Indian Iron Ore Scenario

Executive Summary

India plays an important role as Iron Ore and Steel producer in the World. Iron Ore occurs in different geological associations; however India, belonging to the Gondwana Super- continent, has the major economic deposits of Iron Ore associated with Volcanic-sedimentary banded iron formation of Precambrian age. It stands fourth in the world for the production of iron ore. The production of Iron Ore in the year 2005 reached 145 million tones as compared to 120.60 million tones during 2004, recording an increase of 20.2%. Indian export of Iron Ore also increased from 63 million tones to 81 million tones during the same period, recording an increase of 28.57% over the year 2004 being the World’s no. third in international Iron Ore exports.


World Iron Ore Scenario

According to the Mineral Commodity Summaries, published by US Geological Survey in Jan, 2005, the total ‘reserve base’ of crude ore in the World is placed at 370 billion tones. The iron content is of this reserve is 180 billion tones. It has been shown that Ukraine has the largest reserve base of crude ore of 68 billion tones followed by Brazil, Russia, China, Kazakhstan, USA and India. In terms of Iron content, the largest reserve base is in Brazil followed by Russia, Australia, Ukraine, China, Kazakhstan and India.


The World Iron Ore Reserves
Qty: Million tones
Countries Mine Production Crude Ore Iron content
2003 2004 Reserves Reserve
base Reserves Reserve
base
United States 46 54 6,900 15,000 2,100 4,600
Australia 187 220 15,000 40,000 8,900 25,000
Brazil 212 220 23,000 61,000 16,000 41,000
Canada 31 31 1,700 3,900 1,100 2,500
China 261 280 21,000 46,000 7,000 15,000
India 106 110 6,600 9,800 4,200 6,200
Iran 16 16 1,800 2,500 1,000 1,500
Kazakhstan 17 17 8,300 19,000 3,300 7,400
Mauritania 10 10 700 1,500 400 1,000
Mexico 11 12 700 1,500 400 900
Russia 92 95 25,000 56,000 14,000 31,000
South Africa 38 40 1,000 2,300 650 1,500
Sweden 22 22 3,500 7,800 2,200 5,000
Ukraine 62 66 30,000 68,000 9,000 20,000
Venezuela 18 18 4,000 6,000 2,400 3,600
Other countries 34 40 11,000 30,000 6,200 17,000
World Total 1163 1251 160,200 370,300 78,850 183,200
Source: U.S.Geological Survey, Mineral Commodity Summaries, January 2006


As on January, 2006
The World resources of Iron Ore have been increasing over the last more than 30 years. This shows the more intense exploration, keeping the future demand of Iron Ore World-wide.
Qty: Million tones
Year Crude ore Iron content
Reserves Reserves
base Reserves Reserves
base
1969 90,540 195,050 NA NA
1980 NA 266,210 NA 95,250
1990 147,400 210,100 66,100 96,600
2006 160,000 370,000 79,000 180,000
Source: United States Geological Survey NA- Figures Not Applicable

World Production

As per the statistics by the US Geological Survey World production of Iron Ore in 2004 was 1250 Mt as against 1160 Mt in 2003. China was the largest producer of Iron Ore during 2004 and India was the fourth largest producer during the same year (as shown above). According to the Global reports it has been estimated that there would be an increase of 200 Mtpy of Iron Ore production mainly in Australia and Brazil.
Brazil and Australia have huge reserves which are much in excess as per there domestic demand; therefore, these countries opened the market for the World and invested for expansion of export. In the last 15 years these two countries have added 180 million tonnes of Iron Ore production capacity. On the other hand China had increased it Iron Ore production 7 folds but is also the largest importer of the Iron Ore due to the low Fe content in the ore produced. India, China, Brazil and Australia logged a growth rate of 10 percent in Iron Ore production.


Global Demand

Iron Ore demand will definitely expand due to the growth in the production of Iron and Steel. In 2003 the consumption of Iron Ore was 1.2 billion tones from which China accounts 401.4 million tones followed by Japan at 131.9 million tones. There was a 7% increase in the Iron Ore demand in the year 2004 as in 2003 due to the increase in the demand of the Pig Iron and DRI production.
The demand of Global Iron Ore increased consistently throughout with a constant rate of 3.99 percent from 1994 to 2004 and the growth of Global Iron Ore trade has been increased 5.79 percent through this period. In 2004, China was the highest producer of Iron Ore in the World at 335.6 Mt. (Fe-content 28 percent) followed by Brazil at 270.5 Mt. (Fe-content 66 percent) & Australia at 234.7 Mt (Fe-content 65 percent). India was the fourth highest producer of iron ore in the world at 120.6 Mt. (Fe-content 61 percent) in 2004. Brazil was the highest exporter of Iron Ore at 236.8 Mt. followed by Australia at 210.5 Mt. India was the third highest global exporter at 62.7 Mt. in the same year China was the highest importer of Iron Ore at 208.1 Mt. followed by Japan at 134.9 Mt.

Global Demand of Iron Ore (Mt)
Year Demand
2001 1050
2002 1120
2003 1200
2004 1260
2007(F) 1400
Source: JPC Bulletin, April 2004 (F) = Forecast


World Trade

According to the latest UNCTAD report on the Iron Ore market, world Iron Ore trade reached a new record level in 2004. Exports of Iron Ore increased for the third year in a row and were up by 8.5% over 2003, to reach a level of 634 million tonnes during 2004. The UNCTAD report also states that Iron Ore exports have grown by 60% since 1990 and this represents a rate of growth that is twice that of world Iron Ore production itself. Exports of Iron Ore by developed countries, excluding Australia, fell by 10% between 1990 and 2004. Exports of Iron Ore from CIS countries also fell by 10% during this period. In contrast, exports of Iron Ore from Australia rose by 110% between 1990 and 2004 and those from developing countries rose by 59% during the same period. As regards share of the Iron Ore export market during 2004, while developing countries accounted for 51% of the exports, developed countries accounted for 40% of the exports and the CIS countries for 7.5%. Among individual countries, Australia was the largest exporter of iron ore during 2004, followed by Brazil and India. Other important iron ore exporting countries are South Africa, Mauritania, Russia and Ukraine.

