Centre plans to launch 'Coal Reforms 3.0', eyes non-power sectors

CoalMin plans to unlock domestic coking coal availability via several steps

The Centre is preparing to launch ‘Coal Reforms 3.0’, aimed at reducing overall coal imports and increasing the availability of coal for industrial sectors. The Ministry of Coal plans to unlock the domestic production of coking coal through several steps. 
 

Following coal nationalisation in 1971 and the introduction of the e-bidding regime in 2015, the ministry views this as the third wave of reform, targeting non-power sectors, especially the steel industry. According to ministry sources, the government is targeting zero imports in the next two financial years. 
 

The initial step involves a new forward bidding auction where domestic coking coal will be auctioned through two routes. “One route will be for steel units with washeries, and the other for those without. Those opting to wash their own coal will be allowed to sell the byproducts as well,” said an official.
 

The official added that the coal ministry would remove end-use restrictions for auction participants. Bharat Coking Coal (BCCL), one of Coal India’s (CIL) seven subsidiaries, will establish washeries for this purpose. BCCL is the largest coking coal miner in the country.

Coking coal production

 

“We are discussing the auction of existing washeries with coking coal linkages and long-term coking coal linkages for new washeries. This auction should ensure access to domestic coking coal for the steel sector, reducing reliance on imported coking coal,” said Jayant Acharya, joint managing director and chief executive officer of JSW Steel.

“We have requested expedited auctions for washeries with appropriate coal linkages and long-term coking coal linkages for future washeries,” Acharya said.
 

More suppliers, new FSAs

To allow BCCL to focus on ramping up production and building washeries, the ministry plans to transfer its existing fuel supply agreements (FSAs) with steel players to other CIL subsidiaries, Eastern Coalfields (ECL) and Central Coalfields (CCL), according to another official.
 

 The official explained that ECL and CCL have surplus coal of higher quality than other CIL companies. After washing, this coal will be of an even better grade, G7 or G8.  Initially, 10-12 million tonnes (mt) of FSAs will be transferred, with plans to expand based on the programme’s success, said a senior coal ministry official.

This high-grade coal from ECL can be used as pulverised coal injection (PCI) by steel players, the second official noted. PCI serves as a supplementary carbon and heat source in blast furnaces for producing molten iron, which is then processed into steel.

The Indian steel industry is undergoing big expansion, increasing the demand for coking coal — a key raw material for steelmaking via the blast furnace route. Currently, imported coking coal meets 90 per cent of the industry’s needs.
 

Sehul Bhatt, director of research at CRISIL Market Intelligence & Analytics, said, “In 2023-24, India imported 58 mt of coking coal, marking a 3.7 per cent year-on-year increase. However, the value of these imports decreased by 17.22 per cent to $15.96 billion due to falling prices and Indian mills diversifying their sources to secure lower prices.”
 

Leading integrated steel players in India are set to commission an additional 15 per cent blast furnace capacity in 2024-25.

“This will shore up dependence on imports as India lacks sufficient steel-grade coking coal resources,” Bhatt noted, adding that the overall import bill, though, is unlikely to rise much. “One, global coking coal prices are expected to remain soft over the next couple of years, with declining commodity price volatility and improving supply. Two, the anticipated addition of washery capacity in India and the development of new captive coking coal mines will increase the blend portion of domestic coking coal in overall blast furnace input. The volume of imports, however, is still expected to rise,” he said. 
 

Keeping the coking coal linkage auction regime focused on the steel sector is a proactive initiative by the Ministry of Coal to help the domestic steel industry reduce its reliance on imports, said Alok Sahay, secretary general of the Indian Steel Association (ISA). ISA is the apex body for steel producers.
 

However, Sahay highlighted, “Due to technical and quality constraints, we will largely continue to depend on imports. Even if 15-20 per cent of coking coal imports are replaced by domestic coal, it will result in precious foreign exchange savings. Additionally, the goal is to discourage trading of this scarce domestic resource and ensure the benefits directly reach end-users.”
 

The finer points raised by stakeholders are under discussion with the Ministry of Coal, BCCL, and CIL, Sahay said.

Ministry officials indicated that stakeholder consultations are underway, and an auction regime will be launched soon.