An overview of the Indian coal industry

An overview of the Indian coal industryCoal mining on a commercial level started in India way back in 1774. India’s growth over the years can be well assumed with the fact that today it stands at third position in terms of coal production across the world. The country is also blessed with world’s 5th largest coal reserves or ‘black diamond’ as it is often referred to. India’s coal sector is also recognized by heavy capital investment in the sector. The coal sector of a country is of vital importance because of its role in incrementing the growth of aligned industries like steel, power, fertilizers and cement. The major portion of coal production, around 70% is used for the power generation. The largest coal mining company in India is the PSU giant Coal India which along with the subsidiaries contributes to some 88% of the total coal production. Coal is an important resource used for industrial, commercial as well as domestic purposes. The four states of Orissa, Chattisgarh, Jharkhand and West Bengal together account for 80% of the coal reserves in the country.

The Challenges in Indian coal industry

In spite of being among the world’s largest coal producing country and owning 5th largest coal reserves, Indian coal industry still lags behind to even cater to domestic demand. There is a wide gap between the country’s demand and supply of coal making it depend on imports. The major problems that discourage coal industry’s performance and growth relate to the problems of land acquisition, forest and environmental clearances, the Naxalites issues, lack of proper infrastructure including rail and road connectivity and lack of proper ports causing delays in coal supply. The delays not only affect the coal industry but also aligned industries which rely heavily on coal for their production. In addition to this, the Indian coal is largely of an inferior quality owing to high ash content further enhancing the challenges of the industry.

The road ahead

Seeing the current fast pace of infrastructural development in the country, the demand for energy is expected to grow which may further widen the gap between demand and supply in the sector. The Planning Commission also recently predicted an enormous growth in demand of 1,000 million tonnes by the year 2016-17. The supply at present is however estimated at 750 million tonnes. The production of coal is expected to grow at CAGR of around 9% during 2011-12 to 2013-14. One of the important contributions that will lead to the sector’s growth is the Government’s initiatives in coal industry regarding increasing compensation for land acquisition, de-allocation efforts, and investment-friendly regulations. The need to achieve a balance between the mining needs and environmental concerns has also been understood. All these steps will definitely help to harness the Indian advantage and potential in the coal industry making it emerge as the world leader in coming years.

References

Ankita Agarwal

Analyst at Project Guru
Ankita is working with the editorial board of Project Guru as a Research Analyst and Writer. With Masters in Commerce and Business Studies, Ankita learned much of what she knows about management through experience. She has previously worked in various financial institutions like Birla Global, HDFC Ltd. and Citi Financial. She is self-motivated and writes for the Knowledge Tank section of Project Guru. She has authored more than 80 articles so far in Human Resources Management, Strategic Management, Finance and Marketing. She likes to pen her thoughts about the latest issues gripping these areas across the world.

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