CCAI Newsletter September - 20

September 2020 Price: 40/W H E R E S E R V I C E A N D D E D I C AT I O N J O I N H A N D S

Vol. XLIX No. 06 Published on : 28.09.2020

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From the Editor’s Desk Overcoming the wet blanket of the deadly pandemic which had hit the country during early March, India’s eco nomy is slowly trying to find its rhythm back and the coal is expected to play a pivotal role in this revival thr oug h its significant contributions in the power as well as manufacturing sectors.

India, the world’s second larg est coal consumer currently has about 62 GW of coal projects under constru ction. The Government has rece ntly sanctioned investment of Rs 40, 000 cror e on new technologies to decarb onise the country’s vast reserves of black diamond in a bid to protect the environ ment.

National miner Coal India and its subsidiaries are cur rently in the process of setting up five projects to make methanol from coal usin g CTL (coal-toliquid) technology and reduce the harmful carbon emissions.

A number of coal gasification projects have also been launched to utilise coal waste in a cleaner way including the Rs.13,000crore CTG (coal-to-gas) project in Odisha’s Angul district.

There are also reasons to be optimistic as Coal India has seen fastest growth in output and sales over the pas t six years in September’20 as coal-fired power generation has picked up and demand from smelters and other consumers increased. The company’s out put rose by 32 per cent to 40.

51 million tonnes in September while Offtake incr eased by 31.5 per cent to 46.

46 mil lion tonnes.

This growth is understood to be directly related to the reco very in the thermal power sector as coal-fired elec tricity generation rose 9.9 per cent in September after India removed nearly all coronavirus-related restrictions .

The world’s largest miner has also finalised contracts for hea vy ear th moving equipment wor th over Rs 5,9 00 crore and is planning a cap ex of Rs 10, 000 crore during the current fisca l in a bid to bolster its produc tion capacity. Mine Development and Operator (MDO) documents for open cast and underground mines have also been finalised with valuable input from all stakeholders.

Expansion plans are also ong oing on various fronts. CIL's subsidiary Nor thern Coalfields Ltd is planning to expand three open-cast min ing projects in the ongoing financial year.

The consolidated effort by the Ministry and Coal Ind ia has created high hopes among the coal produc ers and consumers in the cou ntry regarding a steady recovery by the countr y’s coal sector that would incr ease the domestic production, reduce the nee d for import of coal while also ma intaining the delicate environmental balance .

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Content Vol. XLIX No. 06 September 2020

Official Organ of the Coal Consumers’ Association of India. Disseminates News and Views on Coal and all other sources of Energy.

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Consumers' Page

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Power

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Domestic

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Global

4, India Exchange Place - 7th Floor Kolkata - 700 001 Landline : +91 33 22304488 / 22621516 E-mail : sec.ccai@gmail.com Website : www.ccai.co.in Editor : Subhasri Nandi Annual Subscription Rs. 400/(including postage) MO/DD to be made in favour of “Coal Consumers’ Association of India” CCAI do not necessarily share or support the views expressed in this Publication.

28 Monthly Summary Of

Imported Coal &Petcoke

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Production And Offtake Performance Of Cil And Subsidiary Companies

31 Overall Domestic Coal Scenario 32 Energy Generation Report CCAI Monthly Newsletter September 2020

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CONSUMERS’ PAGE Present Coal Scenario: Following the pandemic related disruptions, state owned Coal India has produced 40.51 million tonnes of coal in September 2020 compared to 30.78 million tonnes produced in the same month last year, registering a growth of 31.6% on a y-o-y basis. For the period of April-September 2020, CIL has produced a total of 236.05 MT of coal, close to2% lower than the production figures of 240.93 MT during the same period of the previous financial year.

Coal offtake in September also grew significantly to 46.46 million tonnes registering an upsurge of 31.7% compared to 35.28 MT during September 2019. Offtake for the period of April - September 2020 stands at 254.93 MT. The overall offtake for the ongoing financial year is 7.6% lower than the offtake quantity of 275.93 MT during the same period of the previous financial year.

Issues faced by both Power and Non-power sectors: 1. Submission from both Power and NRS consumers to keep reserve price same as notified price in the coming auctions: Coal demand had shrunk significantly across coal consuming sectors including both Power and Non-power during the pandemic and sub-

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sequent lockdown. Keeping the customers’ constraints in view, CIL has allowed various Eauction schemes like Spot, Special Forward and Exclusive for both Regulated and Non-regulated sectors to be conducted at reserve price which is equal to their respective notified prices till September 2020.

As the financial impact of the pandemic is far more long lasting, request has been made by both Power and NRS consumers to extend the facility of conducting all upcoming auctions at

respective notified prices till the end of current Financial Year i.e. March 2021.

2. Submission by both Power and NRS consumers regarding change of mode from Road to Rail for entire FY 2020-21:

Issues faced exclusively by Power sector consumers: 4. Concerns over recurrent grade variation from various sidings of ECL:

Following the pandemic situation, CIL has allowed the temporary dispensation for change of coal transport mode from Road to Rail under Special Forward e-Auction and NRS Linkage Auction Route from April- September 2020.

However, due to the ongoing surge of COVID cases, coal consumers are facing an acute shortage of workforce at the unloading end as well as lack of road transport vehicles.

The issue of grade variation has consistently occurred in Bankola, Ukhra, POCP Railway sidings, Salanpur and Sonepor Bazari area of ECL in recent months where variation of three to five grades have been observed in the coal received by the Utilities. This grade slippage has caused the TPPs to incur major financial loss due to less quantity realization against annual contracted quantity as per FSA and higher specific coal consumption and reduction in plant PLF.

MoC and CIL has been requested so that considering the ongoing adversities, change of mode from Road to Rail for Special Forward e-Auction and Linkage Auction consumers should be allowed for the entire financial year (FY 20-21).

It had been repeatedly urged through representations and deliberations with the coal company along with MoC and CIL for immediate re-assessment of declared grades from the mines where issues with coal quality are frequent.

3. Submission regarding invoking of general Force Majeure for a period of 6 months for both Power and NRS consumers:

5. Issue of grade slippage from Talcher sidings of MCL:

Considering the adverse situation following the COVID-19 outbreak, CIL has in September, 2020 directed its Subsidiary coal companies to evoke Force Majeure for the month of April and May 2020 and accorded its approval for giving relief to the affected customers to the extent of prorated Monthly ScheduledQuantity (MSQ) of the said months.

However, as per the Office Memorandums issued by the Government, Force Majeure should be invoked for a period of minimum three months to six months.

As per the provisions given in the government directive, CIL is requested to invoke the general Force Majeure for the affected coal consumers across the board for a period of six months starting from 25th March, 2020.

Power sector consumers procuring coal from MCL are facing significant operational difficulties due to repeated instances of grade variation in coal procured from MCL’s Talcher SPUR- I, II, IV, VI, VII, VIII sidings during June-August 2020 period. Variations in the tune of one to three grades are consistently occurring in the rakes loaded from these sidings.

Request has been madeto the concerned coal company along with CIL and MoC by the Power sector to take up necessary measures in order to ensure supply of declared grade of coal as consistent grade slippage hampers the generation and increases the per unit energy cost.

Issues faced exclusively by NRS consumers: 6. Request for providing of Force Majeure relief for the customers of MCL: CCAI Monthly Newsletter September 2020

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NRS consumers procuring coal from MCL have not been receiving rakes which were pending since FY 2019-20 in spite of high demand at their end and were forced to procure from imported sources by paying high premium. However, they were supplied with huge number of pending rakes during the COVID-induced lockdown even as demand was significantly reduced as many of these factories were under complete and partial closure. This situation forced the Industries to cancel the rakes supplied during lockdown period which subsequently attracted hefty penalty for short-lifting and also termination of FSA. CIL has in September 2020, directed its Subsidiaries to evoke Force Majeure for the month of April and May 2020 for giving relief to the affected customers to the extent of prorated MSQ of the said months.

However, it is requested to MoC and CIL that general Force Majeure may be invoked for waiver of all forms of performance related obligations during national lock down period i.e. 24th March to 31st May, 2020. Also, termination of FSAs may not be imposed for rakes being cancelled during the national lockdown.

