Coal

History of coal
India has a long history of commercial coal mining covering nearly 220 years starting from 1774 for about a century the growth of Indian coal mining remained sluggish for want of demand but the introduction of steam locomotives in 1853 gave a fillip to it Till independence, the Indian coal industry witnessed sporadic phases of growth

 the commercial coal mining in modern times in India has been dictated by the needs of the domestic consumption On account of the growing needs of the steel industry, a thrust had to be given on systematic exploitation of coking coal reserves Unscientific mining practices adopted by some of them and poor working conditions of labour in some of the private coal mines became matters of concern for the Government the Central Government took a decision to nationalise the private coal mines.

Present scenario
The Indian coal industry is the world s third largest in terms of production and fourth largest in terms of reserves India is currently among the top three fastest growing economies of the world. Despite having one of the largest reserves, the Indian coal industry does not hold a position in the league of global energy suppliers. Excessive government regulation continues to be a major concern for the Indian coal industry. The existing legislative framework restricts the private sector in the establishment of coal washeries and regulated mining for specific industries India expects FY12E coal demand at 713mnt while the production at 553mnt a shortage of 160mn 88%ofproductionfromopencastmines;12%fromundergroundmines Coal present in 14 out of 28 states Indian coal contain generally high ash,(4500GCV) & low sulphur

Mining Methods
Coal is mined by two main methods surface or opencast mining and underground mining. The choice of method is largely determined by the depth, geology of the coal deposit and other factors. The majority of the world's coal production is coming from Opencast mines. This scenario is same in India also.

Mining Process
Drilling Blasting Loading Hauling Transporting Processing/Warehousing Drill Machines SMS,emulsion,Primer Shovels, draglines, etc. Front-end Loader, etc Dumpers, Conveyors, etc Coal Washeries

Types of coal
Peat - considered to be a precursor of coal, has industrial importance as a fuel in some regions, for example, Ireland and Finland. In its dehydrated form, peat is a highly effective absorbent for fuel and oil spills on land and water Lignite - also referred to as brown coal, is the lowest rank of coal and used almost exclusively as fuel for electric power generation. Sub-bituminous coal - whose properties range from those of lignite to those of bituminous coal are used primarily as fuel for steam-electric power generation. Additionally, it is an important source of light aromatic hydrocarbons for the chemical synthesis industry.

 Bituminous coal - dense sedimentary rock, black but sometimes dark brown, often with welldefined bands of bright and dull material, used primarily as fuel in steam-electric power generation, with substantial quantities also used for heat and power applications in manufacturing and to make coke Anthracite - the highest rank; a harder, glossy, black coal used primarily for residential and commercial space heating. Graphite - technically the highest rank, but difficult to ignite and is not so commonly used as fuel: it is mostly used in pencils and, when powdered, as a lubricant.

Pricing
Government decided to deregulate the prices of all grades of coking coal and A, B, & C grades of non-coking coal and this decision was implemented with effect from 22.3.96 Government decided to de-regulate the prices of soft coke, hard coke and D grade of non-coking coal and this decision was implemented with effect from 12.3.97 The Government also decided to allow CIL and SCCL to fix prices of E, F and G grades of noncoking coal once in every six months

How is it calculated
Forecasting the price of coal is dependent on many variables. These include; supply uncertainties, transportation inefficiencies, international coal demand, regulatory constraints, labor disruptions, natural gas and electricity have highlighted the need for an understanding of coal trading and risk management More volatile fuel prices, increased international coal demand, uncertainties for new coal powered domestic generation, and trade emission programs in SOx and NOx, increased pressure to work with more efficient inventory levels all contribute to a potentially more active and price sensitive market.

