The belief that India has a domestic coal supply that will last over 100 years is a myth, say RK Batra and SK Chand in a TERI policy brief.In India's energy sector, coal accounts for over 50 per cent of primary commercial energy supply. With the economy poised to grow at the rate of 8-10 per cent per annum, energy requirements will also rise at a level of 6 per cent (approximately). Coal will continue to be a dominant commercial fuel two decades from now and beyond, despite our nuclear energy programme, development of natural gas supplies, increased hydropower generation, and emphasis on renewables.There are many issues with regard to domestic coal production. But this policy brief focuses on our domestic coal inventories. In other words, how much coal is there underground, how much of it can be extracted, how much we need to import and what are the associated energy security implications. India is already considerably short of coking coal for steel plants. Table 1 depicts the projected production, demand and import of coal for 2011-12.This brief deals exclusively with thermal coal that is used in power plants and other industries.It demolishes the myth held by many that India has coal in plenty. In reality, the coal that can be extracted is just a small fraction of our total coal inventories, without taking into account no-go areas where coal mining may not be permitted.Context, importance of problemIndia computes its coal inventory on the basis of the Indian Standard Procedure (ISP) code that dates back to 1956. It is essentially a geological classification system, where the parameters are based primarily on spacing of boreholes. The techno-economic parameters are very few, and to a great extent subjective such as amenability to beneficiation, thickness and depth of coal seams. Based on this system, India's inventory of coal resources has been estimated at 267.21 billion tonne (as of 2009). Of this, 39.6 per cent has been categorised as proved, with detailed exploration having been carried out in selected blocks and where the boreholes are less than 400 metres apart. Indicated resources stand at 46.2 per cent while inferred resources are at 14.2 per cent, based on regional and promotional exploration where the boreholes are normally placed 1-2 km apart. This assessment by the Geological Survey of India includes coal that is inaccessible because it lies in protected areas or beneath forests, villages, towns or water bodies, and even includes coal that has been extracted and burnt during the past 200 years (estimated at about 10 billion tonne). It also includes coal at a depth of 1,200 metres, whereas mining of coal, either currently or in the near future, is not likely to go beyond 300 metres. It is this extremely high figure of 267.21 billion tonne that has created a false and risky notion that India is quite comfortably placed with over 100 years of domestic coal supply at its disposal.How much coal is extractable?What is of critical importance is not the total inventory of coal but how much of that coal is technically feasible to extract and can be economically mined. If the coal that exists cannot be reached or cannot be technically or legally mined, then obviously that coal is not available.Similarly, if coal can be mined, but the cost of mining is such that consumers are not prepared to pay the corresponding high price, then again the coal should be considered as 'not available'. Various estimates have been made of how much coal can be extracted from the total coal resources. These are referred to as extractable reserves. However, these reserves have essentially been calculated using various thumb rules. For example, the basis used in the Integrated Energy Policy document of 2006 is provided in Box 1.CIL's extractable reserves under the lensCoal India (CIL) is the largest producer of coal in India with a 77 per cent share in national coal production. In its 2010 Red Herring Prospectus (RHP) for its Initial Public Offering (IPO), it had projected certain numbers of its reserves, which have been examined in Figure 2 (Below).CIL claims a total reserves of 64.79 billion tonne (BT), of which mining studies have been carried out for 30.36 BT and the extractable coal has been assessed at 21.80 BT. This can be further divided under the heads of coking and non-coking coal, with the latter further sub-divided for power and non-power use, based on the current all-India allocation. As is apparent from the flow chart, CIL's extractable coal reserves for the power sector reduce to 14.78 BT.Considering the heavy investments required, coal-based thermal power plants need an assured supply over the plant's life (CIL has entered into a Fuel Supply Agreement with India's biggest power utility NTPC for 20 years). It is estimated that a 2,000 MW plant requires 10 million tonne (MT) of coal annually, or 200 MT over 20 years. Therefore, CIL's coal reserves for the power sector of 14.78 BT can be committed to feed approximately 148,000 MW of generating capacity, against which it is already meeting around 67,000 MW, leaving a balance of 81,000 MW. In the 12th Plan (starting 2013) 74,000 MW coal-based capacity is planned for which long-term commitments will need to be made shortly. CIL's ability to make substantial coal supply commitments for the 12th Plan will depend on the reliability of its extractable coal estimates.At current levels of production CIL's extractable reserves will be exhausted in 45 years. This may seem to be a very comfortable situation and should enable CIL to meet increasing demand despite some limitations by way of 'no go' areas. However, the Central Electricity Authority (CEA) told the power ministry in January 2011 that CIL will be unable to make coal available to new power plants commissioned after 2010, which questions the authenticity of CIL's reserves.CIL, under the section on risk factors in its RHP, has stated 'we have historically followed the ISP guidelines for our resources based estimation, and intend to continue to follow the ISP guidelines for such reserve-based estimation'. The question, therefore, arises as to how reliable are these estimates of CIL which can be considered as a proxy for the reliability of extractable reserves for all the producers in the country? Also, SCCL, the second highest coal producer in the country after CIL at 47 MT/annum, had stated on its website that it has 'whopping reserves of 8,791 MT'. However, the actual amount of extractable reserves is not mentioned). Let us now take a look at the United Nations Framework Classification (UNFC of 1997) for fossil energy and mineral reserves and resources.An internationally accepted 3-d classification systemThe UNFC is a universally applicable scheme for classifying mineral resources and reserves. The total estimated resources are categorised using the following three essential criteria that affect their recoverability.
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