7. Referee analysis results from ECL pending since2019: NRS consumers procuring coal from ECL have stated that in many cases, reports of referee analysis are pending since 2019 and the consumers are not able to get any status update of the same in spite of giving several written representations to the coal company. Settlement of quality claims for samples which has not been challenged by ECL have also been kept pending in many cases.

Request has been made to expedite the process of releasing the Referee results and immediately process the undisputed quality claims which have been kept on hold for long.

September 2018 in form of quality claims as the Referee analysis result of received quantity revealed that the supplied grade of coal was often significantly lower than the billed grade. ii. In some cases, third party analysis results showing grade slippage, were challenged by ECL after the stipulated timeframe, which subsequently got rejected by QCI (3rd party agency) as per the norms of tripartite agreement. However, ECL has not resolved this issueagainst any claim of those amounts so far. Submissions and deliberations are continuing for taking upthese pending claims into processing.

Issue related to Railways for all coal consuming sectors : 9. Submission to Railways regarding discrepancy in the Tare Weight of rakes being received at the sidings: Consumers from both Power and Non-power sectors stated that during weighment of rakes at the electronic in-motion weighbridges, the actual tare weight of rakes is often found to be much higher thanthe designed tare weight in BOXNS and BOXNHL wagons which leads to short receipt of coal of equivalent quantity. Since the designed tare weight is also mentioned in the RR, the tare difference leads to significant overcharging of freight for quantity of coal not delivered to the buyers. This leads to major financial loss for the consumers. *Request has been made to the Railway board to consider the actual tare weight of every wagon before loading them. *Periodic assessment of tare weight of different types of wagons needs to be done at loading and unloading ends in presence of customers and the standard tare weight needs to be revised accordingly.

8. Pending quality claims for Non*Also, it has been requested to remove the power sector consumers from ECL: Several Industries procuring coal from ECL have large amounts of compensation pending since

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anomaly in designed tare weight and actual tare weight and prepare the RR with correct weighment.

CCAI CCAIMonthly MonthlyNewsletter NewsletterSeptember November 2020 2019

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POWER Integrated energy policy need of the hour: Coal Secretary Coal powers almost three-quarters of the country’s electricity generation in India, and half of the total energy consumed. The government estimates that the country will need 892 million tonnes of the fuel in FY30—around 40% higher than current levels— for power generation.

To address the transition in energy sources, where renewable sector is seen to gradually have a larger share, an integrated energy policy with a balanced approach towards all forms of fuel is the need of the hour, Union coal secretary Anil Kumar Jain said on Monday. With new technology such as coal gasification coming in, coal can have a number of alternative uses in the future other than power generation, Jain added.

Coal powers almost three-quarters of the country’s electricity generation in India, and half of the total energy consumed. The government estimates that the country will need 892 million tonnes of the fuel in FY30—around 40% higher

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than current levels— for power generation. The fuel is also deeply intertwined into the country’s economy not only as a source of employment, but a significant source of revenue for the Central government, state governments and the railways. The secretary also pointed that the removal of coal would also warrant the government to find alternative sources of revenue.

India's dependence on thermal power to dip to 50% by FY22: Report India's dependence on thermal power will reduce to 50 per cent by 2021-22 and 43 per cent by 2026-27 on the back of renewable energy (RE) capacity additions, a report said.

Thermal power includes diesel, gas and coalbased electricity generation which contributes 63 per cent of total electricity generation capacity in India as per the report.

"India is chasing ambitious RE targets and enhancing its T&D (Transmission & Distribution)

infrastructure. Increasing RE use is decreasing dependence on coal. Contribution of the thermal sector will reduce to 50 per cent by FY22 and 43 per cent by FY27," said a report by Praxis Global Alliance and Zetwerk.

The recent study by Praxis Global Alliance, a leading management consulting and advisory firm, and Zetwerk, an Indian B2B marketplace for manufacturing products and services, highlights the impact of COVID-19 on the overall power sector including key segments - generation, transmission, and distribution.

According to the report the installed power generation capacity has increased at 8.6 per cent CAGR over the period FY12FY19 and renewable energy is growing at the fastest pace. New private investment in the generation sector is expected to be largely in the renewable sector, it added.

The report showed that owing to past bad experiences, long-term PPAs (power purchase agreement) in thermal power are unlikely to pick-up in the future. Renewables sector is likely to continue with long-term PPAs, it added.

Power tribunal allows passing pollution control costs on to tariffs Setting the stage for meeting the cost of mitigating pollution by passing it on to tariff, the Appellate Tribunal for Electricity (APTEL) has asked the Punjab government to treat investment made by Vedanta promoted-Talwandi Sabo Power Ltd and Larsen & Toubro’s Nabha Power Ltd as "change in law relief". This will allow the companies to recover costs for setting up FGD (flue-gas desulfurization) mandated under the ministry of environment norms from tariff to be paid by the state owned power distributor.

APTEL, simultaneously, rejected an appeal filed by the Maharashtra State Electricity Distribution Co. Ltd. against a state regulator’s order allowing Adani Power’s 3300 Tiroda plant to load on the increased cost on to tariffs.

Vedanta’s Sterile Power Ltd signed a share purchase agreement for taking over the Punjab government special purpose vehicle on Sep-

tember 1, 2008. On the same day, a power purchase agreement (PPA) was executed between TSPL and erstwhile Punjab State Electricity Board for sale of power from its 1980 (3x660) MW plant. The company contended that almost seven years after that the Environment (Protection) Rules, 1986 were amended by the MoEF on December 7, 2015 introducing the standards of emission and the level of water consumption for all coal based thermal power plants in India.

The MoEF rules set emission limits of suspended particulate matter and introduced new emission norms of sulphur dioxide (S02), nitrogen oxide (NOx) and mercury came in December 2015.

Thermal power plants are required to adhere to the specified emission and water consumption limits based on the year of their commissioning. All power plants have to be compliant by December 2022.

Cabinet expands lending limits for power discoms to help them clear dues The Cabinet Committee on Economic Affairs (CCEA) on Wednesday relaxed the lending limits of the state-owned power distribution companies (discoms), in order to assist them to clear their dues to power generation and transmission companies.

Discoms can borrow only up to 25 per cent of their last year’s working capital, under the limits stipulated in the UDAY scheme for turnaround of the discoms. Any lending was tied with the performance of the discom. This was done to discipline the discoms’ finances.

The CCEA has now relaxed this limit for onetime lending. This would help discoms that have exhausted their borrowing limits.

The loan is part of the Aatmnirbhar package announced by the finance ministry in May to infuse liquidity in the financially ailing power distribution sector. The scheme aimed at providing a one-time loan by Power Finance Corporation and Rural Electrification Corporation to discoms for clearing their dues to generating and transmission companies. As of June 2020, the total dues of the discoms to gencos stood at Rs 1.13 trillion.

CCAI Monthly Newsletter September 2020

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Smart metering will improve discoms' efficiency, high cost a hurdle: Crisil Smart metering will help empower discoms by improving billing efficiencies and reducing leakages, however, the scale of financial investment required is a major roadblock in its path, according to a report.

India's traditional power metering system is inadequate, resulting in MBC (metering, billing and collection) inefficiencies, high commercial losses and revenue leakages, Crisil Ratings said in a report.

Smart metering could empower discoms by improving billing efficiencies, enhancing customer services and reducing leakages, thus enabling financially distressed discoms to maximise revenues, it added.

The report also noted that smart metering could also help meet the need for robust metering systems, given the rising dependence on renewable energy will result in a growing tribe of distributed generators with net metering requirements.

State discoms with high MBC efficiencies may believe that they can postpone the switch to smart meters, however, the pandemic has shown that Indian discoms need to be better prepared to tackle such events.

Further, the report stated that smart meters could help ensure that they are future-ready. Despite the benefits, only 3 million smart meters are operational in India compared with 270 million traditional meters, it said.

CRISIL Research estimates that the country would need to invest Rs 65,000 crore to transit from traditional to smart meters entirely, assuming a substantial reduction in current meter prices coupled with rising volumes.

