“Ensure Fuel Security for India” [June 2012]

June 19, 2012 12:59 pm

Coal security needs to be given the same importance as oil security, as the sources of imported coal are limited to just three or four countries, unlike oil. Also, a large import by China is tightening supplies and prices- Anil Sardana, Managing Director, Tata Power
Energy powers the growth of a nation and has been universally recognised as one of the most important inputs for economic growth and GDP. To maintain this growth, it is imperative that energy is readily available and is affordable. The growth of an economy hinges on the availability of cost effective and environmentally benign energy sources, and the level of economic development has been observed to be reliant on the energy demand.
Sources of power must necessarily be reliable without being vulnerable to long- or short-term disruptions. Interruption of energy supplies can cause major financial losses and create havoc in economic centres, as well as potential damage to the health and well-being of the population.
Energy and GDP growthA few years back, “Dr. Kirit Parikh Committee” of the Planning Commission had highlighted projections of the energy requirements based on GDP growth rates of 7 per cent and 8 per cent at constant and falling energy elasticities. Energy elasticity, which is with reference to the GDP, is the percentage change in energy consumption for 1 per cent change in GDP. Currently, this elasticity is 0.80. The Committee considers lower elasticities of 0.75 to be attained by the decade beginning 2011-12 and 0.67 from the decade beginning 2021-22.
India is well-endowed with both exhaustible and renewable energy resources. Coal, oil, and natural gas are the three primary commercial energy sources. Historically, coal has been the largest source of energy. However, India’s primary energy mix has been changing over a period of time. But resource augmentation and growth in energy supply has not kept pace with increasing demand and, therefore, India continues to face serious energy shortages. Until renewable energy sources in one form or more becomes capable of providing 365 days x 24 hours continuous predictive power, irrespective of input similar to conventional power plants running on coal, nuclear, hydro etc., grid parity has little intrinsic value and can at best address grid power requirement for the time of day when either wind or solar energy can deliver associated output. Due to shortages and the inability of renewable energy resources to provide continuous power like oil and coal, there has been an increased reliance on imports to meet the energy demand and more imported sources will be needed in the years ahead.
The absence of new gas finds and declining production from Krishna-Godavari-D6 field is pushing the needs for enhanced gas imports. Petroleum ministry data suggests LNG imports in 2012-13 is expected to be at 69 million standard cubic metres per day, well over twice the quantity last year. From there on, the imports will increase over two and half times, to 184 MSCMD, in 2016-17, with total gas availability estimated at 197 MSCMD and 394 MSCMD, respectively. This will increase the LNG share in five years from 37 per cent to 46 per cent.
Coal has been the mainstay of the power production in India and would continue to have a loins share and thus, an important role to play in meeting the demand for a secure energy supply. Historically, coal prices have been lower and more stable than oil and gas prices, and coal has also been easily available for power producers across the country. However, things are no longer the same. Power Developers and other Coal dependent Industries under PressureAccording to the Ministry of Coal, the gap in demand and domestic supply of coal has increased from about 50 million tonnes (MT) in 2007 – 08 to 83 MT in 2010 – 11. The projected coal demand in the terminal year 2016 – 17 of the 12th Five Year Plan is about 980 MT and the envisaged production to meet the projected demand is 795 MT leaving a gap of 185 MT. This demand includes 682 MT for power utilities. This domestic demand and supply gap is continuously widening with rising imports and its impact on the prices. High import levels are likely to destabilise the financial structure of the coal dependent sectors by exposing them to volatile international prices. Also, the availability of coal will be a critical constraint on the development of coal-based power plants in the 12th Plan when the projected gap between demand and supply is likely to go up by 200 MT.
With the shortage of coal, generation in different power plants is getting affected. As many as 18 power plants in the country are faced with critical level of coal shortage. Power utilities have reported a generation loss of 8.7 billion units in 2011-12 (up to February, 2012) due to shortage of coal. As many as 11 plants of NTPC lost 7.8 billion units because of shortage of coal during current fiscal. Other utilities that lost on generation of electricity included ones in Madhya Pradesh, Maharashtra and Andhra Pradesh. There is a need for the government to fully liberalise the coal business and for Coal India Limited to step up domestic production, as well as acquire coal mining companies abroad, if necessary. While there are unexplored coal blocks that companies can apply for captive mining, the challenges are huge and can deter companies from applying for captive mining. There is a lack of assessment of India’s natural resources – a number of areas remain unexplored and the mineral resources in these areas are yet to be assessed. A TERI policy brief on coal concludes that India may have coal reserves in plenty but in reality, the coal that can be extracted is only a small fraction of our total coal inventories without taking into account areas where coal mining may not be permitted. The current economic mining practices are generally limited to a depth of 300 m, and about 40 per cent of the reserves of the country are beyond this depth. Coal production from underground mines has either stagnated or has declined, despite significant investments. Also, a large part of India’s coal reserves may not be extractable with current mining technologies.

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