Fuelling Growth: The Surge in India's Coal Production and Its Implications

India’s coal industry

India is the world's third-largest electricity generator and consumer with an installed capacity of 454.45 gigawatts (GW) as of October 31, 2024. Coal contributes more than 55% of the total commercial energy of the country and accounts for 70% of the total generation. The coal industry provides jobs for around 13 million people across mining, transportation, power generation, and steel manufacturing. While India has sufficient thermal coal for power generation, it faces a shortage of steel-grade coking coal. As of February 2024, India had a total thermal installed capacity of 240 gigawatts, of which 210 gigawatts was the installed capacity of coal, vital for energy security and stable power supply. Overall, coal remains a fundamental part of India's energy strategy and economic framework.

Source: coal.gov.in, F- Forecasted

Coal production has grown steadily, with a CAGR of 5.6% over FY15 to FY24.  Further, the coal production is expected to grow at a faster pace, with an estimated CAGR of 7.0% from FY24 to FY30.

In FY24, both coal production and consumption saw significant growth, with production increasing by 11.7% YoY and consumption rising by 10.7%. In absolute terms, coal production grew from 609 million tonnes (MT) in FY15 to 997 MT in FY24.This was largely due to growing demand from heavy users of coal such as the power generation and steel manufacturing industries.

Factors driving the coal industry growth

Energy security v/s emissions goals

India imports about 20% of its thermal coal, costing over Rs. 1.38 lakh crore (US$ 16.1 billion), which puts a pressure on foreign exchange reserves and increases power generation costs. The rise in coal imports in FY24 shows that local coal supply cannot meet the growing demand. Therefore, to make India self-sufficient, the government shifted its approach towards the energy mix of India. The government now aims to make India energy independent by 2047, ensuring energy security. This self-sufficiency will result in a significant shrinkage in trade and the current account deficit. The focus has moved towards developing domestic resources rather than solely on lowering carbon emissions.

Additionally, India with its massive coal reserves can mine coal cheaply. Hence, building the requisite infrastructure throughout the coal value chain - from exploration to transportation - could transform the industry and reduce its dependence on expensive imports.

Power demand is pushing the coal industry

India's power sector is experiencing increased demand, driven by a resurgence in industrial and commercial activity over the years. Naturally, these industries require significant amount of power to function, representing ~50% of the total power consumption of the country. Heavy demand from these industries is pushing the coal production to newer heights.

To keep up with the ever-increasing power demand, India increased its installed capacity to a five-year high. According to the Central Electricity Authority, 4.0 GW of coal-fired capacity was added in 2023 and 2024. Further, the Ministry of Power in 2023 disclosed its plan to increase close to 90.0 GW of coal-fired capacity through 2032, pushing its previous goal beyond 60.0%. This translates into adding at least 9.0 GW of plants every year.

Initiatives by the government of India to increase domestic coal supplies

The Indian government is running various schemes that will ensure more availability of coal within the country, along with keeping sustainability a priority. Among them is the Financial Incentive Scheme for the Coal Gasification with funding of Rs. 8,500 crore (US$ 985.05 billion). It aims to capture 100 million tonnes (MT) of coal gasification by 2030.

Under the Central Sector Schemes, efforts include:

• Exploration of coal and lignite: Detail and regional exploration will substantiate indicated reserves for further provision in new coal block auctions.
• Research and development: An innovation committee comprising the Standing Scientific Research Committee incentivises innovations in modern technologies and sustainable development.

Implications of surge in coal production

Top coal-producing companies in India

Coal India Limited

Coal India Limited (CIL) was founded on October 21, 1975, as a holding company aiming to produce coal efficiently and economically. It is the world’s largest producer of hard coal and employs over 2,39,210 people as of March 2023. The company operates 83 mining sites across more than eight states in India with a total of 322 mines. This includes 138 underground mines, 171 opencast mines, and 13 mixed mines. The company also manages 13 coal washeries.

Singareni Collieries Company Limited (SCCL)

The Singareni Collieries Company Limited (SCCL) is a state-owned coal mining company, jointly managed by the governments of Telangana and India, with a 51:49 ownership split. Established on December 23, 1920, SCCL’s coal reserves cover 350 km in the Pranahita–Godavari Valley of Telangana, with proven reserves of 8,791 million tonnes. The company operates 17 open-pit and 22 underground mines across six districts in Telangana and employs around 42,000 people.

Current policies and initiatives

• By 2030, government aims to convert 100 million tonnes of coal into gaseous state using gasification technology. This would help stabilize energy security while lowering costs. To promote this transition, a massive investment package of Rs. 8,498 crore (US$ 982 million) was announced for FY24.
• Recognizing the need for efficient transport infrastructure, an Integrated Coal Logistics Policy and Plan was also launched earlier in 2024. Coordinated efforts are underway to build out an integrated, technologically-driven logistics network for evacuating coal in a cost-effective manner from mines to load points. Updated rules for coal block allocation were notified, promoting transparency.
• India's largest coal miner, Coal India Limited, aims to set an inspiring example by establishing 3,000 megawatts of renewable power capacity to help electrify their own mining operations by 2025-26. Significant progress is already being made, with over 8.6 million solar units generated across CIL projects through December of last year. CIL is gradually moving toward a high-capacity coal evacuation system and making it more efficient by installing coal handling plants/silos under its ‘First Mile Connectivity’ projects.

Challenges and solutions

The country is expected to increase its coal production by 250-300 MT or over 22.0% by 2030. India’s progress towards becoming a US$ 5.0 trillion economy will be driven by industrial activities. With manufacturing activities picking up, coal demand will rise in the short to medium term and is projected to peak around 2040, before India targets net zero emission by 2070.