Iron Ore Export of World

Quantity in Million tonnes
Country 1996 1997 1998 1999 2000 2001 2002 2003
(A) 2004
(B) Change
B/A %
Europe
Excluding
CIS 20.10 19.90 16.70 14.60 16.6. 14.20 15.00 16.60 18.00 8.40
CIS 28.30 30.40 36.10 29.60 43.90 40.40 42.70 48.80 48.60 -0.40
Brazil 129.00 140.00 143.00 140.00 160.00 155.00 170.00 184.00 200.90 8.90
America
Including
Brazil 184.00 199.00 199.00 189.00 209.00 201.00 220.00 238.00 254.20 6.70
Africa 30.60 32.60 33.60 32.10 32.50 33.60 34.80 33.70 35.70 6.10
India 31.70 32.90 32.80 31.00 32.90 41.00 54.90 57.30 62.70 9.30
Asia
Including
India 32.20 34.40 34.20 32.50 34.30 42.10 57.10 59.40 65.30 10.00
Australia. 135.00 155.00 144.00 146.00 165.00 164.00 175.00 187.00 210.70 12.00
Oceania
Including
Australia 136.00 156.00 146.00 147.00 166.00 165.00 176.00 188.00 211.70 13.00
Total
World 431.20 472.30 465.60 444.80 485.70 496.30 545.60 584.50 633.50 8.30



Iron Ore Imports of World

Quantity in Million tonnes
Country 1995 1996 1997 1998 1999 2000 2001 2002 2003
(A) 2004
(B) Change
B/A %
Europe
excl. CIS 178.70 164.10 173.40 174.20 152.90 168.50 146.00 155.70 154.90 169.30 9.40
CIS ~ ~ ~ 7.30 7.30 16.50 15.20 13.70 17.70 13.70 -23.00
Africa 2.60 2.70 3.20 4.10 3.80 5.50 4.80 5.20 6.30 6.70 6.10
Japan 118.90 120.70 127.60 118.60 123.00 131.50 125.30 131.80 132.40 134.90 1.90
Korea 35.10 34.80 38.60 33.60 35.50 39.00 45.90 43.30 43.10 44.20 2.70
Asia
exl. China 183.50 185.31 200.30 183.10 188.90 205.80 203.80 213.30 214.10 218.70 2.20
China 41.20 43.90 55.10 51.80 55.30 70.00 92.30 111.50 148.10 208.10 40.00
Total
World 560.00 551.51 598.20 572.70 566.70 636.80 633.30 674.50 716.60 795.60 15.00


In so far as imports of Iron Ore are concerned, European countries accounted for 26% of the world imports during 2004 at 169.3 million tonnes. Developed market economy countries accounted for about 56% of world imports and as a group, developing countries accounted for 44% of total imports during 2004. Among various iron ore importing countries, China has moved ahead of Japan as the world’s largest Iron Ore importer at 208 million tonnes of ore in 2004; which is 2% of total world imports during the year. Japan was the second largest importer of iron ore at 134.9 million tonnes during 2004. Korea was the third largest importer. China, Japan and Korea put together accounted for 59% of world Iron Ore imports in 2004. Data on world exports extracted from the UNCTAD Report indicates from the first few months of 2005 indicate that growth in Iron Ore production and trade will continue at the same high rate as through 2002-04.


Indian Iron Ore Scenario


Reserves of Iron Ore

Iron Ore

Source: www.mapsofindia.com

The major Iron Ore deposits in India occur in Jharkhand, Chhattisgarh, Orissa, Karnataka, Goa, Maharashtra, Andhra Pradesh and Tamil Nadu.

Total Iron Ore Reserves of India
Quantity in Million tonnes
Type of Ore Proved Probable Possible Total
Hematite 6800 2122 3395 12317
Magnetite 1770 1807 1818 5395
Total 8570 3929 5213 17712
Source: SEAISI Newsletter, November 2005

Total iron Ore Reserves (Grade Wise- Recoverable)
Quantity in Million tonnes
Grade Appox. % Share in Recoverable reserve
High Grade Fe:>65 9.7
Medium Grade Fe:62-65 46.71
Low Grade Fe: <62 22.4
Unclassified 21.17


Location of Indian Iron Ore Reserves

Iron ore (Haematite)
All India total resource is 14,630 million tonnes as 1-4-2005 (provisional). Out of these, the resources under Reserve Category are 7004 million tonnes. Out of these reserves under proved category are 73%. Under the reserve category, 43% are lump (high medium, low and unclassified grades), 41% are fines (high, medium, low and unclassified grades), 15% are lump/fine (high, medium, low and unclassified grades) and balance are in Black iron ore, other unclassified and not known grades. Out of 14,630 million tonnes of total resources 61.0% are in lease hold areas and 39% are in freehold areas). Further, 56% are in public sector, 44% are in private sector, about 37% are in captive and 63% are in non-captive areas.



Haematite

Quantity in Million tonnes
States Proven Probable Possible TOTAL
Orissa 1824.10 762.90 1590.20 4177.20
Jharkhand 2560.20 334.80 386.00 3281.00
Chattisgarh 993.10 537.50 747.50 2278.10
Karnataka 795.70 208.70 311.20 1315.60
Goa 461.00 149.30 119.40 729.70
Redi 106.90 76.90 89.20 273.00
Rajasthan 2.00 12.70 5.60 20.30
TOTAL 6743.00 2082.80 3249.10 12074.90
SOURCE: Indian Bureau of Mines, Nagpur.






Iron ore (Magnetite)

All India total resources of magnetite are 10,619 million tones as on 1-4-2005 (Provisional). Out of these, Reserves are only 207 million tonnes (1.89%) and 10,412 million tonnes are Remaining Resources. Out of the total resources, 20.6% are of metallurgical grade, 8 million tonnes are of Coal-washery grade and the balance is of foundry, others, unclassified and not known grades. Out of total resources, 95.27% are in freehold and remaining 4.73% (501.47 million tones) are under leasehold with 85.86% in public and 14.14% in the private sector.

Magnetite Quantity in Million tonnes
States Proven Probable Possible TOTAL
Karnataka 1653.4 503.9 1686.6 3843.9
AP 43 1266.7 ~ 1309.7
Goa 67.3 5.4 115.2 187.9
Kerela 0 26.9 12.3 39.2
Others 6.1 4 4.3 14.4
Total 1769.8 1806.9 1818.4 5395.1
SOURCE: Indian Bureau of Mines, Nagpur.



