Utilising India’s existing coal capacity a better option than adding new mines: Study

India had repeatedly faced coal shortages but the situation became acute this summer when power demand rose to an all time high. As a possible solution to this problem, the Indian government has come up with a plan to develop 99 new coal projects with a production target of 427 million tonnes per annum (mtpa).

However, as per a study conducted by Global Energy Monitor (GEM), coal mining in India suffers from chronic underutilisation. The country has 1,211 mtpa of existing capacity but near-about 433 mnt or 36% of this capacity is idle and unused.

Challenges in adding new coal mines

There are following hurdles in the development of new coal mining sites.

Human displacement: As per a GEM report, the mines under development could displace at least 165 villages and 87,630 families. Of these, more than 41,000 families live in Fifth Schedule and tribal dominated areas. This could lead to protest and as a result even delay projects which have received approvals and are about to start.

Environmental degradation: New coal mines are expected to increase India’s water demand by 168,041 kilo litres per day. In addition, these could cause clearing of forests and loss of natural habitats of living organisms.

Requirement of resource and finance: Adding new mines would also require more finance and resources as compared to utilising existing capacities.

Underutilisation: An opportunity

State-owned enterprises Coal India Limited (CIL) and The Singareni Collieries Company Ltd (SCCL) have a large share of underutilisation, even as they plan to build more mines as reported by GEM.

The highest underutilisation rate is at the mines run by CIL subsidiaries like Central Coalfields Limited (CCL) and Eastern Coalfields Limited (ECL), where nearly half (47%) of the mine capacity is unused in each of these companies. Despite the excess capacity, CCL is planning to expand 41 mnt, even with 64 mnt already approved and untapped at its operating mines.

Similarly, CIL subsidiaries like North Eastern Coalfields Limited (NECL) and Western Coalfields Limited (WCL) have more capacity idling at their operating mines than those under development.

Outlook

Better utilisation of existing mines is the way out in the short term as new mines would take time to become operational. Meanwhile, in the long term, additions of new coal mines are necessary to keep pace with the ever-growing coal demand.