Geography assignment essay on: Types of coal

Introduction

 There are basically four types of coal available:

Lignite coal:

Lignite coal is used majorly for generation of electricity. Some of the qualities of Lignite are colour: brownish black with high sulphur content. It has a moisture content up to 45 %, which is assumed as pretty high for all the different types of coal. Another name for Lignite is brown coal.
The calorific value of Lignite is less than 5kw/kg approximately.

Subbituminous coal:

Black lignite is another name of subbituminous coal. Subbituminous coal is black and has to 20-30% of moisture content. Subbituminous coal is used for electricity generation and space heating.
The calorific values of sub bituminous coal ranges from 5 – 6.8 kW/kg approximately.

Bituminous coal:

Bituminous coal is one of the best coal for power generation. Australia has very high content of Bituminous coal deposits. The coal deposits of Bituminous in Australia are not only high in quantity but also very high in quality. Bituminous coal is dense, soft & black coal. Dull material& bands of bright light are often found in Bituminous coal. It is the most common coal and the content of moisture is less than 20 %. This low moisture content is one of the biggest advantages of Bituminous coal.It is used for generating electricity, making coke, and space heating.

The calorific value found in Bituminous coal has approximate rangebetween 6.8 – 9 kW/kG.

Anthracite coal:

Anthracite coal is often referred to as hard coal.The qualities of Anthracite are its hard material and the black and lustrous feel. Anthracite is high in carbon& low in sulphur. It is the highest rank of coal. The presence of moisture is less than 15 %.
The calorific value of anthracite is around 9 kW/kG or above.

Coal Usage in India:

Coal mining has been there in India for 220 years. In 1774 it was started by the Messrs Sumner & Heatly of the East India Company on the Western bank of river Damodar at the Raniganj coal field. After independence Coal mining continued and coal production was 33Million tonne (Mt)at thebeginning of India’s first 5 year plan in 1951, which rose to 73 Mt in 1970 and 313.4 Mt in 2000. Currentlythe coal production stands at 535 Mt.

Majority of the coal mines until 1970 were exploited by private parties. In 1970, as not enough capital investmentswere coming from private miners, theGovernment of India started nationalizing the mines. The labourer’s condition in those mines was alsoa cause for concern. Coking coal mines were first nationalised by Government of India throughthe Coking Coal Mines – Emergency Provision Act, 1971, which was followed by the nationalizationof all mines in 1973 with the Coal Mines Nationalization Act. Fuel for electricity generation in the country was shared equally by coal andhydro till the sixth plan period(1985-86). After that the share of hydro electricity went on a decline to the current standard of less than 15 percent(2010-11) while coal dominates with more than 69% in terms of generation.

Trade Relations between India & Australia

India and Australia share a relationship in trade which trades back to 1801 and interestingly the first Australian ship which touched upon the shores of India was carrying coal for East India Company. Another relationship or common link between India & Australia is the commonwealth. Though the India-Australia trade relations are active today but they are yet to reach the full potential.

 Market Assessment of India

General Assessment:

There is a very high scope for improvement in the trade relations between Australia and India. This is where Australia can take advantage as India is a power hungry country. Its population is growing.

Stats for India (World Bank, 2011)

GDP = $1.848 trillion

Population = 1.241 billion

Income Level = Lower middle income

GNI per capita = $1410

As it is visible from the data presented above, India is a land of very high opportunities. Due to its ever growing middle class the hunger for power or electricity has never went down. It has not been able to keep pace with the demand for electricity by masses. Thus the demand for Coal is always there. Considering the fact that the Coal found in India is high in sulphur content and the supply of Bituminous coal in India is never able to keep pace with the demand, India is always importing coal from Australia.

Political Assessment:

 India is the world’s largest democracy. It has a stable political environment. India will be foreseeing next assemble elections in 2014. As Electricity is one of the major deferential points during elections none of the political parties plays with the import policies of coal in India.

 

Investment:

India’s power sector is currently ranked 6^th among the leading sectors in the Economy & attracted a FDI equivalent to US $ 4.6 billion since 2000. (OIFC, 2012) . Policy roadmaps by Government of India which are Effective and investment friendly are increasing the liberalization of the nation’s economy, especially in the energy sector. Initiatives taken by government of Indiafor increasing installed electricity infrastructure includes ambitious five-year plans,for increasing the production of oil and gas the New Exploration and Licensing Policy, and the nuclear sector’s recent embrace of international companies to provide equipment and related services.

Though the investment between India and Australia is gradually increasing but it remains low. Last year India’s GVK Group’s purchase of a majority stake in Australia’s Hancock coal project which was billed for $1.26 billion leads the Indian companies’ investment in Australian mining operations.

Economy:

Indian Economy is one of the most robust economies in the world. It has been constantly growing at a pace of 7-8% during the last decade. The current steps by Government of India to open Foreign Direct Investment in several sectors including Retail, Power and Aviation has attracted huge amount of Foreign Direct Investment in the country. The ever increasing Middle class keeps increasing the demand for electricity generation and thus for coal too.