Grade wise/ State wise recoverable reserves of Haematite as on 1.4.2000
Quantity in Million tonnes
State High Grade Ore
(Fe+65%) Medium Grade
Ore (Fe 62-65%) Low Grade Ore (Fe below 62%) Unclassified/others/
Blue Dust Black Total
Jharkhand 44.04 1754.06 873.09 188.07 2859.26
Orissa 547.64 1857.33 507.54 291.4 3203.91
Chattisgarh 461.24 562.06 463.17 416.59 1903.06
Karnataka 214.86 583.01 78.59 89.84 966.3
Goa 0.02 132.75 392.38 55.71 580.86
Others 30.47 134.13 146.22 104.33 415.15
Total 1298.27 5023.34 2460.99 1145.94 9928.54
Source: IBM, Nagpur


Grade wise/ State wise recoverable reserves of Magnetite as on 1.4.2000
Quantity in Million tonnes
State Metallurgical
Grade Coal Washery grade Foundry Unclassified Others/not
known Total
Andhra Pradesh 37.87 ~ ~ 380 ~ 417.87
Assam 2.54 ~ ~ ~ ~ 2.54
Goa 98.33 ~ ~ 64.69 3.28 166.3
Jharkhand ~ 5.09 ~ 0.11 0.06 5.26
Karnataka 1265.32 ~ ~ 1615 5.4 2885.72
Kerela 36.09 ~ ~ ~ ~ 36.09
Maharashtra 0.19 ~ ~ ~ ~ 0.19
Rajasthan ~ 0.3 0.08 ~ 0.38
Tamil Nadu 1.08 ~ ~ ~ ~ 1.08
Total 1441.42 5.09 0.3 2059.88 8.74 3515.43
Source: IBM, Nagpur






Recoverable reserves of Iron ore (Haematite) - comparative statement grade wise increasing decreasing as on 1.4.1990 & 1.4.2000
Quantity in Million tonnes
Grades Recoverable
Reserves as on
01.04.1990 Recoverable
Reserves as on
01.04.2000 Increase or Decrease as on
01.04.2000
All India 9602 9919 Increase of 317 million tonnes
High Grade 1099 963 Decrease of 136 million tonnes
Medium grade 4050 4634 Increase of 584 million tonnes
Low grade 2638 2222 Decrease of 416 million tonnes
Others(unclassified, blue dust, black iron not known) 1815 2100 Increase of 285 million tonnes.


Source: IBM


Production of Iron Ore

Production of iron ore increased from 74.94 million tonnes, in 1999-2000, to 99.07 million tonnes in 2002-03, to 120.6 million tonnes in 2003-04
State Wise Production of Iron Ore
Quantity in Million tonnes
States 1999-00 2000-01 2001-02 2002-03 2003-04
Chattisgarh 19.3 20 18.66 19.78 22.67
Goa 15.41 14.56 14.78 17.88 20.15
Jharkhand 11.92 12.4 13.06 13.7 14.48
Karnataka 15.87 18.9 17.95 25.64 17.69
Orissa 11.93 14.38 16.6 22.07 30.17
Others 4.89 4.95 5.17 8.26 15.44
All India Total 79.32 85.19 86.22 107.33 120.6
SOURCE: Indian Bureau of Mines, Nagpur


Quantity of Iron Ore produced by India has picked up by an annual average rate of 4.1% ion the last six years up to 2002-03.
The captive mines for the private producers accounts for only 9% of the total Iron Ore production even while they produce around 60% of the total steel production.
Of the production in 2003-04, 47.42 million tonnes were lumps, 73.18 million tonnes were fines and 6.13 million tonnes were concentrates. Fines and concentrates, thus, constituted over 65 % of the total production.
Grade Wise Production of Iron Ore (Fe Content)
Quantity in Million tonnes
Grades 1999-00 2000-01 2001-02 2002-03 2003-04
Lumps
>=65% 15.39 16.32 19.7 22.33 24.76
62-65% 10.39 11.31 9.53 11.91 17.72
60.62% 3.34 4.07 3.02 3.23 2.17
Below 60% 2.97 1.87 2.33 2.11 2.76
Total 32.09 33.57 34.58 39.58 47.41
Fines
>=65% 12.56 14.84 15.9 18.84 20.25
62-65% 15.41 19.26 20.06 23.96 34.07
Below 62% 8.15 7.08 9.2 10.19 12.74
Total 36.12 41.18 45.16 52.99 67.06
Concentrates(Total) 6.72 6 6.43 6.5 6.13
Grand Total 74.93 80.75 86.17 99.07 120.6
SOURCE: Indian Bureau of Mines, Nagpur

Quality of Indian Iron Ore

Experts maintain that Indian iron ores are characterised by high alumina / silica ratio. The alumina content lies between 2-4 percent in the lumps and 4-6 percent in the fines. Sinter produced from such fines contains much higher alumina compared to other countries. The high alumina inputs through the ferruginous feed, coke and flux results in formation of highly viscous slag containing 22-26 percent alumina and as consequence, blast furnace operation and its performance is severely affected.
The ROM materials and the feed stock, therefore, needs to be properly characterized and beneficiated through suitable technique prior to use in blast furnace. The beneficiation scheme broadly comprises crushing to the required size followed by scrubbing and / or wet screening and classification to separate slime from fines. By this process, although the adhering clay matter is removed, the alumina cannot be significantly lowered. This necessitates development of improved beneficiation technique, capable of removing the adhered alumina without sacrificing recovery of valuable iron bearing constituents.



Generation of fines is a natural phenomenon during the process of mining. Whereas (in 2003-04) the generation of fines for high grade ore was 44.98 %, that for medium grade and low grade ore was 65.78 % and 72.10 % respectively. It may thus be seen that generation of fines is higher for lower grades of ore. State wise contribution of fines in total production is highest in Goa (76%) followed by Karnataka (57%). There has been an increase in generation of fines each year.




Domestic Consumption

Out of the total domestic consumption of 51.62 million tonnes in 2003-04, 20 million tonnes were consumed by SAIL and 6 million tonnes by TISCO from their captive mines. Vizag Steel Plant (RINL) consumed 6.6 million tonnes from MDC and IISCO mines. JSPL and JVSL had their own captive mines. ESSAR, Vikram spat, Ispat industries and JVSL sourced 6.78 million tonnes of ore from NMDC under long-term contracts. The balance 12 million tonnes of ore-mainly lumps- re bought by pig iron and sponge iron ore units, at spot prices, from the open market. Most of these supplies come from private mine owners and some supplies are sourced from companies in the state sector such as OMC, OMDC, NMDC and MML.