Western Coalfields offers additional coal to various power gencos at cheaper price Western Coalfields Ltd (WCL) has offered additional quantity of coal to various power gen-

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eration companies of central, west and south regions at a cheaper landed price, according to a WCL release. WCL, a subsidiary of Coal India Ltd, said the move will not only help power generation companies (gencos) minimise their cost to cut power tariffs, but will also reduce import of thermal coal.

The company has the advantage of having its mining operation in central India, it added. This helps consumers of central, west and south India to get cheaper landed coal due to advantage in lesser railway freight in comparison to other coal companies of CIL located in the eastern part of the country. “With locational advantage and phenomenal growth in production, WCL has offered 20-25 million tonnes of coal to state gencos, NTPC and other independent power producers (IPPs) by swapping their linkage from other coal companies. This will be in addition to their existing linkage quantity with WCL,� it said.

WCL further said that in a series of detailed discussion during the past two days with WCL and state gencos of Maharashtra, Madhya Pradesh, Karnataka, Gujarat, followed by NTPC and IPPs, all parameters of existing linkage and future swapping have been discussed along with financial benefit to gencos.

Indian power market goes green with GTAM launch As a first step towards the greening of the Indian short term power market, Power Minister R.K. Singh on Tuesday launched the pan-India Green Term Ahead Market (GTAM) in electricity.

The introduction of GTAM platform would lessen the burden on RE-rich states and incentivise them to develop RE (renewable energy) capacity beyond their own RPO (renewable purchase obligations). This would promote RE merchant capacity addition and help in achieving RE capacity addition targets of the country he said at the launch held via video conference.

He added that GTAM platform will lead to increase in number of participants in the RE

sector, and will benefit buyers of RE through competitive prices and transparent and flexible procurement. It will also benefit RE sellers by providing access to pan-India market, the Minister said.

The government target of 175 GW RE capacity by 2022 is driving accelerated renewable penetration pan-India. Green Term Ahead Market contracts will allow additional avenues to the RE generators for sale of renewable energy, enable obligated entities to procure renewable power at competitive prices to meet their RPOs, and provide a platform to environmentally-conscious open access consumers and utilities to buy green power. Further, within the two segments, GTAM contracts will have Green Intraday, Day Ahead Contingency, Daily and Weekly Contracts with bids on a 15-minute time-block wise.

chain of their operations, and current installed solar power capacity is 270 MW. Additional 60 MW solar capacity will be added in the coming year. We have taken up the mission of solarising about 50 per cent of fuel stations owned by public sector oil companies in the next five years," he added.

Adani now the world’s largest solar power developer India’s Adani Group is the world’s largest solar power developer with 12.3 GW of a solar portfolio, according to a Mercom Capital ranking.

The ranking includes the company’s 2.2 GW of operating and 10.1 GW of under construction and awarded solar capacity.

India to have 220 GW renewable energy capacity by 2022: PM Narendra Modi

Hong Kong-based GCL New Energy is the second-largest solar developer with 7.1 GW, followed by Japan’s Softbank-backed SB Energy (6.9 GW) and Italy’s Enel Green Power (5.9 GW).

Prime Minister Narendra Modi on Tuesday exuded confidence that India will increase its existing clean energy capacity of 134 GW to 220 GW by 2022 and stressed on reducing tariffs further through technological advancements.

Adani is the only Indian company to rank amongst top 10 developers globally—compared to the engineering, procurement, and construction (EPC) market, where four of the top 11 spots were claimed by Indian companies (Sterling & Wilson Solar, Acme Solar, Mahindra, and Larsen & Toubro) in a WikiSolar ranking.

New and Renewable Energy Minister R K Singh read out Modi's message at the virtual summit.

"We have scaled up our non-fossil fuel based generation to 134 GW, which is about 35 per cent of our total power generation. We are confident of increasing it to 220 GW by 2022," Modi said.

Modi also mentioned the 'One World, One Sun, One Grid' project which is aimed at clean energy supplies across nations. The Prime Minister asserted that ISA is part of this project which can bring transformational benefits for entire humanity. He also stated that the government wants to take solar energy to all villages in the country and replace diesel with this clean source in the farm sector.

"Our oil and gas companies are also making efforts to deploy solar panels across the value

“Adani’s renewable energy portfolio exceeds the total capacity installed by the entire United States solar industry in 2019 and will displace over 1.4 billion tons of carbon dioxide over the life of its assets, a report by Mercom stated.

Bidders can furnish letter of undertaking instead of bank guarantees for renewable power projects The government on Friday said clean energy developers can furnish letter of undertaking issued by IREDA, PFC or REC in lieu of bank guarantees under state auctions for renewable power projects. The move will further improve CCAI Monthly Newsletter September 2020

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ease of doing business for companies, New and Renewable Energy Minister R K Singh said.

In a statement, the Ministry of New and Renewable Energy (MNRE) said Singh "has approved a proposal for acceptance of Letter of Undertaking issued by IREDA, PFC and REC in lieu of bank guarantees for Earnest Money Deposit (EMD) by SECI (Solar Energy Corporation of India), NTPC and NHPC in the case of tenders/ biddings for developing renewable energy (RE) projects in the country."

SECI, NTPC, NHPC are the government nodal agencies for bidding out clean energy projects.

In a letter to the agencies, MNRE said SECI, NTPC, NHPC or any other implementing agency on behalf of the ministry may accept EMD, in the form of bank guarantees or 'Payment on Order instrument'. "'Payment on Order instrument' means Letter of IREDA or PFC or REC Ltd... to pay in case situation of default of RE power generator in terms of tender conditions and/or Power Purchase Agreement (PPA) arises," it said.

The communication further said "the above decisions may be treated as amendments to the respective Standard Bidding Guidelines (SBG) (solar/ wind) and notified accordingly." IREDA, PFC or REC may issue such letters of undertaking as per their policy, on merit and after due diligence.

Solar power not finding buyers – Here’s what Centre plans to do To address the issue of solar power not finding buyers, the government will bundle projects in order to cushion the hit to state-run power distribution companies (discoms) from high tariffs discovered under certain auctions, Union power minister RK Singh told FE. To start with, projects with a combined capacity of 3 gigawatt (GW) bid out under the manufacturing- linked solar scheme in January will be bundled with a total 3.2 GW capacity awarded in the last two auctions held in February and June. This means that the discoms concerned could buy power at composite rate of `2.66 per unit, against a higher tariff of `2.92 discovered

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the manufacturing-linked scheme.

The 3 GW capacity to be combined with other projects is part of the 12 GW projects awarded in the maiden auction under the manufacturinglinked scheme.

The winners of the February auctions for 1.2 GW were SoftBank Group’s SB Energy, Canadian energy firm AMP Energy’s India unit, New York-based Eden Renewables’ Indian arm and ReNew Power. In the June auction for 2 GW — where the all-time low tariff of `2.36 per unit was discovered — the winners were Spanish firm Solarpack’s Indian arm, Avikiran Surya (backed

by Italian utility Enel), Eden Renewables, a subsidiary of Germany’s Ib Vogt, UK’s CDC-backed Ayana Renewable, Amp Energy Green and ReNew Power.

PPA-starved power companies seek changes in rare 25-year RE + Thermal tender Thermal power producers have sought changes in tender documents for a 5,000-mw renewable-plus- coal power supply, citing difficulties deterring them from participating in a rare 25year long-term tender in a decade.

The companies have sought to become signatory to the power purchase agreement as the tender documents in present form allow agreement between only renewable power developers and the Solar Energy Corp of India (SECI), which has floated the tender.

The Association of Power Producers in its letter to power secretary Sanjiv Sahai has also sought extension of the bid submission deadline by one month from the present September 15.

As per the bidding document, the renewable power developer is required to bid and enter into agreement for an aggregate bundled quantum of renewable plus thermal capacity, of which 51% should comprise green energy.

The arrangement is only good for companies which have imported coal tie-ups. However, lack of PPA with SECI will disallow thermal companies to approach regulators seeking changein law relief if the coal costs or levies rise or in case of other unforeseen circumstances over 25 years of supply period.

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DOMESTIC Miners and steelmakers lock horns over mines ministry's proposal to amend MMDR Act The mines ministry has proposed changes in the law to allow auction of around 500 iron ore mining leases currently stuck in legacy issues among its recommendations under the Atmanirbhar Bharat scheme.

