The Hindu Business Line : Buoyant coal outlook calls for more pvt hands

The reason — it has to meet the increased requirements of good quality coal for the cement and steel industries, which are the cardinal crutches for infrastructure development.

The Budget has proposed an investment of Rs 60,000 crore through public and private participation for development of physical infrastructure like roads, airports and ports. A chunk of this investment (Rs 40,000 crore) has been proposed for development of 48 new road projects involving 10,000 km, with 25 per cent of this to be made of cement and concrete.

The sentiments in the cement and steel sectors are understandably buoyant in the immediate aftermath of the Budget presentation in the Parliament. But the key question is whether these sectors are geared up to ramp up production, especially from the point of view of the poor quality and quantity of domestic coal supplies.

Let us take the cement industry first. Coal is one of the chief inputs in cement making, providing the required heat and temperature for formation of clinker, while the ash content also combines chemically with limestone to form clinker.

The Indian cement industry has been marked by a significant growth in the last few years, ranking second after China today with a production of 108.40 million tonnes last fiscal, which is expected to touch the 113-million tonne mark by the end of the current fiscal.

According to the projections of the Cement Manufacturers' Association, the coal consumption by the domestic industry was 16.5 million tonnes in the last fiscal, with the demand of this principal input slated to bloat up to about 24 million tonnes by the end of the Tenth Plan when the cement production would nudge 165 million tonnes.

The estimates are based on a coal/clinker ratio of 17 per cent, corresponding to 170 kg of coal for each tonne of clinker produced.

Presently, the industry receives about 48 per cent and 26 per cent of its coal supplies from Coal India Ltd (CIL) and Singareni Collieries Co Ltd respectively, with 21 per cent being imported and the remaining 5 per cent replaced by Pet Coke.

The cement industry has been facing problems with indigenous coal, with large scale open cast mining affecting the quality of coal, marked by high ash content and non-uniform quality. High ash coal not only results in underutilisation of cement plants but also applies pressures on the units to get better quality limestone and increases energy consumption.

The other problems being faced by the cement industry regarding coal supplies include high price and transportation cost and loss of weight in transit.

Against this background, the cement industry has begun to look for alternatives as resorting to imports when feasible and use of washed /beneficiated coal, pet coke and lignite.

Even in regard to the steel sector, which will be playing a vital role in the new infrastructure development initiative proposed in the Budget, a similar situation prevails. With a production of 36 mt (including 19 mt from integrated plants and 12 mt from EAF/IF units), India is the eighth largest steel producer in the world.

Notwithstanding the industry's efforts to pare down specific coal consumption, this raw material accounts for over 30 per cent of steel production in India, with the present consumption of coking coal being 25 million tonnes.

Thus, the domestic coal industry will have to play a significant role in infrastructure development programme proposed in the Union Budget, calling for more private participation for increased production.

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