Total Production, Export and Consumption
Quantity in Million tonnes
Year Production Export Domestic Consumption %Production
Exported
1991-92 57.46 30.37 25.92 54.9
1992-93 58.12 27.86 29.6 49.02
1993-94 58.67 31.94 27.17 53.67
1994-95 64.5 28 36.5 43.41
1995-96 66.58 31.34 35.24 47.07
1996-97 66.6 31.7 34.9 47.59
1997-98 75.72 35.61 40.11 43.03
1998-99 70.68 31.68 39.41 44.24
1999-00 74.95 32.91 42.04 43.91
2000-01 80.76 37.49 41.73 46.42
2001-02 86.22 41.64 41.36 48.29
2002-03 99.07 48.02 49.98 48.47
2003-04 120.6 62.58 51.62 51.89
2004-05 145 78.15 66.85 53.89
Source: IBM for Domestic Consumption & MMTC for exports


Exports

India has been a traditional exporter of iron ore in the world market. Most of the exports go to Japan, South Korea, China and other Far Eastern countries due to proximity. Export of Iron Ore has increased from 31.27 million tonnes in 1999- 2000 to 62.58 million tonnes in 2003-04.As per provisional data for 2004-05 exports were 78.15 million tonnes during 2004-05. The current export policy with regard to iron ore limits export of iron ore of 64 % plus Fe content through MMTC.

Export of iron ore of Goan origin, when exported to China, Japan, South Korea, Taiwan and Europe is freely allowed irrespective of Fe content. Likewise the following is also freely allowed:
• Iron Ore of Redi origin to all destinations irrespective of Fe content.
• All iron ore of Fe content up to 64 %.

The government has been issuing permits to mining companies for direct export of iron ore having Fe content of 64 % and above. During 2003-04 and 2004-05 permits, for direct exports of + 64% Fe grade ore, have been issued for 11.7 million tonnes and 6.88 million tonnes of ore respectively on high grade ore there are quantitative restrictions in place for Bailadila Lumps and Fines.
Grade wise Export of Iron Ore from India
Quantity in Million tonnes
Year High Grade
(Fe+65%) Medium Grade
(Fe+62-65%) Low Grade
(Fe <62%) Total
Export.
1990-91 10.8 17.63 3.58 32.01
1991-92 10.63 16.8 2.94 30.37
1992-93 8.84 15.25 3.77 27.86
1993-94 10.39 16.71 4.84 31.94
1994-95 10.13 16.73 4.89 31.75
1999-00 7.94 3.8 15.4 27.14
2000-01 8.55 5.77 17.2 31.52
2001-02 8.9 7.88 17.68 34.46
2002-03 8.75 9.67 20.58 39
2003-04 14 21.89 26.68 62.57
2004-05 21.5 24.73 31.91 78.14
Source: MMTC

Export of high-grade iron ore has been canalised through the Minerals and Metals Trading Corporation Ltd. (MMTC) apart from quantitative restrictions being imposed by the Government to ensure that only the surplus quantity is exported after indigenous demand is met. This policy is perceived to be inconsistent with the present policy dispensation. It is likely that there will be a shift in the policy relating to canalization as well as quantitative restrictions for high-grade iron ore. In case the high-grade iron ore export is to be discouraged, it can best be done through tariff mechanisation.
Destination wise export of iron ore
Quantity in Million tonnes
Country 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
CHINA 10 14.1 19.22 26.27 42.05 59.39
JAPAN 15.07 16.77 15.62 15.75 13.1 11.13
S.KOREA 2.59 2.31 3 2.41 2.15 2.17
TAIWAN 0.5 0.9 0.43 0.58 0.88 0.6
EUROPE 2.55 1.48 1.81 2.04 2.47 2.89
OTHERS 2.2 1.93 1.56 0.97 1.92 1.93
TOTAL 32.91 37.49 41.64 48.02 62.57 78.11
Source: MMTC





Structure of the Iron Ore Industry

Iron ore mining is undertaken both by the public sector and private sector companies. Public Sector’s share of iron ore production has decreased from 55.17 % 50 to 48 % in 2003-04 and that of the private sector has correspondingly increased. The public sector companies that own and operate mines are SAIL, NMDC, KIOCL and some state mining companies. The main private sector companies that own and operate mines are TISCO, ESSEL Mining and Industries Limited, Rungta Mines, JSPL, JSW, Sesa Goa, Dempo Mining Corporation, Salgaoncars, etc. Mining is undertaken both by steel companies, who operate captive mines, and exclusively mining companies. SAIL, TISCO, JSPL and JSW have captive mines. NMDC, KIOCL, OMC and other state mining companies and most mining companies in the private sector are independent mining companies .The total percentage of production through captive mines has decreased from 35.8% in 1999-2000 to 27.28% in 2003-04 and the share of production from mining companies has since increased from 64.17 % to 72.70 % during the same period.




Public/ Private Sector Production of Iron Ore
Quantity in Million tonnes
Year 1999-2000 2000-01 2001-02 2002-03 2003-04
Public Sector 41.36 43.49 45.09 49.69 56.9
Private Sector 33.58 37.27 41.13 49.37 63.69
Captive 26.85 28.67 28.03 29.97 32.91
Non-Captive 48.09 52.09 58.19 69.09 87.68
All India
Total 74.94 80.76 86.22 99.06 120.59
Source: IBM, Nagpur

Iron Ore Prices
S. No. Grade & Size Basis Price of April-June'07 Qtr.
BARBIL SECTOR
1 Sponge Grade Lumpy Ore
Fe-65% Min
Size- 10-180mm +/-10% 65%Fe Rs.1722/MT
Rs.1742/MT
(Crushing Unit)
2 Sized Iron Ore
Fe- 65% Min(Barpada-kasia)
Size- 5 - 18 mm +/-10% 65% Fe Rs.2601/MT
3 Sized Iron Ore
10-30/40%Fe
Fe- 62% Min 62% Fe Rs.1479/MT
Rs.1499/MT
(Crushing Unit)
4 Iron Ore Fines
Grade: 64 - 62%Fe 64%Fe Rs.426/MT
KOIRA SECTOR
1 Sponge Grade Lumpy Iron Ore
KHANDADHAR
Fe - + 65% Min
Size - 10-180mm +/-10% 65% Fe Rs.1742/MT
Rs.1722/MT
(Crushing Unit)
2 B.F Grade Lumpy Iron Ore
Fe - + 62% Min
Size - 10-180mm +/-10% 62% Fe Rs.1311/MT
Rs.1331/MT
(Crushing Unit)
3 Khandadhar/Kurmitar
Fe - + 62%
Size - 10-40 mm +/-10% 62% Fe Rs.1929/MT
Rs.1949/MT
(Crushing Unit)
4 Iron Ore Fines
Grade: 62 - 60%Fe 62%Fe Rs.516/MT
GANDHAMARDAN SECTOR
1 Sponge Grade Lumpy Ore
Fe-65% Min
Size- 10-180mm +/-10% 65%Fe Rs.1657/MT
Rs.1677/MT
(Crushing Unit)
2 B.F. Grade CLO
10 - 40mm +/-10%
Fe: +62% 62%Fe Rs.1709/M
Rs.1729/MT
(Crushing Unit)
3 B.F. Grade Lump
10 180mm +/-10%
Fe: +63% 63%Fe Rs.1209/MT
Rs.1229/MT
(Crushing Unit)
4 Soft grade lump(Puthulpani)
10-180mm +/-10%
Fe : 66.5% 66.5%Fe Rs.1630/MT
(Crushing Unit)
5 Iron Ore Fines
Grade: 62 - 60%Fe 62%Fe Rs.488/MT
DAITARI SECTOR
1 B.F. Grade CLO
10 - 40mm +/-10%
Fe:+ 62% 62%Fe Rs.2056/MT
2 Iron Ore Fines
Grade: 62 - 60%Fe 62%Fe Rs.799/MT