While steel companies have welcomed the move, merchant miners have opposed it saying it will put to risk significant investments made by existing concession holders and deny them a level-playing field.

The ministry has proposed amending Sections 10A(2)(b) and 10A(2)(c) of the Mines and Minerals (Development and Regulation) Act, 1957 to pave way for auctioning of a large number of potential leases currently blocked in legacy cases.

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“The cases coming under Section 10A(2)(c) of the Act, which stood extinguished on January 12, 2017 as per law, but are still litigated or pursued unnecessarily at various levels, need to be brought to a closure to end the policy stalemate," the ministry said in a notice dated August 24.

Cases under Section 10A(2)(b) are still disputed in the absence of a specific sunset clause in the act, and they have not reached closure yet, it said.

Mines ministry comes out with reform proposals “Proposal is there to remove the provision of earmark any mine for captive purpose during auction, henceforth, all the blocks will be auctioned without any end use restriction,� it said.

The mines ministry has come out with a slew of

reforms proposals, including amending the contentious provisions of 10A(2)(b) and 10A (2)(C) of the Mines and Minerals (Development and Regulation) Act, to pave the way for auctioning of around 500 potential leases stuck in legacy issues now.

Section 10A(2)(b) deals with leases where reconnaissance permit or prospecting licence were granted; while 10A(2)(c) relates to grant of mining leases (ML). The mines ministry has sought comments from the stakeholders on these proposals till September 3.

The cases coming under Section 10A (2)(b) of the Act are still disputed in the absence of a specific sun set clause in the Act, and they have not reached closure till date. Section 7 of the MMDR Act provides for maximum period of five years for completing the prospecting operations.

These amendments came in effect on January 12, 2015, and the maximum period of five year for prospecting has also lapsed on January 12, 2020.

The government has recently amended several rules to make the coal mines more attractive for private players in the upcoming auctions, and has offered some blocks falling in areas which had been earlier designated as ‘no-go zones’.

This would also be the first set of coal assets to be auctioned off for selling the fuel in the open market. The government estimates that the country will need 892 million tonne of the fuel in FY30 — around 40% higher than current levels — for power generation.

More than 75% electricity is currently generated by thermal power plants, though the share of such power generation capacity is only around 60%. The intermittent and limited hours of power supply from renewable energy render it unattractive for state-owned discoms, which have to spend more on making backup arrangements. The nameplate tariffs of some solar/ wind based projects are currently cheaper than coal, but only when the sun shines and the wind blows.

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Commercial mining: UN secretary India plans deep cut in thermal general expresses concern over coal imports in coming years India plans to significantly reduce its thermal ongoing coal auctions After the government recently launched the maiden auction for 40 coal blocks for commercial mining, Antonio Guterres, secretary general of the United Nations, said on Friday that such a “strategy will only lead to further economic contraction and damaging health consequences”.

While delivering the 19th

coal imports in “the next few years” to save foreign exchange and create jobs through the development of existing and new coal blocks, a senior official in the federal coal ministry said.

Coal is among the top five commodities imported by India, the world’s largest consumer, importer and producer of the fuel after China.

Darbari Seth Memorial Lecture organised by Teri, Guterres said, “In India, 50% of coal capacities will be uncompetitive in 2022, reaching 85% by 2025.” He added that “the coal business is going up in smoke”.

India spent 1.58 trillion rupees ($21.28 billion) on importing 247 million tonnes of coal, including 197 million tonnes of thermal grade, in the fiscal year to March 2020, M. Nagaraju, a joint secretary in the coal ministry, told a seminar.

Expressing his concerns about the “continued support for fossil fuels in so many places around the world”, Guterres said that “we have seen countries doubling down on domestic coal and opening up coal auctions”.

“As per our assessment, we can actually substitute between 110-120 million tonnes of coal.

We will not be able to do this year, but certainly we will do in the next few years,” Nagaraju said, without giving more detail on the timeframe.

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He said increasing local coal production would help to improve the economies of states in central India, where most coal mines are located.

To boost local output, India in June launched an auction of 41 coal blocks with an annual production capacity of nearly one third of total national output..

auctions from Oct. 19 to Nov. 9, allowing private companies to mine and sell coal for the first time in nearly five decades. A representative for SBI didn’t immediately reply to an email seeking comment.

Domestic coal demand may be subdued in Q2 on lower demand: State Bank of India plans coalReport loan policy before key auctions, Demand for domestic coal is likely to be subcould put 41 mines in private dued in the second quarter of the current finanhands cial year, due to lower demand from end-user .

State Bank of India is creating a policy to lend to coal miners before landmark auctions that would end decades of state monopoly on the fuel, according to a person with knowledge of the matter.

Long-term offtake contracts assuring demand will be central to any lending decision, the person said, sking not to be identified before terms are finalized. The nation’s biggest bank would prefer a loan tenor closer to five years, the person added.

The planned policy suggests SBI is open to providing some of the financing required to put 41 coal mines with a combined annual production capacity of 225 million tons into private hands.

The giant bank has flagged concerns about the sector, and Indian banks are reining in loans to corporate borrowers as the coronavirus pandemic pressures asset quality.

Lenders are also wary about sustained demand for coal, which is seen globally as a dirty fuel but is still the biggest source for electricity generation in India. In Japan and Europe, several banks have announced plans to cut down lending to coal projects.

India’s coal-fired power plants, the biggest users of the fuel, operated at an average 46.2% of their capacity during the three months ended June, compared with 63.2% a year earlier.

State-run MSTC Ltd will hold the final online

18 | CCAI Monthly Newsletter September 2020

industries amid the COVID-19 pandemic along with high inventory at power stations, according to a report by India Ratings.

The rating agency said domestic coal production remained subdued for the third consecutive month in June 2020 year-on-year as well as month-on-month due to low power demand and higher inventory at power stations.

"Despite gradual relaxation in lockdown norms, demand over the second quarter of FY21 shall be further dampened by the onset of the monsoon season. Overall, domestic coal imports are also likely to be lower in Q2 FY21 year-onyear," it said.

According to IndRa, domestic coal imports are likely to have been lower in July 2020 due to the low domestic demand from end-user industries amid the COVID-19 outbreak.

"The share of imports in the total domestic consumption reduced to 22 per cent in June 2020 from 28 per cent in FY20. While the non-coking coal imports reduced 34 per cent y-o-y, coking coal imports declined 41 per cent y-o-y," it said.

In talks with Environment Ministry to bring down time taken for Forest Clearances: Coal Secretary

The Ministry of Coal is in talks with the Ministry of Environment, Forest and Climate Change (MoEFCC) to bring down the time taken for getting Forest Clearances to coal mining projects.

Speaking at a virtual conference titled Stakeholders Consultation on Addressing Financing Perspective for Auction of Coal Mines for Commercial Mining, Coal Secretary Anil Kumar Jain said: “Earlier in the mining plan, the project developer also had to submit the environmental plan too. We realised that the MoEFCC will anyway be looking at the environment plan, so why repeat it. So now the mining plan has become much more manageable.”

“Forest Clearance still takes much time. In this case, we are constantly applying our mind and talking to the Ministry of Forest. We are hopeful that in the next 6 to 12 months, the time taken to get Forest Clearance will also come down,” Jain added.

This facilitation is essential to help India grow and plug outflow of foreign exchange.

A coal ministry official also said that the Centre considering acquiring land under the Coal Bearing Areas Act, 1957 for speedier commercial coal mining. This would result in the Centre acquiring land and then leasing it out to the companies for commercial coal mining.

Till now, this Act was used to acquire land only for Public Sector Undertaking companies.

STEEL

Steel firms set to raise prices from Sept on higher costs, global prices Steel companies are set to increase prices from September due to rising costs and higher international prices, Jayant Acharya, director – marketing, commercial & corporate strategy at JSW

Steel, said, the difference between domestic and international prices currently is about 8 per cent. “An increase in prices from September is on the cards. The amount will be decided, he added.

Acharya explained that iron ore prices were at a 6-year high. “International steel prices in August, too, have increased," he said.