Social:

Land acquisition is a must to increase Mining as an activity, irrespective of thedensity of the forest land& population base. Acquisition of land is anothermajorfactor as is gettingthe rights to the mineral. The major hurdle for the new projects is land acquisitionasland owners are unwilling to part with land. Secondly, they are very doubtful of theRehabilitation & Resettlement plans of the Government of India. It has been witnessed in somecases that the compensation paid to the land owners is very low. Once industrializationtakes off in the nearby areas it leads to appreciation in  land prices and this leaves the land owner’s feeling cheated.

Transportation:

Transportation is one of the major problems for the coal industry in India. Majority of the coal imported by Coal India Limited is wasted or lost during the transportation. Though the country has built a vast network of roads but the highways connecting the mines and the power plants to the national highways are not of great quality. But the connectivity between the ports and the National highways is of very well developed.

Dedicated freight corridors have been required for a long time to be developed so that reliability of the systemcan be increased and per unit cost of the transportation can be further reduced. TheMinistry of Railways has taken a decision to construct a new Dedicated Freight Corridor (DFC) covering two routes – the Eastern Corridor coming from Ludhiana towards Dankuni and the Western Corridor from Jawaharlal Nehru Port, Navi Mumbai to Tughlakabad, Delhi/Dadrithat will interlink the two corridors at Khurja. Thecorridor on the east has been sanctioned to help North India power Houses where asWestern corridor will be helpful in movement of imported coal from the Western seaports. As the 2 corridors are supposed to come up in 2016-17 if things goaccordingly. Shortfall&Pilferage in loading can be prevented byproper vigilance.

Trade restrictions:

Though India has trade restrictions for several other commodities but the restrictions are almost equivalent to non-existent in coal sector due to huge supply and demand gap in India.

Competitive Advantage for Australia:

The biggest competitive advantage for Australia is the improving trade relations between the two countries. Today many of the Indian firms have started investing in Australian coal Miners. The image of Australia is more or less positive in India.

As per the Planning Commission,India’s coal imports are projected to touch 185 million tonnes (MT) by 2017, which is equivalent to 20 per cent of the international dry-fuel trade amid widening demand-supply deficit.

The large abundance of bituminous coal in Australia is already a major heads up for Australia. Adding to that is the shortage of good quality of Bituminous coal in India. Coal dominates the majority of electricity production in India i.e. up to 69%. In terms of generated energy the difference between coal and hydro is now above 450Bill units.

Sources :The calculations on ITC are based on Ministry of Commerce & Industry statistics since January, 2007. The calculations of ITC based on UN COMTRADE statistics until January, 2007.

In US $ thousand

Product code	Product label	India’s imports from Australia			India’s imports from world
		Value in 2009	Value in 2010	Value in 2011		Value in 2009	Value in 2010	Value in 2011
‘27011910	Coal “ECSC”, whether or not pulverized, non-agglomerated (excl. anthracite and bituminous coal): Coking coal	3,556,943	3,324,974	7,447,492		4,161,247	4,119,118	9,119,987
‘27011990	Coal “ECSC”, whether or not pulverized, non-agglomerated (excl. anthracite and bituminous coal): Other	228,551	165,175	277,786		1,214,183	718,601	1,919,750
‘27011920	Coal “ECSC”, whether or not pulverized, non-agglomerated (excl. anthracite and bituminous coal): Steam coal	10,923	3,782	106,078		2,658,151	3,235,496	5,567,057

As we can see in the table above the share of Australian Coke import in India is around 80% of the total imports by India. The biggest advantage/opportunity for Australia for exports to India is in Steam Coal which is still only 2% of total imports by India. This has increased considerably from 1% in 2010 but there is a huge opportunity for Australia to dominate the coal imports of India in Steam coal from 2% to atleast 50% by 2015.

Recently India witnessed a major corruption scandal in allocation of coal blocks in the country to private players and the allocation was cancelled in many cases by judiciary of the country. This has led to an acute supply shortage in the country. It is important for Australia to take full advantage of the same and increase its dominance in Indian imports from 2%. The coal shortage estimated for 2012-13 is around 63MT. (GOI)

Trade restrictions and Tariff policy:

Currently there are no direct trade restrictions for import of coal in the country. The major restriction for import is the current electricity prices being controlled by the government. This discourages the power generation companies from setting up a power plant based entirely on imported coal as they are unable to recover the cost of power generation due to the pricing policy restrictions. Power Projects worth 43000MW are currently under construction of which 30% i.e. 13000MV is supposed to work on imported coal. Currently the power projects based on imported coal in India are submitting their tariffs bids with fuel suppliers which are predominantly in Indonesia based on their agreements.Currently domestic coal in India is 3 times cheaper than imported coal.

Future Projections for trade volume of coal with India:

As per all the macroeconomic and microeconomic variables currently present in India its important that Australian Miners aggressively try for increasing the export volumes to India. The trade between Australia and India should at least reach up to 50% of total imports by India in Steam coal for power generation projects. The current figure of Australian Export value of Steam coal of US $ 106 Million is not even 2% of India’s import needs and requirement. If the Australian firms are able to reach a safe figure 50% of requirement of Indian coal the value in trade terms can reach up to US $2.5 Billion only in Steam Coal by 2017. This is a relatively modest figure reached by taking into account the continuous upward trend in the prices of coal.

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