Notes:
(i) The above prices are on ex-mines basis, excluding royalty, taxes, other Govt. duties and 50% analysis charges which are to be borne by the buyer.

(ii) Price of all grades of Iron Ore will be computed as per analysis report on the basis of unit as per actual scale fraction prorates for respective grades.

(iii) Rest of the terms & conditions as per OMC's approved sales policy effective on the date of listing.


Grant and Operations of Leases – Regulatory Frame work and Process

The policy and regulatory frame work for the grant and operation of leases is provided by the following:

• The National Mineral Policy 1993(revised from time to time)
• The MMDR Act 1957
• The MC Rules
• State level mineral policies and guidelines
• The Environmental Protection Act and rules and procedures there under
• The Forest Conservation Act, rules and procedures there under

This policy and regulatory framework aims at achieving sustainable development of the country’s mineral resources to meet both the present and long terms needs of the country. These seek to balance the objectives of development with conservation, environmental protection, safety, health and development of the mineral bearing regions.
Broadly for starting iron ore mining activities the following clearances are required from different agencies:
• Approval and grant of Mining Lease (ML)
• Forest Clearance
• Environment clearance

Action Plan by GSI during XI plan for Iron Ore
Exploration and New Reserves
With the increasing global demand for iron ore and its escalating price in the international market, the issue has undergone a quantum change in the last two years of the X Plan period. The trend is anticipated to continue and as a result there is a considered feeling of assigning importance to iron ore exploration in the XI Plan tenure. As per reasonable estimate approximately 5000 sq km is occupied by potential iron ore targets distributed in different states. Out of these large part has been covered by regional exploration some of which are under exploitation, while major parts of the areas are under lease hold. GSI envisages identifying lease free areas beyond forest cover and continuing exploration in these sectors to augment the iron ore reserves of the country.

In the XI Plan the following areas for iron ore exploration is proposed to be taken up.

Karnataka and Andhra Pradesh: Sandur schist belt, Gadag and Hungund Schist belt

Madhya Pradesh: In Bijawar, Mahakoshal, Bundelkhand and Gawalior Groups of rocks located in Jabalpur. Sidhi, Katni, Gwaliar and Shivpuri district

Maharashtra: Chandrapur and Gadchiroli district.

Orissa: Kendujhar district, northwestern part of Daiteri - Tomka belt Mayurbhanj district,
Badampahar-Sulaipat area

Tamil Nadu: Vellore, Tiruvannamalai district

Chhattisgarh: Continuity of Dalli-Rajhara iron ore belt

Jharkhand: Bonai-Keonjhar belt

India has a substantial resource of iron ore to meet the domestic demand. There is an increase in demand due to substantial increase in the export market. The country has planned for capacity expansion on a large scale from its existing mines and development of new mines. Apart from expansion plans of present iron ore mines in all the sectors, development of following identified hematite and magnetite deposits/mines are envisaged for further exploration wherever required and exploitation by interested parties from within or outside the country.

Hematite Deposits:

Jharkhand: Chiria, Gua

Orissa: Thakurani, Malangtoli, Mankarnacha, Badampahar, Gandhamardan, Garjantoli and Daiteri

Chhattisgarh: Bailadila deposit Nos. 1, 4 and 13, Rowghat and Dalli Rajhara

Karnataka: Kumarswamy and Ramandurg

Magnetite Deposits:

Karnataka: a) Kudramukh group of deposits: Kudramukh deposits of KIOCL, Nelibadu, and Gangrikal.
b) Bababudan deposits

Andhra Pradesh: Ongole group of deposits



Besides, magnetite deposits in Tamil Nadu also deserve attention. The areas, although already explored and came out to be quite potential.

o There are areas of iron ore which are not available for exploitation as these lie under forest cover, some falling within National Park region and also owing to sensitive environmental issues requiring necessary clearance from the Government. Problems of forest clearance and environmental issues have to be addressed properly to increase iron ore production.
o In certain areas, several small, isolated but workable deposits occur in close proximity. Profitable exploitation of these individual deposits is not possible owing to their small sizes. This type of situation calls for cluster mining by a single or a joint Group. Technically and financially sound parties may be invited for economic exploitation of the following isolated deposits through cluster mining with conditions of proper environmental management and systematic development of the resources.

 Bellary-Hospet Sector, Karnataka: A good number of small deposits lie in close proximity.
 Chandrapur, Bhandara and Gadchiroli districts of Maharashtra Exploration work has revealed the presence of 14 isolated deposits yielding substantial reserves.

In the above two areas, feasibility study has already been carried out.

Mining Leases granted for Iron Ore
Area in Hectare
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
No. of ML Area No. of ML Area No. of ML Area No. of ML Area No. of ML Area No. of ML Area
2 94 3 132 7 117 2 24 1 38 13 487
Source: IBM

Mining Leases Executed
Area in Hectare
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
No. Area No. Area No. Area No. Area No. Area No. Area
2 29 3 1095 8 344 1 5 3 167 1 322
Source: IBM

The additional capacity is expected to come from the following regions.

(a) Bellary Hospect Region: The present production level of 14 Mtpy can be increased to 25 Mtpy by consolidating the mining leases and developing new deposits.

(b) Eastern Region: The region has the maximum share of the total iron ore resources in India. Capacity of this region is proposed to be increased from the existing level of 27 Mtpy to 45 Mtpy by 2006-07 and further to 70 Mtpy by 2011-12.