The average FoB China for hot rolled coil (HRC) in April 2019 was $532 a tonne. At the beginning of August 2020, it was at $495 a tonne and currently is at Rs $515, indicating an increase of nearly $20 a tonne. However, the current price is yet to breach last year's April-level.

The increase from September could be in the range of Rs 2,000-3,000 a tonne. While a major primary steel producer said that an increase of Rs 3,000 a tonne in steel prices was being contemplated, a secondary steel producer said that the increase could be Rs 2,000 a tonne. In the second quarter, so far, steel prices have increased by about Rs 3,000 a tonne.

JSW Steel said that it had started the roll-out of JSW Radiance, a steel colour-coated produce range in high-gloss feature with multiple variants. It was suitable for applications ranging from warehousing, appliances, cold storage, hospitals etc.

India's crude steel output falls over 24 pc in July, global production shrinks 2.5 pc: worldsteel India's crude steel output fell 24.6 per cent to 7.150 million tonnes (MT) during July 2020, according to global body worldsteel. The country had produced 9.485 MT crude steel during the same month in 2019, World Steel Association (worldsteel) said in its latest report.

Global steel production also registered a fall during the month under review, the data showed.

"World crude steel production for the 64 countries reporting to the worldsteel was 152.694 CCAI Monthly Newsletter September 2020

| 19

MT in July 2020, a 2.5 per cent decrease compared to 156.679 MT in July 2019.

"Due to the ongoing difficulties presented by the COVID-19 pandemic, many of this month's figures are estimates that may be revised with next month's production update," it said.

According to worldsteel data, China registered a 9.1 per cent year-on-year growth in its steel output at 93.359 MT during July 2020.

The United States produced 5.241 MT of crude steel in July 2020, registering a fall of 29.4 per cent compared to 7.419 MT output in July 2019.

Japan produced 6.049 MT of crude steel in July 2020, down 27.9 per cent from 8.387 MT in July 2019.

South Korea's steel production for the month stood at 5.526 MT, down 8.3 per cent compared to 6.026 MT in July 2019.

EEPC urges PM Modi to rein in sharp spike in steel prices to help MSMEs Engineering Export Promotion Council (EEPC) India, the apex body of engineering exporters, has sought an immediate intervention of Prime Minister Narendra Modi to rein in a sharp spike in steel prices and help the micro, small and medium enterprises (MSMEs) manufacturing exporters.

In a statement on Thursday, EEPC India said the Indian steel makers have raised the prices across different product categories in the backdrop of the restrictions that the government imposed on the imports from China, Vietnam and South Korea.

The government imposed duty on imports is in the range of $ 13.07 per tonne to $ 173.1 per tonne on imports of flat rolled products of steel, plated or coated with alloy of Aluminium and Zinc from China, Vietnam and South Korea.

According to the apex body, the government

20 | CCAI Monthly Newsletter September 2020

should intervene to ensure that the benefits of ‘Aatma Nirbhar Bharat’ were shared widely with the MSME manufacturing exporters and not grabbed by large steel makers.

EEPC India said the sharp spike in prices by the steel makers made the raw material costs for user industries shot up that left the engineering exporters non-competitive in the international markets.

The protection against imports that the government initiated was largely accruing to the steel makers at the cost of engineering industries, particularly in the MSMEs, said EEPC India chairman Mahesh Desai.

CEMENT

Cement demand to surge on the back of strong recovery from the rural segment, say analysts Higher agricultural income, a better-than-expected monsoon and pick up in the affordable housing segment will lead to a surge in India’s cement demand in the rural segment, analysts said.

Rural demand is likely to help contain the onyear drop in cement sales volume to 12-14% this fiscal as against an average annual growth of 6% during the last three fiscals, said analysts from rating agency Crisil in a sector research report.

“Demand recovery, however, has not been uniform across regions and bears a likeness to the intensity of the pandemic – East and Central regions are more resilient, while West and South are more impacted,”said Crisil Research’s Director Isha Chaudhary.

Data shows a V-shaped recovery in the cement sector from a sharp contraction of 85% seen

in April to an estimated 7-10% growth by the fourth quarter.

Rural demand will also ride on a sharp rise in spending under the Mahatma Gandhi National Rural Employment Guarantee Act to engage migrant workers who have returned home following the Covid-19 pandemic. Cement demand is expected to de-grow by 12% in FY21 and is likely to rebound by 11.4% FY22, he added.

Lower cement volume will result in a 50-100 basis points (bps) moderation in earnings before interest, taxes, depreciation and amortisation (Ebitda), or the operating profit margin, to around 19% this fiscal. Despite the volume contraction and lower cash accrual, credit profiles of cement makers won’t be impacted. .

For cement players, the benign input costs party is about to end Cement companies did relatively better than expectations in the June quarter, owing to cost savings. However, certain costs have increased recently, which does not bode well for cement manufacturers.

The price of key input material petroleum coke (pet coke) has recently started to rise. In August, international pet coke prices surged 31% on a month-on-month (m-o-m) basis to $83/tonne, as per a Kotak Institutional Equities report. Domestic pet coke prices too increased by 8% mo-m in August to â‚š7,275/tonne. Also, the price of imported coal has started to inch up; it was up around 1% in August at 55/tonne, the report said.

Analysts say pet coke prices are unlikely to see a runaway rally to their previous high levels of beyond $100/tonne. However, the landed cost may continue to head northwards due to increased ocean freight cost.

Analysts also caution about increased input cost pressures to start reflecting from the second half of the fiscal year. Pet coke inventory is procured at lower prices and a lag in exhaustion of that inventory could help temporarily.

As for other input costs, diesel prices remain high compared to the year-ago period. This will weigh on freight costs.

That said improvement in realizations can compensate for these increasing cost pressures.

Currently, demand and pricing scenarios are bleak as September is a seasonally weak quarter for the sector.

CCAI Monthly Newsletter September 2020

| 21

GLOBAL Coking coal future growth increasingly global: traders Coking coal derivatives markets are developing liquidity and global trade volumes, with interest in the market seen globally, according to traders at the S&P Global Platts Singapore coking coal conference.

Growth in participants and greater volumes across multiple market segments have helped liquidity and pricing indications on the forward curve, SSY Futures coal derivatives broker Stephanie Idulca said in a webinar at the event.

"We've got quite a full spectrum of entities trading, all with different motivations, all with different views, which has really increased the liquid-

22 | CCAI Monthly Newsletter September 2020

ity we've been seeing in the market� Idulca said.

First and second-tier coking coal producers, financial institutions including banks, funds, international traders, and traders across the regions, along with end-users are active, according to the inter-dealer brokerage. Activity is growing from traders in Singapore along with the US, Europe, India, China and Japan among other locations.

Volumes and open interest have risen this year on the SGX's cleared market, from a weaker 2019.

This is making it easier to find tighter pricing bands and execute forward strips and hedge entire vessel quantities more easily, with options trade looking to pick up, participants said.

Coal's rapid decline won't cripple future energy grid: COAG study Coal’s rapid exit from the energy grid can run smoothly and governments won’t need to intervene in the market to keep the lights on.

The future energy market can serve consumers well without big government subsidies despite the unprecedented disruption in the shift to renewables, said Energy Security Board (ESB) chair Dr Kerry Schott. The ESB is proposing a range of market reforms in a new study released for consultation on Monday.

The Loy Yang coal power stations in the Latrobe Valley stations supply around half Victoria's energy. The ESB has found the rapid exit of coal over the next 20 years can be managed with minimal impacts if prudent reforms are put in place.

Established by the Commonwealth of Australian Governments (COAG) Energy Council in 2017 the ESB advises on the unprecedented market transition so it can deliver “security and reliability to drive better outcomes for consumers” in the national electricity market.

“Governments are pretty nervous about big coal plants exiting the grid, and old gas plants for that matter, and I can understand why they want to intervene,” Dr Schott said..

4 Ways Coal Might Advance the Energy Transition Coal power is on borrowed time. Its exit from the U.S. mix is accelerating. In the U.K., records for consecutive days without any coal power at all have been tumbling. Later this month, Germany will hold a reverse auction that will see the country paying hard coal generators not to operate.

A new report by the think tank Ember finds that

the global fleet of coal power plants is now running at a utilization rate of 47 percent. Phaseout dates for coal power are fast approaching across Europe. Most of the continent's major economies have targets this side of 2025; Germany's 2038 goal makes it the exception.

