Firing Up India’s Coal Supply

By Thomas Timlen

India is betting big on coal: In a bid to bolster energy security to stave off a power crisis, the government has pledged to double production over the next four years. As cargo-carrying opportunities soar, project logistics are set to emerge big winners.

From Issue 1, 2024 of Breakbulk Magazine.


With India’s coal production expected to double in the next four years, its 427 million tonnes per annum (mtpa) of planned new coal mine capacity will place it second in the world after China with 596 mtpa – and provide a slew of project cargo work.

Following the announcement that India aims to reach net zero carbon emissions by 2070, it has been acknowledged that the country has made significant progress in renewable energy capacity installation, ranking fourth in the world in 2022 according to the Climate Action Tracker, a non-profit climate science and policy institute based in Berlin. However, making significant progress with renewable energy while preparing to double coal production presents quite a paradox.

What’s on offer for project cargo handlers? A brief published by Global Energy Monitor, or GEM, in 2022 reported that there were 99 proposed coal mines in India, with 77 percent of planned capacity clustered in just three states: Chhattisgarh, Jharkhand, and Odisha.

The initiative to open new mines would bode well for the project cargo sector, as the mines would create increased demand for transportation of mining construction equipment and mining infrastructure. The project transportation sector could also benefit from demand from the 26 new railway projects linked to the coal mining initiative, 10 of which are considered as critical and to be pursued on a priority basis for completion within the next three years. Expansion of roads and other infrastructure would also create additional demand for transportation providers.

NLC India Ltd. and Hindalco Industries Ltd. were reportedly among the companies that will be operating six coal mines that were put up for auction in 2023 in the seventh round of auctioning of mines for commercial mining. A total of 92 mines have been auctioned so far, only seven short of the 99 projected by GEM.


Addressing a Power Crisis

The onset of a power crisis in India in 2022 emboldened the national government’s plans to mine more coal and advance its long-standing commitment to produce 1,000 million tonnes in 2023-2024. As the coal ministry devised new measures to rally production, the backbone of the scheme was the continued privatization of the mining sector and the opening of new coal blocks for commercial auction.

However, a survey conducted by GEM of every operating coal mine and proposed project in the country found that the industry suffers from chronic underutilization. With 1,211 mtpa of approved capacity at its operating coal mines, 433 mtpa, or 36 percent of that capacity is idled and unused. At some large coal mines, underutilization is so severe that operators mine just 1 percent of available capacity.

Dorothy Mei, GEM’s project manager, told Breakbulk that there are hurdles to overcome before new projects can progress. “The private sector lacks sufficient incentives to engage in the development of new coal mines in India. The recent decline in global coal prices in 2023 and the production increases of Coal India Limited (CIL) have cast doubt on the wisdom of pursuing commercial coal auctions. The prospective mining development projects are also situated in forested areas, necessitating longer lead times for environmental review, greater expenditures for exploration and development, and provoking resistance from local communities.”

Global events have also had an impact on India’s plans. “The geopolitical tensions with China, and the impact of the Russia-Ukraine war, have heightened India’s resolve for energy independence,” Mei said, “but the primary impetus behind this pursuit remains the country’s domestic energy demand.

“In the past two years, the production of coal hasn’t kept up with the soaring demand fueled by severe weather and post-Covid-19 economic rebound, which has prompted India to push for new coal mines to avoid major power shortages. While India is relatively less reliant on coal imports compared to oil and gas, it still sources over 20 percent of its coal from overseas, especially for metallurgical coal.”

GEM’s report showed a notable uptick in approvals for coal power plant projects in the first half of 2023, with three non-captive coal plant expansions (3.9 GW) receiving permits in the first five months of 2023 and seven other proposals (7.6 GW) also moving forward in the permitting process by receiving Terms of Reference, and two additional projects (2.9 GW) under consideration for the first time in 2023. “New coal mines can’t open fast enough to ease these short-term demands,” Mei said.