(c) Bailadila Region: Speedy implementation of the expansion plans for this region may enhance the capacity from the existing 17 Mtpy to a level of 26-27 Mtpy.

(d) Goa Redi Region: Present capacity has now come up to 20 Mtpy. Experts opine that consolidation in this region may further augment the capacity by another 5 Mtpy.

(e) Karnataka Region: About 800 Mt of proven reserve of magnetite ore deposit in Bababudan area can be lapped after overcoming environmental hurdles.

To ensure availability of iron ore to the level of 190 Mt for domestic production and 100 Mt for export by 2019-20 as projected in the NSP would need opening up of new mines and expansion of the existing ones in a big way. India has presently a reserve of over 27 billion tonnes of iron ore of which only about 530 Mt were exploited between 2000 and 2005.
Technology up gradation and eco-friendly production should be the goal of iron ore miners. The railway, road and port infrastructure will have to be immensely improved to handle the huge traffic for domestic and export needs by 2019-20. If a concerted effort is undertaken by iron ore industry, steel industry and the Central / State Governments, the Indian iron industry would become a dominant player in the global arena of iron ore of high quality.


Sources

• Annual Report 2006-07 Ministry of Mines
• XI Planning Commission Report on Mineral Reserves, Exploration & Future of Indian Minerals
• National Mineral Policy, Report of the High Level Committee, Planning Commission, Dec. 2006 (Hoda Committee)
• Home pages of Companies:
http://www.mspllimited.com
http://www.kudremukhore.com
http://www.smi.co.in
http://www.sesagoa.com
http://www.esselmining.com
http://www.nmdc.co.in
http://www.essar.com
http://www.jisco.com
http://www.jindalsteelpower.com
http://www.mmtclimited.org

Indian Coal Scenario

COAL
Executive Summary

Coal has an important role in the economic development of a country. Worldwide, the total primary energy supply (TPES), petroleum accounts for 38% of TPES, followed by Coal (24%) and natural gas (24%). In India, Coal accounts for 55% of total commercial energy demand followed by oil & petroleum (20%) and natural gas. In addition, other industries like steel, cement, fertilizers, chemicals, paper and any medium and small industries are dependent on coal for their process and energy requirements. In the transport sector, though direct consumption of coal by the railways is nominal on account of phasing out of steam locomotives, the increasing electrified traction of railways is dependent on coal converted to electric power.

Present coal consumption in the country is around 310 million tonnes of which the requirement of the power industry (including captive plants) is about 240 million tonnes. In order to meet the rising coal demand for power industry and other consumers it is estimated that an additional annual availability of around 25 million tonnes will be required by the year 2015. India is world's third largest coal producers but instead of this according to the 11th Planning Commission Report (2007-12) it has been estimated that, India may have to import about 76 million tonnes of the fuel by 2011-12 to meet domestic requirement as total demand is estimated to nearly double to 710 million tonnes. The country may need to import 30-40 million tonnes of superior grade thermal coal and an additional 36 million tonnes of coking coal by 2011-12 to meet the shortages.



The Indian Coal Reserves
Source: www.mapsofindia.com

India has one of the largest reserves of coal and is the world's top coal producers after the US and China. Proven coal reserves stand at around 92 billion tonnes, while total reserves are estimated at more than 240 billion tonnes. Coal would remain the dominant commercial energy source with total demand across all sectors such as power, cement, steel and paper estimated to rise to about 710 million tonnes as against about 370 million tonnes in 2005-06. Power sector alone would require about 503 million tonnes by 2011-12, when total installed electricity generation capacity is projected to increase to about 200,000 MW from 1,25,000 MW at present.Thus, the Indian coal industry has a diversified user base. However, power sector accounts for the bulk of the consumption at 74%. Other prominent user sectors include steel, cement and fertilizers.
Coal India Limited the state-run company is doing well in the Coal sector for India but despite of this there would be a huge import of coal in future. This embarked a sudden expansion of plans of CIL towards the increase of coal production for future Indian demand. According to the Eleventh Plan, it has been estimated that there would be an increase of 60% in the production of the Coal in India by CIL. According to the Government, Coal imports are expected to increase about 11.87% this fiscal that would be nearly 46.6 Mt as against on going 41.67 Mt in 2005-06. It has been estimated that out of the total coal imports in 2006 -07, there would be a requirement of 24.19 Mt of coking coal and 22.43 Mt of non-coking coal as compare to 23.89 Mt of coking and 17.78 Mt of non-coking coal in 2005-06.


Integrated Energy Policy

The Planning Commission constituted an Expert Committee to prepare an integrated energy policy linked with sustainable development that covers all sources of energy and addresses all aspects including energy security, access and availability, affordability and pricing, efficiency and environment in August, 2004 under the Chairmanship of Dr. Kirit S. Parikh, Member, Planning Commission. The Expert Committee submitted its report in August, 2006. Major recommendations for coal sector are listed below:

Increasing number of Coal Producers

• The number of players in coal mining should be increased.
• Captive block holders must be permitted to sell incidental coal surpluses during the development and operation of a block to CIL.
• Group-captive mines should be allowed for small end-users.
• Coal blocks held by Coal India Limited that cannot be brought into production by 2016-17, either directly or through joint ventures, should be made available to other eligible candidates for development with the condition that they be brought into production by 2011-12.
• Allot tees of captive blocks in general should be required to work the block within a specified time limit failing which allotment should be cancelled and/or a pre-agreed penalty imposed.
• The gestation periods for the end-use project may be different than that of the coal mine. To ensure that both the mine and the end-use project are developed in a cost-effective manner the innovative use of short-term linkages can be made. This must be linked with strictly enforced guarantees that back performance related to both the end-use project and the captive mine.
• Transfer pricing of coal from captive mines needs to be established both for the sake of assessing coal royalties as well as tariffs in a regulated sector such as power.


Pricing of Coal

• High quality coking and non-coking coals which are exportable may be sold at export parity prices.
• 20% of the total coal produced should be sold through e-auctions.
• Remaining coal should be sold under long-term Fuel Supply and Transport Agreements (FSTA’s).
• Pithead price of coal under FSTAs should be revised annually by a coal regulator.
• Replace the practice of grading coal under wide bands of the empirically determined UHV by the international practice of grading coal based on GCV.