So the writing for coal power itself is on the wall.

But some of the infrastructure associated with the coal economy — mines and power stations alike — should not be so hastily scuttled.

Across Europe, a host of projects will use coal’s legacy to contribute to the energy transition.

Some are still in the conceptual phase, but some are fully-financed and ready to scale.

All in all, coal infrastructure could yet play a role not just in power, but heat, energy storage and carbon capture and storage.

BHP to tap green energy to mine coal in Australian state Global miner BHP Group said on Tuesday it has signed an agreement to use more renewable energy at its coal mines in Australia's Queensland state which it expects will help it cut its indirect emissions such as those from fuel and power in the country by 20 per cent in five years.

The move comes as BHP prepares to update the market on its climate actions next week which will include targets to cut operational emissions by 2030, as part of its broader commitment to reach net zero emissions by 2050.

The steel-making coal that BHP digs out of the Bowen Basin in central Queensland will be exported and does not count towards BHP’s net zero target. This is an important step forward in BHP's transition to more sustainable energy use across our portfolio, and a first for our Australian operations, said BHP’s President Minerals Australia Edgar Basto said in a statement.

CCAI Monthly Newsletter September 2020

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BHP produced 41 million tonnes of the steelmaking ingredient last year.

The renewable power purchasing agreement with Queensland's state-owned clean energy generator CleanCo, will run for five years from Jan. 1 2021.

The agreement will support the development of new solar and wind farms in Queensland - the Western Downs Green Power Hub due for completion in late 2022, and Karara Wind Farm due for completion in early 2023.

South32 to lift 2020-21 Australian coking coal output Australian mining firm South32 plan to produce 6.4mn t of metallurgical coal from its mines in the Illawarra region of New South Wales in the 2020-21 fiscal year to 30 June before easing back to 6.3mn t in 2021-22, which are up from the 5.55mn t produced in 2019-20.

Operating costs at Illawarra are forecast to fall to $84/t in 2020-21 from $93/t in 2019-20, which are down from $142/t in 2017-18. The firm also expects sustaining capital expenditure to fall to $150mn in 202021 from $185mn in 2019-20 as underground mine development drops following substantial investment previously.

Thermal coal production from the Illawarra mines is forecast to drop to 1.3mn t in 2020-21 and to 1mn t in 2021-22, down from 1.46mn t in 2019-20. South32 plans to lift metallurgical coal production from the Illawarra mines to 7.6mn t/ yr beyond 2021-22.

The firm plans to extend the 3mn t/yr Dendrobium coking coal mine to 2035-36 and plans a final investment decision (FID) on the extension in the second half of 2020-21. It also plans a FID on the Eagle Downs coking coal mine in the Bowen basin region of Queensland in the

24 | CCAI Monthly Newsletter September 2020

October-December quarter of 2020-21.

ASIA PACIFIC COAL – Newcastle index extends 4-year low Asia’s benchmark coal index has pushed out a fresh four-year low amid a collapse in imports among big consumers and mounting competition with gas.

The Newcastle index for high grade (6,300 kcal/ kg) Australian coal exports last stood at USD 47.62/t, down 6% week on week, according to broker Global Coal. It is now trading at its lowest level since February 2016.

Citing Refinitiv ship tracking data, the Eurasia Group estimated the region’s top four buyers would import around 70m tonnes of thermal coal in the third quarter – down 39% year on year.

This also put China, India, Japan and South Korea on track to import 26% less coal than during the second quarter of 2020 as fallout from the coronavirus pandemic showed little sign of abating. “The coal industry has defended prices around USD 50/t,” said Eurasia Group energy director Henning Gloystein. “This is nice for them in the short-term, but it is costing them market share.”

Cheap gas prices were prompting coal-to-gas switching among Japanese and South Korean utilities, said Gloystein. The Japan Korea Marker, a regional spot reference price, last stood around USD 4.10/MMbtu, down 36% year on year.

Both China and India have stepped up efforts in the wake of the coronavirus to increase domestic coal production at the expense of imports in a bid to guarantee employment, said Gloystein.

A growing divergence between Chinese domestic coal prices and their international counterparts since many could yet encourage a rise in Chinese imports.

South African coal industry looks toward post-coronavirus recovery

The government set its coal benchmark price (HBA) at $49.42 per tonne, the Energy and Mineral Resources Ministry said on Tuesday, down from $50.34 per tonne last month.

South Africa's domestic and export coal industry is tentatively bullish about a post-coronavirus recovery after weathering the initial supply disruptions and recently experiencing an increase in export demand. Receive daily email alerts, subscriber notes & personalize your experience.

September marked a sixth consecutive month of decline in the benchmark price, which is used in spot trading in Indonesia, the world's top thermal coal exporter. COVID-19 has resulted in a 20 per cent drop in coal imports by China and demand from India is yet to recover postlockdown," energy ministry spokesman Agus Pribadi said in the statement.

Speaking at the 2020 Coal Industry Day Online Edition on Aug. 20, panelists discussed the current state of coal production in South Africa, developments in key export markets as well as the future of coal in the global energy mix.

India is by far the largest export destination for South African coal, so it would be no surprise that panelists closely linked the recovery of South Africa's export business to Indian demand.

Divyesh Kalan, Executive Head at Makoya Advisory, Puneet Gupta, CEO of CoalShastra, Sajid Hussain, Chief Representative for Pakistan at VISA Resources, Greg Hunter, Director for Africa business Since the onset of the pandemic, coal imports

by India have dropped sharply year on year, but rising steel prices had signaled some positive indicators more recently as India primarily uses South African coal for its steel and sponge iron sectors, Gupta said.

Indonesia’s Sept coal price at record low, miners say oversupply worsens Indonesia has set the coal benchmark price at the lowest level on record amid subdued demand from big buyers, while the country’s miners group said a global oversupply of coal was worsening.

Indonesia is increasingly looking to diversify markets for its coal and is targeting Vietnam as potential growth market.

Coal miners everywhere are in survival mode, Hendra Sinadia, executive director of Indonesia Coal Miners Association (ICMA), said at a virtual seminar on Tuesday, as the global coal oversupply situation worsens.

A global demand correction due to the coronavirus pandemic is expected at around 100 million tonnes, Sinadia said, citing IHS Markit, while output levels of the world's biggest suppliers are not coming down significantly.

Indonesian coal association lobbies for higher exports SThe Indonesian coal mining association (APBI) has asked the government to relax the country's domestic market obligation (DMO) for coal to give producers some financial breathing space during the Covid-19 pandemic.

Indonesia's DMO system requires the country's coal producers to make a percentage of their annual output — currently set at 25pc — available to the domestic market.

Producers that are unable to fulfil their DMO requirements have to pay a fine and will be subject to production cuts under a December 2019 minCCAI Monthly Newsletter September 2020

| 25

isterial regulation, which is designed to reduce electricity costs by increasing the supply of coal for utilities.

But the APBI has now asked for sanctions against companies that fail to meet their DMO quotas to be temporarily suspended because of weak coal demand. Coal use has fallen significantly in recent months because of travel restrictions and a nationwide lockdown, which has resulted in commercial and industrial businesses cutting operations.

Coal consumption at state-owned utility PLN, Indonesia's largest coal consumer, was 50.16mn t in January-June or 46pc of its 2020 target. PLN expects demand to remain weak because of Covid-19 and has also warned of delays bringing new coal-fired power plants on line this year.

The energy ministry originally set a production target of 550mn t for this year, comprising 400mn t earmarked for export and 150mn t for the domestic market. But sales are now projected to reach only 00mn-110mn t because of the economic impact of the pandemic, down from 138.4mn t last year. .ndonesia,

India work to develop underground coal gasification technology The Indonesian Ministry of Energy and Mineral Resources and the Indian Ministry of Coal are working together to develop and test the underground coal gasification (UCG) technology in two locations in India’s West Bengal and Rahihajit regions.

of fossil energy reserves, namely having coal reserves far greater than oil and gas reserves.

In detail, this technology will extract and convert coal below the surface into synthesis gas (syngas) in an on-site manner.