Investment in New Mines

GEM’s brief noted that “up to 70 percent of the country’s active mines operate at a financial loss.” Some firms faced significant financial difficulties after entering the sector, poor performance that could discourage potential operators from opening new mines. Under these circumstances, what is the motivation to pursue operations that do not generate profits?

“The financial losses may not really deter potential operators, particularly big state-owned enterprises like Coal India, from opening new mines,” Mei explained. “These operators often receive government subsidies, which can offset financial losses. The primary motivation for continuing operations despite lack of profitability lies in the national goal of achieving energy independence since India is focusing on leveraging its substantial coal reserves to reduce reliance on imported energy sources. The strategic importance of coal mining may outweigh immediate financial considerations.”

Internal arrangements are one factor, but there are also factors beyond India’s borders. Aside from geopolitics, environmental groups also have an impact. In Australia, pressure has been applied by environmentalists regarding mines operated by Indian companies there, which could be seen as another driver that adds to India’s desire to have more coal mining conducted in India.

However, GEM’s Program Director for Coal, Ryan Driskell Tate, told Breakbulk that the environmental campaigns in Australia against the Carmichael coal project are unlikely to encourage new mining inside of India. “The Godda power plant originally intended to source coal inside Jharkhand but only later changed to source from Australia’s Carmichael coal project, with electricity exported to Bangladesh,” he said. “The maneuver was viewed by some as an effort to prop up the Carmichael mine amid controversy. As GEM has found, India has a widespread underutilization of its existing mine capacity. Whatever happens with Carmichael, the supply should be sufficient at existing operations inside India.”


Domestic Versus Global

If India’s initiative does result in new mines being established, project cargo transportation services will certainly be needed. The question is, is there sufficient domestic construction and transportation capacity to meet the needs of India’s ambitious initiatives to establish new mines, or will it be necessary to involve foreign service providers?

“As evidenced by the halting of passenger trains to free up rail track to move coal, India lacks the infrastructure to meet their ambitious coal initiatives. Despite the 13 coal-railway projects currently underway and an additional 26 announced, as long as India’s coal production targets continue to increase year-over-year, its coal phase-up plans will continue to outpace its coal infrastructure capacity,” GEM’s researcher Tiffany Means said.

“Not having a coal logistics roadmap in place prior to coal phase-up is thwarting India’s efforts to decrease dependence on coal imports and is costing India more in crore and carbon dioxide emissions as rail is more cost-effective and environmentally friendly than other modes of coal transport, such as trucking. The Ministry of Coal and Indian Railways doesn’t expect coal evacuation requirements to be met until nearly 2050, a mere 20 years before India’s 2070 net zero target. This could not only put India at risk of missing its net zero emissions goal, it could also put the country’s planned coal infrastructure at risk of becoming stranded assets.”

While there have been no significant developments since August 2023, as of September 11, 2023, India’s Ministry of Coal had formally signed agreements with the successful bidders of all six coal mines which were auctioned off during the seventh tranche of commercial coal mine auctions.

According to Means, the mines and their new mining companies include:

• Meenakshi West (partially explored) - located in Odisha State - owned by Hindalco Industries Ltd
• North Dhadu East (explored) - located in Jharkhand State - owned by NTPC Mining Ltd
• North Dhadu West (explored) - located in Jharkhand State - owned by NLC India Ltd
• Pathora East (partially explored) - located in Madhya Pradesh State - owned by Shri Bajrang Power and Ispat
• Pathora West (partially explored) - located in Madhya Pradesh State - owned by Shri Bajrang Power and Ispat
• Sherband (partially explored) - located in Chhattisgarh State - owned by Nilkanth Coal Mining Private Ltd

Details of future tranche auctions haven’t as yet been released.

Despite the combination of poor performance of companies operating the mines and pressures to achieve the 2070 net zero goal, it appears that political pressure and subsidies will bolster plans to create new coal mines in India, and with that dynamic, opportunities for the project cargo transportation sector will naturally follow.


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