Reducing Coal Cost

• Rail freight rates for coal transport should be rationalized.
• Infrastructure status should be extended to the coal industry.
• Duties on capital goods imported for coalmines must be lowered.
• Coal companies should be required as per international practice to “prepare” and “dress” coal prior to sale.
Facilitating Production
• Strategies for matching the growth of infrastructure needed for movement of coal to load centres should be aligned with the growth of coal industry.
• Wherever the techno-economic parameters of the geological resource demands development of underground mine, related technology must be encouraged by giving incentives.
• National Rehabilitation and Resettlement Policy for people affected by coal/lignite mining projects should be mooted. Such policy should be acceptable to all state governments.
• Early approval for the projects Environmental Management Plan by simplification of procedures, preparation of comprehensive EMPs and demonstration of environmental responsibility on the ground.
• Notify in-situ coal gasification and coal liquefaction as end-uses under the current captive consumption policy.


Regulation

Institute an independent regulatory body to regulate upstream allotment and exploitation of available coal blocks to yield coal, coal bed methane, and mine mouth methane, coal to liquid and for in-situ coal gasification.
The follow up action on most of the recommendations pertaining to Ministry of Coal has already been initiated.

MAJOR COAL PLAYERS
1) Coal India Limited (CIL)

a) Eastern Coalfields Limited (ECL)
b) Bharat Coking Coalfields Limited (BCCL)
c) Central Coalfields Limited (CCL)
d) Northern Coalfields Limited (NCL)
e) Western Coalfields Limited (WCL)
f) South Eastern Coalfields Limited (SECL)
g) Mahanadi Coalfields Limited (MCL)
h) North Eastern Coalfields Limited (NEC)

2)Singareni Collieries Company Limited (SCCL)

3)Neyveli Lignite Corporation (NLC)

4) Rajasthan State Mines & Minerals Limited (RSMM)

5) Gujrat Mineral Developement Corporation

6) Jammu & Kashmir Minerals Limited

7) Bihar State Mineral Developement Corporation Limited

8) Indian Iron and Steel Company Limited

9) Tata Iron & Steel Company Limited

10) Damodar Valley Corporation

11) Bengal Emta Coal Mines Limited



The Major Coal Producing Mines of India


Source: www.mapsofindia.com


The Lignite Reserves of India
Source: www.mapsofindia.com


Coal Exploration

The exploration of Coal takes place in two stages:

• The Geological Survey of India (GSI) undertakes Regional Exploration of large areas to find out the broad availability of Coal seams, geological structure, resources etc. on a continuous basis, confirming the presence of Coal. The funds for the same are provided by the Ministry of Mines, in order to supplement and augment the efforts of the GSI for Regional Exploration. Government introduced a scheme of Promotional (regional) Exploration in Coal and Lignite in 1989 which is under implementation on plan-to-plan basis. The mineral Exploration Corporation (MECL), Geological survey of India (GSI) and Central Mine Planning & Development Institute (CMPDI) also provide there services for carrying out the Promotional (regional) Exploration in various parts of the country. Ministry of Coal provides fund for this scheme. The Sub-committee on Energy Minerals (Group III of Central Geological Programming Board) with representatives of GSI, CMPDI, MECL, Singareni Collieries Company Limited (SCCL), Neyveli Lignite Corporation (NLC), CFRI, Ministry of Coal, Planning Commission etc., approves the programmes, coordinates and reviews the Regional Exploration work. CMPDI acts as a nodal agency for disbursement of funds for Promotional Exploration besides carrying out technical supervision of MECL’s work in coal Sector.

• Detailed Exploration: In the second stage, Detailed Exploration is carried out in potential areas of small size identified through Regional/Promotional Exploration, as per the requirements of Coal Companies in CIL blocks and others in Non-CIL/Captive blocks. Such blocks are taken up for detailed drilling to bring the reserves into Proved category and thus to reduce the uncertainties. The results of Detailed Exploration are incorporated in Geological reports that lead to Mine Feasibility Studies/Mining Plans and formulation of Project Reports of Mining. The reports are used for exploitation of coal reserves considering factors like emerging demand, its location, and availability of infrastructure for coal evacuation and techno-economics of the mine development including coal quality. The Detailed Exploration is funded by Coal Companies from their capital budget. CMPDI directly, and in a limited manner through State Governments, carries out detailed exploration in CIL command areas whereas SCCL takes up such work in its own area. CMPDI is also conducting Detailed Exploration in Non-CIL/Captive Mining blocks within the CIL Command Area.


Captive Coal Mining Blocks

Under the Coal Mines (Nationalisation) Act, 1973, coal mining was mostly reserved for the public sector. By an amendment to the Act in 1976, two exceptions to the policy were introduced viz.

(i) captive mining by private companies engaged in production of iron and steel and
(ii)Sub-lease for coal mining to private parties in isolated small pockets not amenable to economic development and not requiring rail transport.
.
Mapping of buffer zone have been completed for some of the area for Environment Management Plan (EMP) and water balance study these are:

i) Chitra, Gaurangdih and Kunustoria OCPs of Eastern Coalfield Ltd. (ECL).
ii)Golukdih, Shatabdi, Dahibari Basantimata and Chaptoria OCPs of Bharat Coking Coal Ltd. (BCCL).
iii)Ashoka, Purnadih and New Giddi ‘C’ OCPs of Central Coalfield Ltd. (CCL).
iv)Bhubaneswari, Samleswari, Basundhara and Kaniah-II OCPs of Mahanadi Coalfield Ltd. (MCL).
v) Gevra, Dipka and Kusmunda OCPs of South Eastern Coalfield Ltd. (SECL)

Digital processing of leasehold areas of Bhanegaon, Gondegaon and Umrer OCPs of Western Coalfield Ltd and Ashoka and Piparwar OCPs of Central Coalfield Ltd is under progress for monitoring of land environment towards compliance of MOEF stipulation.

• Land use/cover mapping of buffer zone of 21 mining projects of different subsidiaries of CIL is under progress.
• Settlement mapping of six villages of Lakhanpur project of Mahanadi coalfield Ltd. based on CARTOSAT & IKONOS satellite data is under progress.
• CIL R&D project titled “Development of methodology for rapid volumetric analysis of excavated in-situ overburden using high resolution satellite, ALTM, terrestrial laser scanner supported with ETS through Digital Photogram-metric Technique" in collaboration with NRSA is under progress.