Besides being able to be used as fuel for power plants, this unconventional technology also produces syngas for various purposes such as petrochemical and chemical industries, Kumar noted, adding that UCG syngas production costs are cheaper than LNG imports.

China’s benchmark power coal price remains flat The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of coal prices in northern China’s major ports, stood at 544 yuan (about 79.69 U.S. dollars) per tonne Wednesday, according to the Qinhuangdao Ocean Shipping Coal Trading Market Co. Ltd. Analysts said that the price of the coal in the Bohai Rim region was influenced by many factors, the trade between the trading parties tended to be white-hot and the spot market was in the price selection period, resulting in the BSPI being flat for three consecutive weeks.

Released by the Qinhuangdao Ocean Shipping Coal Trading Market Co., Ltd. every Wednesday, the BSPI is a leading indicator of China’s coal prices.

China Approves Massive Coal Company Merger

Technology Director at the Indian ministry Peeyush Kumar said the implementation of UCG technology is expected to help increase energy availability, conserve natural resources and reduce energy costs.

China has approved the merger of two of Shandong province’s top state-owned coal miners, Shandong Energy Group and Yankuang Group, a decision that effectively creates a new major company in the world’s top producer and consumer of the fossil fuel.

This technology is considered suitable for application in Indonesia and India. Moreover, the two countries have similarities in the proportion

The combined company, China’s second-largest coal producer after China Energy Investment

26 | CCAI Monthly Newsletter September 2020

Corporation (CEIC), will operate under the name Shandong Energy Group Top of Form

the electricity generated last year, according to the Vietnam Energy Association.

It is expected to account for close to 7% of the country’s total coal output. Gewin Ho, a Moody’s vice president and senior credit officer, said that because the combined group will derive most of its businesses from coal mining, its credit profile will remain constrained by significant carbon transition risk and by its exposure to coal-price volatility.

Vietnam is expected to import 12 million tons of coal this year, 30 million tons in 2025 and 50 million tons in 2030 to fuel its thermal power plants, senior officials of the state-owned coal mining group Vietnam National Coal and Mineral Industries Holding Corporation Limited (Vinacomin) said earlier this year.

The merger of Yankuang and Shandong Energy comes as China forges ahead with the reform of its stated- owned enterprises. The newly merged company will further increase its competitiveness on the market as it will have a whole industrial chain integrating coal production, coal-fired power plants and coal chemicals, International Energy Agency’s analysts said in July.

Vietnam coal imports jump 50 pct Vietnam has spent around $2.6 billion on importing 36.5 million tons of coal in the first seven months of this year, up 50 percent in volume year-on-year.

In July alone, the country imported five million tons of the product worth $294 million, mostly from Indonesia, Russia and China, according to Vietnam Customs.

Vietnam also exported more than 410,800 tons of coal worth $57 million between January and July. The country has been importing increasing amounts of coal in recent years as demand from thermal power plants increases and domestic production is mired in difficulties, requiring deeper pits to reach the mineral.

It became a coal importer from being a net exporter just five years ago. Though the government has been try to reduce its reliance on coal, encouraging solar and wind power plants, thermal power plants accounted for 36.1 percent of

US coal stockpiles steadily increase The US Energy Information Administration (EIA) has reported that after reaching their lowest level in more than a decade in March 2019, US coal stockpiles steadily increased to 152 million t in April 2020, recovering to levels not seen in 3 years. Total US coal stockpiles have increased as coal-fired generation has fallen to a 42-year low.

Coal power plants generally stockpile much more coal than they consume in a month. Coal consumed by power plants in the US follows the seasonal pattern in overall electricity generation; coal consumption is typically highest in the summer and winter months. Because coal-fired power plants are consuming more coal in the warmest summer months and coldest winter months, coal stocks at power plants are often at their lowest in August and February.

This value, known as days of burn, considers each plant’s current stockpile level and its estimated consumption rate in coming months. In April 2020, US coal power plants had, on average, about 114 days of burn.

Because coal-fired power plants use different types of coal, EIA tracks days of burn based on coal rank. The two main types of coal used for electricity generation in the US are bituminous coal, which is mostly produced in states such as West Virginia, Illinois and Pennsylvania, and subbituminous coal, which is mostly produced in Wyoming.

CCAI Monthly Newsletter September 2020

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MONTHLY SUMMARY OF IMPORTED COAL & PETCOKE

Coal Price Index COAL

(kcal/kg)

Monthly Price - FOB

Monthly Price- FOB

Monthly Change (USD)

South Africa

6000 NAR

USD 57.03

INR 4192

1.73

South Africa

5500 NAR

USD 44.45

INR 3268

2.63

Australia

5500 NAR

USD 39.09

INR 2874

2.52

Indonesia

5000 GAR

USD 36.61

INR 2692

-0.07

Indonesia

4200 GAR

USD 23.17

INR 1703

-0.14

Indicative Pet Coke Price PET COKE

Sulphur

Price

Monthly Change

India-RIL(Ex-Ref.)

-5%

INR 7894

INR 626.00

Saudi Arabia (CIF)

+ 8.5%

INR 6378 ($87)

$8.75

USA (CIF)

- 6.5%

INR 6617 ($90)

$8.00

Exchange Rate

Change (Monthly)

INR 73.52

-0.99

Indicative Coking Coal Price Premium Low Vol Current Month

Monthly Change (USD)

HCC 64 MID Vol

Semi Soft

CFR China FOB Aus

Low Vol PCI

Mid Tier PCI

FOB Aus

FOB Aus

CFR India

FOB N China

MET COKE 62% CSR

FOB

CFR China

FOB Aus

121.06

131.69

99.32

111.00

64.67

73.70

71.20

272.88

288.50

14.12

13.54

13.22

12.12

3.20

7.26

6.76

17.13

16.38

South African Coal News: * Figures for South Africa’s country’s production recently released by Statistics South Africa paint a grim picture of the local mining industry. Production output for 2Q20 shrank by 73.1%, the third most affected by the global pandemic, after construction at 76.6% and manufacturing at 74.91% in 2020. ** The South African cabinet has approved a goal to reduce greenhouse gas emissions to net zero by 2050, but still plans to burn coal till that time. 5,000 MW of coal power capacity is forecast to still be

28 | CCAI Monthly Newsletter September 2020

operating in 2050.New coal power stations are under construction in Kusile and Medupi, with another 1,000 MW expected to come online by 2030.

Australian Coal News:

* White heaven Coal, Australia's biggest independent coal miner has called the resolution, which seeks a plan demonstrating how it would wind up its production assets and operations in a manner consistent with the goals of the Paris

Agreement, a misrepresentation" and said the company has no intention of shutting down its mining operations. * Switzerland-based trading and mining firm Glencore will stop operating two of the five excavators at its 4.5mn t/yr Glendell thermal coal mine in Australia in response to a fall in coal prices that has already curtailed production at several other mines. The longer-term scale-back of operations at Glendell, which is part of Glencore's Mount Owen thermal coal mining complex New South Wales' (NSW) Hunter Valley, comes as a 2-3 week closure of the company's Australian coal mining operations starts this week.

Indonesian Coal News:

* Indonesia’s Energy and Mineral Resources Ministry has set its coal benchmark price HBA at USD 49.42 per tonne for September 2020, down from USD 50.34 per tonne in August 2020, lowest level on record amid subdued demand from big buyers, while global Over supply of coal was worsening. *In the first 8 months of 2020, Indonesia exported 217.4 mln tonnes of coal (excluding Lignite), based on Refinitiv vessel tracking data. This represents a net decline of -16.1% y-o-y, compared to the 259.1 mln tonnes exported in the same eight-month period of 2019. * Indonesia’s coal exports fell 8 percent in the first five months of 2020 compared with a year ago, according to data from Statistics Indonesia, led by a mammoth 35 percent drop to India as lockdown restrictions hit demand for power in the Asian giant.

US Coal News:

* US coking coal prices have stayed flat, with scant buying interest in Europe and US miners largely occupied by domestic contract negotiations or refusing to accept current market indications, keeping spot trades from concluding.

