Thread by @jshilanjanm

India’s pvt sector is going gangbusters on coal mining, breaking all records ⛏️⛏️

A 5yr old #ModiGovt reform has set India’s captive coal economy on a big growth path.

Here’s all you should know! 👇

India’s coal is primarily produced by 2 sets of entities.

⛏️ PSUs: #CoalIndia & #SCCL

⛏️ Captives: Pvt sector entities or PSUs like #NTPC or #SAIL which mine coal to meet in-house power demand

Here is how their production (million tonnes/MT) has fared over the last 10yrs 👇

Brackets show share of captives in overall production.

(Total | Coal India | SCCL | Captives)

FY14: 566 | 462 | 51 | 53 (9.3%)
FY15: 609 | 494 | 53 | 62 (10.2%)
FY16: 639 | 539 | 60 | 40 (6.2%)
FY17: 658 | 554 | 61 | 42 (6.4%)
FY18: 675 | 567 | 62 | 46 (6.8%)

FY19: 729 | 607 | 64 | 57 (7.8%)
FY20: 731 | 602 | 64 | 65 (8.9%)
FY21: 716 | 596 | 51 | 69 (9.6%)
FY22: 780 | 623 | 65 | 91 (11.6%) 👏
FY23: 893 | 703 | 67 | 123 (13.8%) 👏👏

You would have noticed, I shared the nos. for FY14-18 in one block & FY19-FY23 in a separate block.

That’s cuz, in FY19 it announced its solution to a big problem.

In India, the high cost of power for industries has always been Ann issue.

The reason 👇

⛏️ Govts provides mostly free/cheap power to farmers/households

⛏️ It then cross-subsidises by charging 2-3x to industries & commercial entities

Small companies can’t do much about this, but this is why big ones have always had in-house coal power plants.

⛏️ After all, solar and wind got affordable just recently. And most people don’t realize that too is partly because the Govt has waived off transmission charges

⛏️ And given that PSU coal has always been prioritized for power needs of farmers/households, the industries have been dependent on imports

Hence, Manmohan Singh Govt had auctioned a lot of coal mines to the pvt sector. But that ended up in a major scandal, following which Supreme Court canceled most of those.

But, in FY19, the Modi Govt introduced an e-bidding system & got back to auctioning mines.

And in bygone March, it just launched the 7th such auction involving 100+ mines.

To boost production, Govt allowed captive miners to sell as much as 25% of their coal in open markets!

It did so intelligently to ensure this won’t hurt the PSUs and only hurt the imports.

It said,

⛏️ Mine operators will have to pay a royalty on every bit of coal mined determined as a %age of the base price determined by Coal India’s own selling price

⛏️ This ensured that captive coal will never be cheaper than PSU coal and won’t hurt their biz

Result?

👏 Since FY19, the share of captive coal in overall production has risen to an all-time high of ~14% & is projected to hit ~25% mark by FY30

👏 Overall, captive production has already jumped 2.7x in 5yrs!

👏 And by FY26, India will eliminate coal imports

Much to be celebrated & appreciated 🙌

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