: Sustainable Development Growth Profitability Efficiency 16

17 Enhancing Availability of Resources EXPLORATION Drilling targets increased 5x Convert inferred and indicated category of reserves to proved category Carrying out detailed drilling and projectisation of coal blocks allocated to captive block owners COAL INVENTORY Exploration being carried out in systematic manner to arrive at reliable estimate of coal reserves Application of Information Technology to create geo database PROJECTS New projects for ultimate capacity of ~325 Mty in public sector New players to contribute ~450 Mty by FOREIGN ACQUISITIONS Process of acquiring coal resources abroad through equity stake in working or green field projects Acquired 2 virgin coal blocks in Mozambique Global EoI floated for selection of strategic partners for overseas operations 17

18 P r EXPLORATION Carried out in two stages: Regional and Detailed In , 0.272mn meters of drilling has been achieved COAL MINING CIL owns 473 mines 279 UG 163 OC 31 Mixed SCCL and TISCO are the other main players in coal mining 201 blocks are allotted to public/private companies. BENEFICIATION CIL operates 17 washeries ( 11 coking and 6 non coking) CIL has taken a decision to supply beneficiated coal to all consumers, other than those located at pitheads 19 new washeries are being taken up for construction under BOM with a total washing capacity of Mty 18

19 Ensuring Accessibility of Resources OPENCAST MINING UNDERGROUND MINING Computer-aided mine planning for deeper OC mines Deploying high capacity equipment to achieve economies of scale OITDS for efficient fleet management State-of-the-Art mass production technology being used Tapping large reserves below 300m depth 7 UG Greenfield properties being developed 18 abandoned mines with estimated reserves over 1600 MT identified for development HIGHWALL MINING Mining of good quality thin seams Recovery of good quality coal in OC mines beyond economic stripping ratio limit CBM/UCG Recovery and commercial utilization of CBM from deep seated seams Underground coal gasification of deep seated seams 19

20 Increasing Sustainability of Mining Practices SOCIAL Liberalized R&R policy for the Project Affected People (PAP) Supports 665 educational institutes in coalfield areas Provides medical assistance through 85 fully-equipped hospitals and numerous dispensaries ENVIRONMENTAL Setting up 19 washeries with a capacity of Mty Started satellite surveillance for land reclamation and restoration of OC mines 29 OCPs secured ISO (Environmental Certification) Planted ~70 million trees with survival rate of over 75% Plantations and Greeneries over OB Dumps 1 1 Left Picture: Plantation over OB Dump, MCL. Right Picture: Greeneries over OB Dump, Umrer, WCL Source: Coal India Management 20

21 Policy Initiatives Policy framework (operational guidelines) for underground gasification notified. Guidelines on allocation of blocks for coal liquefaction notified 2 blocks since allocated to two companies. E-auction and forward e-auction of coal started. Policy on mine closure published thrust on restoration of land and funding for the purpose. Exploration outsourced to new/ private players. Committee constituted to plan infrastructural support to coal mining.

22 Policy Challenges Opening up of sector removal of entry barriers : Group of Ministers constituted. Independent Regulator draft Bill (legislation) circulated for inter-ministerial consultation. Competitive bidding for grant of concessions a Bill (legislation) introduced in the Parliament. Listing of coal PSEs/ SOEs for better corporate governance and market discipline. Land use regulation entire coal bearing area to be mapped, regulation of use for other purposes. New statute on land acquisition, resettlement & rehab.

23 Thank You! 23