 The price of coal increased from around $30.00 per short ton in 2000 to around $150.00 per short ton as of September 2008. As of October 2008, the price per short ton had declined to $111.50. Prices further declined to $71.25 as of October 2010. The trading unit is 1,550 short tons (1,410 t) per contract on MYMEX, and is quoted in U.S. dollars and cents per ton. Since coal is the principal fuel for generating electricity in the United States, coal futures contracts provide coal producers and the electric power industry an important tool for hedging

India Announces New Coal Pricing system

Country to lower prices using price pooling of domestic, international coal India announced that it is formulating a policy to balance international and domestic coal prices by "pooling" the rates of both imported and local coal The government says the new pricing system aims to contain the rising costs of coal used in power generation The new policy will be formulated by the Central Electricity Authority (CEA).

Major Players
Coal India Public sec company with 390 mines, control 88% domestic coal production Singerani Collieries Company : 50 mines Minerals & Metals Trading Corp responsible for conversion of imported coal into coke

Coal India

Company Update
Headquarters in Kolkata, West Bengal. Was incorporated as a private limited company with the name of 'Coal Mines Authority Limited', under the Companies Act on June 14, 1973 N C Jha is the current managing director produce non-coking coal and coking coal of various grades for diverse applications including 163 open cast mines, 273 underground mines and 35 mixed mines (includes both open cast and underground mines). operated 17 coal beneficiation facilities with an aggregate designed feedstock capacity of 39.40 million tons per annum. Coal India's major consumers are the power and steel sectors. Others include cement, fertiliser, brick kilns etc. has nine direct Subsidiaries and two indirect Subsidiaries October 2009-10 conversion of the company into a public limited company Enjoying a near monopoly in the domestic market

Structure

Products & Services

COKING COAL SEMI COKING COAL NLW COKING COAL: used for metallurgical industries NON-COKING COAL WASHED AND BENEFICIATED COAL MIDDLINGS REJECTS CIL COKE / LTC COKE COAL FINES / COKE FINES TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH

Collabrations
Indian Oil Corporation Limited, IBP Division ("IOCL-IBP") for the supply of bulk loading explosives to our Subsidiaries. Limited ("Mitsui") for the supply of OTR Tires to NCL Rail India Technical & Economic Services Limited ("RITES") for provision of management consultancy services. Joint Venture Agreement dated September 27, 2007 with BEML Limited and Damodar Valley Corporation. Joint Venture Agreement dated October 12, 2009 with NTPC Joint Venture Agreement dated January 14, 2009 with Steel Authority of India Limited, Rashtriya Ispat Nigam Limited, NMDC Limited and NTPC Limited

Current Scenario
As of March 31, 2010, operated 471 mines in 21 major coalfields across eight states in India Current capacity 431.32MT 142 projects have been identified to be taken up during the XI period. Out of these 77 projects with an ultimate capacity of 184.78mty have already been approved Introduction of mass production technology with continuous miners & shuttle car combination Timely implementation of projects Increasing productivity in both underground and open cast mines Some of underground coal mines / blocks have been identified for development, construction and operation Prices of coal india coal still at discounted prices due to heavy pressure from the goverment

 Coal pricing upside in short and long term Despite the price hike the CIL s prices continue to be at discount CIL can raise prices for the non power segment Long term- coal prices for power users to rise as proportions of washed coal volumes will increase

CIL pricing
CIL has a huge upside if global prices rise/remain at current levels and no downside if global prices fall as its prices are already discounted The recent price hike demonstrates CIL s power and willingness to align its pricing to market driven pricing

Environmental clearance important for expansion

Coal ministry said it has received clearance for 14 Coal India projects Potential to add 275mnt of capacity based on the projects under implementation Expect volumes to grow at 5.5% every year from FY13E Logistics to improve availability of wagons a major reason of flat production in FY11

CIL s Long term Expansion Plan

142 projects have been identified to be taken up during the XI period. Out of these 77 projects with an ultimate capacity of 184.78mty have already been approved Introduction of mass production technology with continuous miners & shuttle car combination Timely implementation of projects Increasing productivity in both underground and open cast mines Some of underground coal mines / blocks have been identified for development, construction and operation

Downside
Inability to obtain environmental clearances and/or acquire land MOEF s proposal to segregate mining locations into Go and Non-go zones Increase in costs without immediate increases in price