While offers have risen significantly over the past two weeks, there remains little to no fresh spot trades reported at the higher price levels. * Weekly US coal production in September-end was estimated at 10.8 million tonnes last, up by 4.7%

week on week, Energy Information Administration data showed. It was the first week on week increase in four weeks, and the highest level of production in as much time. The output has declined 21.1% compared to the same week a year ago.

Pet Coke News: * Indian petcoke producer self-consuming the same for its gasification project led to increasing demand in the Indian Market. Cement output is expected to be stronger in post monsoon months in India but would actually depend on petcoke vis-a-vis coal price. Prices of US coke in India remain unchanged this week with limited trading activity. If the trend remains same, it may encourage domestic cement players to switch to coal in the coming months. * Due to limited supply and very few spot deals, the prices of US based petcoke has risen several dollars in recent weeks. The traders have pointed out that due to ongoing tepid market demand, suppliers have largely rolled over their contracts into next year and plan to start over from the next financial year for new contracts.

Shipping Update: * With the world trade expected to heavily contract this year, the dry bulk order book has diminished significantly. The global trade has posted a massive decline this year, with estimates from the WTO pointing to an annual drop of between 13% and 32%.

As on 1st September 2020, the total dry bulk order book comprises of 614 vessels. This number is much lower than the respective figures for September 2019 (870 units), 2018 (863 units). * The data recently released by the Ministry of Shipping stated that the tonnages of vessels in India saw an increase of 9.7 percent from 11.55 MT to 12.68 MT between March 2017 and March 2020.The gains were largely led by a few important government initiatives intended towards incentivising the shipping sector, such as a reduction in GST from 18 per cent to 5 per cent on bunker fuel used in Indian flag vessels, providing cargo support to the Indian shipping industry through the right of first refusal (RoFR) etc.

CCAI Monthly Newsletter September 2020

| 29

PRODUCTION AND OFFTAKE PERFORMANCE OF CIL AND SUBSIDIARY COMPANIES COAL PRODUCTION (Figs in Mill Te) SUB CO.

SEP'20

APR'20 - SEP'20

ACTUAL ACTUAL THIS SAME % YEAR PERIOD GROWTH LAST YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

2.82

2.81

0.6

18.07

20.84

-13.3

BCCL

2.01

1.74

15.6

10.09

11.69

-13.6

CCL

4.83

3.28

47.4

20.27

22.61

-10.4

NCL

9.26

7.67

20.8

53.54

51.00

5.0

WCL

2.51

1.75

43.7

16.50

17.45

-5.5

SECL

8.50

7.24

17.4

53.69

60.72

-11.6

MCL

10.58

6.28

68.5

63.86

56.51

13.0

0.04

0.11

236.05

240.93

NEC CIL

0.03 40.51

30.78

31.6

-2.0

OFFTAKE (Figs in Mill Te) SUB CO.

SEP'20

APR'20 - SEP'20

ACTUAL ACTUAL THIS SAME % YEAR PERIOD GROWTH LAST YEAR

ACTUAL THIS YEAR

ACTUAL SAME PERIOD LAST YEAR

% GROWTH

ECL

2.88

2.81

2.7

19.15

22.59

-15.2

BCCL

2.42

2.02

20.3

10.40

13.96

-25.5

CCL

5.73

4.36

31.5

26.81

32.70

-18.0

NCL

9.27

7.97

16.3

49.98

51.27

-2.5

WCL

3.77

2.36

60.2

19.07

23.52

-18.9

SECL

10.40

8.39

24.0

61.69

67.74

-8.9

MCL

11.98

7.35

63.0

67.75

63.96

5.9

0.09

0.20

46.46

35.28

31.7

254.93

275.93

NEC CIL

0.04

30 | CCAI Monthly Newsletter September 2020

-7.6

OVERALL DOMESTIC COAL SCENARIO Coal Production (in MT) Company

August, 2020

August, 2019

% Growth

April -August, 2020

April- August, 2019

% Growth

CIL

37.16

34.70

7.1%

195.54

210.15

-7.0%

SCCL

2.44

4.05

-39.8%

14.79

26.28

-43.7%

% Growth

April- August, 2020

April- August, 2019

% Growth

Overall Offtake (in MT) Company

August, 2020

August, 2019

CIL

44.36

40.57

9.3%

208.37

240.65

-13.4%

SCCL

2.80

4.20

-33.3%

14.18

26.16

-45.8%

% Growth

April- August, 2020

April- August, 2019

% Growth

Coal Despatch to Power (Coal and Coal Products) (in MT) Company

August, 2020

August, 2019

CIL

33.86

33.47

1.2%

160.63

190.33

-15.6%

SCCL

2.35

3.53

-33.3%

12.03

21.85

-44.9%

Spot E-auction of Coal (in MT) Company

Coal Qty. Allocated August, 2020

Coal Qty. Allocated August, 2019

Increase over notified price

Coal Qty. Allocated April August, 2020

Coal Qty. Allocated AprilAugust, 2019

Increase over notified price

CIL

3.36

0.61

18%

13.86

9.27

15%

Special Forward E-auction for Power (in MT) Company

Coal Qty. Allocated August, 2020

Coal Qty. Allocated August,2019

Increase over notified price

Coal Qty. Allocated AprilAugust, 2020

Coal Qty. Allocated AprilAugust, 2019

Increase over notified price

CIL

0.00

0.62

0%

7.94

7.32

1%

Exclusive E-auction for Non- Power (in MT) Company

Coal Qty. Allocated.

August, 2020

Coal Qty. Allocated August, 2019

Increase over notified price

Coal Qty. Allocated April- August, 2020

Coal Qty. Allocated AprilAugust, 2019

Increase over notified price

CIL

6.47

0.11

8%

13.44

2.31

6%

Company

Coal Qty. Allocated August, 2020

Coal Qty. Allocated August, 2019

Increase over notified price

Coal Qty. Allocated April -August, 2020

Coal Qty. Allocated April -August, 2019

Increase over notified price

CIL

0.00

0.66

0%

1.79

0.66

10%

Special Spot E-auction (in MT)

CCAI Monthly Newsletter September 2020

| 31

32 | CCAI Monthly Newsletter September 2020

55.92

75.47

77.78

55.17

14

13

SEPT- 2020

1,330,000.00

7,230.00

ACTUAL*

NUCLEAR

Source CEA

43,880.00

140,357.00

PROGRAM

283,833.44

THERMAL

Category

TOTAL

0.00

HYDRO

BHUTAN IMP

6,780.00

45,699.22

NUCLEAR

2

1,138,533.00

1

231,354.22

TARGET APR 2020 TO MAR 2021

Monitored Capacity (MW)

THERMAL

Category

SUMMARY- ALL INDIA

109,843.14

1,526.17

18,939.64

3,796.92

85,580.41

4

ACTUAL

86.45

51.30

15

ACTUAL SAME MONTH 2019-20

5

105,194.51

1,203.30

20,790.73

4,220.23

78,980.25

99.50

192.70

112.52

94.69

96.42

6

% OF PROGRAM (4/3)

69.15

60.37

16

PROGRAM

74.45

49.58

17

ACTUAL

80.69

57.87

18

ACTUAL SAME PERIOD 2019-20

APRIL 2020 - Sept-2020

PLANT LOAD FACTOR (%)

110,390.00

792.00

16,832.00

4,010.00

88,756.00

3

PROGRAM

ACTUAL SAME MONTH 2019-20

SEP-2020

AN OVERVIEW

104.42

126.83

91.10

89.97

108.36

7

% OF LAST YEAR (4/5)

694,072.00

4,821.00

89,021.00

21,355.00

578,875.00

8

PROGRAM

GENERATION (GWH)

ACTUAL

598,935.69

6,883.87

96,975.30

22,168.51

472,908.01

9

PERIOD : SEPTEMBER, 2020

659,059.52

4,184.10

95,994.19

24,026.47

534,854.76

10

ACTUAL SAME PERIOD 2019-20

86.29

142.79

108.94

103.81

81.69

11

90.88

164.52

101.02

92.27

88.42

12

% OF LAST % OF PROGRAM YEAR (9/10) (9/8)

APRIL 2020 -SEP-2020

ENERGY GENERATION REPORT

Note

34 | CCAI Monthly Newsletter September 2020

CCAI Monthly Newsletter June 2020

| 35

REGISTERED

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