Coal Industry Tackles Challenges: Self-Reliance, Energy Crises, and Production

State-run Coal India (CIL) has seen a 13.4% year-on-year increase in outstanding dues from the power sector, reaching approximately $169.65 million at the end of March 2023 on a provisional basis. This is in contrast to the roughly $149.62 million owed to CIL at the end of March 2022, marking the lowest figure for that month since 2019. Month-on-month, however, the power sector's outstanding dues to CIL fell by 16.3%.

Outstanding dues for Singareni Collieries Company (SCCL) also decreased, falling 10.4% month-on-month to around $40.58 million. Although figures for March 2022 are not available, dues at the end of January 2022 stood at approximately $68.55 million. Cumulatively, the total outstanding dues of the two state-controlled coal miners fell by 15% month-on-month to about $210.23 million at the end of March 2023.

Coal production in India increased by 14.7% year-on-year to 892.74 million tonnes (MT) in FY23. CIL's production rose 12.9% year-on-year to 703.22 MT during the same period, with an average cost of production at around $15.98 per tonne. The lowest dues in the past several years were recorded at the end of March 2019 at about $102.87 million.

Despatch of coal grew by 7% to 877.45 MT during FY23, while CIL's despatch increased almost 5% year-on-year to 694.70 MT. The power sector's despatch of the dry fuel grew by more than 9% year-on-year to 737.93 MT. However, average railway rake loading fell marginally on an annual basis to 294 rakes per day in March 2023. Rakes for the power sector were slightly higher year-on-year at 271.20 rakes per day.

In March 2023, coal-based power generation grew by 5.70% year-on-year, while overall power generation increased by 4.59% on an annual basis. India's total power generation rose to 139.72 billion units (BU) in March 2023, marking a year-on-year growth of 9.13%.

BHP's BMA assets in Queensland experienced a 12.8% year-on-year decrease in production, down to 13.9 million tonnes. BHP's BMA operations produced 41.1 million tonnes of coal in the nine months leading up to the end of March, which is 2% below the previous financial year. BHP has cited wet weather as the cause of these falling production levels, with its BMA operations experiencing the highest level of rainfall in the last decade and the fifth wettest year in the last 50 years. Consequently, BHP warned that further wet weather in Queensland may cause the company to fail in meeting its annual production targets.

To achieve self-reliance, India's Coal Ministry has initiated various steps to boost domestic production, such as single-window clearance and the amendment of the Mines and Minerals (Development and Regulation) Act, 1957 to allow captive mines to sell up to 50% of their annual production after meeting the requirements of end-use plants. Other measures include production through mine developer & operator (MDO) mode,

increasing the use of mass production technologies, implementing new projects, expanding existing projects, and auctioning coal blocks to private companies and public sector undertakings (PSUs).

South African President Cyril Ramaphosa is expected to discuss the country's dependency on coal with leaders of nations offering $8.5 billion in climate finance to close coal-fired power plants. The National Energy Crisis Committee, established by Ramaphosa to address the unprecedented energy crisis, will make the request to the president. South Africa has already made informal approaches, as it experiences rolling blackouts due to poorly maintained coal-fired power plants, which have hindered economic growth and frustrated residents.

The Just Energy Transition Partnership between South Africa and funding partners—the US, the UK, Germany, France, and the European Union—was announced at the COP26 climate conference in Glasgow in 2021. In exchange for reducing its reliance on coal for electricity generation, South Africa would receive grants, concessional finance, and loans to help close old power plants and replace them with renewable energy sources.

Despite the ongoing power crisis and political constraints, funding partners are likely to adopt a pragmatic approach, according to sources familiar with the situation. Troubled state power utility Eskom closed the dilapidated Komati plant last year and plans to close another five of its 14 remaining coal-fired plants by 2030. However, Vikesh Rajpaul, who runs the Just Energy Transition office at Eskom, has suggested that some units may need to remain open longer than planned to address the electricity crisis.

BHP's Queensland coal operations will need a significant boost in the last few months of the financial year to meet the company's guidance range, following a slump in output and exports in the March quarter. BHP's coking coal exports from its Queensland operations fell by 18.8% compared to the first quarter of 2022, and by 12% compared to the three months leading up to the end of December. The company shipped 12.4 million tonnes of coal during this period.

In contrast, thermal coal exports from BHP's Mt Arthur mine in New South Wales increased to 3.7 million tonnes, up from 2.7 million tonnes in the March 2022 quarter. The mining giant has attributed the falling production levels to the wet weather experienced by its BMA operations, marking the highest level of rainfall in the last decade and the fifth wettest year in the past 50 years. The Moranbah production hub recorded 767 mm of rain in nine months.

In conclusion, the coal industry faces a range of challenges and opportunities, with countries like India striving for self-reliance through increased domestic production and policy changes. Meanwhile, South Africa aims to balance its dependency on coal-fired power plants with the pursuit of cleaner energy sources, backed by international financial support. Companies like BHP must navigate the complexities of fluctuating production levels due to weather conditions and shifting global demand for coal.