Coal Demand

The Working Group Committee has estimated that there would a requirement of 731.10 Million tonnes of Coal & Lignite in India in the XI Financial Plan (20011-12). The annual growth rate of Coal demand is expected to be about 9% over X plan terminal year demand (BE) of 473.18 Mt. The all India Coal demand for the year 2007-08 has been assessed at 492.50 Mt. Sector wise break-up are:

Coal Demand (Million tonnes)

Sl.No. Sectors XI Plan (2011-12)/ Projections 2007-08

1. Steel & Coke Oven 68.5/ 38
2. Power (Utility) 483/ 333
3. Power (Captive) 57.06/ 33.6
4. Cement 31.9/ 26.8
5. Sponge Iron 28.96/ 15.1
6. BRK & Others 61.68/ 49
Total 731.1/ 495.5
(Source: Ministry of Coal Annual Report 2006-07)


Coal Supply

The required Coal supply in the terminal year of XI Plan is projected to be 680.00 Mt. The supplies from CIL & SCCL sources are expected to be 520.50 Mt and 40.80 Mt respectively. Other producers are anticipated to increase to a level of 118.70 Mt. The demand-supply gap emerging from these projects would be 51.10 Mt which would be met by imports of 40.85 Mt of Coking coal and 10.25 Mt of Non-Coking Coal. The scenario is like:

Demand-Supply Gap (Million tonnes)

Source XI Plan
2011-12 (Proj./) 2007-08

CIL 520.5/ 385.9
SCCL 40.8/ 38.04
Others 118.7/ 37.95
Total Indigenous
Supply 680/ 461.89

Import
Coking 40.85/ 20
Non-Coking 10.25/ 10.61
Total Imports 51.1/ 30.61
Gap 0/ 0
(Source: Ministry of Coal Annual Report 2006-07)


Coal Production

Coal is considered as the most essential source of electrical energy generation in India. It has been found that 75% of the coal in the country is consumed the Power Sector. In addition there are other sectors required coal like Steel, Cement, fertilizers, Chemicals, Paper and millions of other medium and small-scale industries are dependent on coal. In the transport sector there is negligible use of direct coal, as Railways are using very less number of steam locomotives, but there is a requirement of coal for the electric traction as coal is converted into electricity. The Ministry of Coal is engaged in the developing of Coal resources of the country in such a manner to meet the requirements of Coal for different consuming sectors.

The production of Coal in India is given emphasis and there are programmes to invest in Modern technologies for Coal production to raise the production level as per the increasing requirements. This can clearly be shown from the progress CIL had done from the level of about 70 million tonnes at the time of nationalisation of coal mines to in 1970’s to 407.02 million tonnes in 2005-06.

Coal India Limited and its subsidiaries are the major Coal producers in India, about 250.721 million tonnes of Coal is produced by Coal India Ltd. And its subsidiaries during the year 2005-06 (April-Dec.) this is leading to a growth of 4.5%. Singareni Collieries Ltd. (SCCL) is the main source of Coal supplier in the Southern region. The company has produce 26.097 million tonnes of coal during 2006-07 (Apr.-Dec.) as against 24.537 million tonnes during the corresponding period last year. Small producers of coal are TISCO, IISCO, DVC and others.


Productivity

The productivity is measured in terms of raw Coal produced (output) in tonnes per man shift (OMS). There has been improvement in the OMS in Coal Companies in last decade for CIL group of companies. The OMS at the time of nationalisation was 0.58 tonnes and 3.35 tonnes in Coal India Ltd. in the year 2006-07 for (Apr.-Dec.). In SCCL OMS is 2.21 tonnes in 2005-06 (Apr.-Dec.) due to increased number of high skilled labour, better & modernisation in the Equipments.



Distribution

The distribution of Coal is done through the Standing Committee (Short period) operating under the Ministry of Coal comprising ministers of parliament, Ministries of Government of India. They allocate Coal to the Core sectors consist of Power, including CPP, Steel, Cement, Defence, Fertilizers, exports Aluminium, Paper and Railways.



Import of Coal

According to the present Import Policy, Coal can easily be imported by the consumers as per there requirements based on their commercial prudence. Coking Coal is imported by the Steel Authority of India Limited (SAIL) and other steel manufacturing companies. This is mainly to fulfil the gap between the requirement and the availability of the Coal to improve the quality. Coast based power plants, cement plants, captive power plants, sponge iron plants, industrial consumers and coal traders are importing non-coking coal. Coal is mainly imported by the Pig-Iron manufacturers and Iron & Steel sector consumers using mini-blast furnace.


Details of import of coal and products
during the last five years
(Million tonnes)

Coal----------2001-02/02-03/03-04/04-05/05-06
Coking Coal-----11.11/12.95/12.99/14.57/17.11
Non-coking Coal--9.44/10.31/08.69/11.56/19.75
Coke-------------2.28/02.25/01.89/02.51/02.56
Total Import----22.83/25.51/23.57/28.64/39.42
(Source: Ministry of Coal Annual Report 2006-07)



Coal Consumers Council

There is consumer council for the rectification of consumer's grievances and monitoring of complaints received from the consumers, one Regional Coal Consumers Council has been set up for each coal company. An Apex body viz. National Coal Consumers Council has also been set up at the Headquarters of Coal India Limited. In case the complainant does not receive a reply within a month or the complainant is not satisfied with the reply of Coal Company, he may prefer a complaint to the National Coal Consumers Council.



Royalty

Royalty is an amount payable by a lessee to the lessor for removing or consuming a mineral Section 9(1) of the Mines and Minerals (Development & Regulation) Act, 1957 requires the holder of a mining lease or his agent, manager, employee, contractor or sub-lessee to pay royalty in respect of any mineral removed or consumed from the leased area at the rate specified in the Second Schedule of the Act. Section 9(3) of the MMDR Act empowers the Central Government to enhance or reduce the royalty rates in respect of any mineral by notification in the official Gazette with effect from such date as may be specified in the notification. This revision is done by amending the particular entry of royalty rate for the respective mineral in the Second Schedule of the Act. The provision to Section 9(3) of the act prevents the Central government from enhancing the rate of royalty in respect of any mineral more than once during any period of three years. The Act also does not mandate that royalty on coal should be revised after every three years.



Royalty Rates(Rs. Per tonnes)

Coal Royalty Rates
Coal group w.e.f. 13.2.1981/1.8.1991/11.10.1994/16.6.2002

Group I Coking Coal
SG I, II, WG-I---------7/-------150/--------195/---250

Group II,
Coking
WG-II, III;
Non-coking AB,
Semi Coking Gr I,
Semi Coking Gr II----6.5/------120/--------135/----165


Group III
Coking coal
WG- IV,
Non-coking Coal-----5.5/-------75/---------95/-----115


Group IV
Non-Coking D,E------4.5/-------45/---------70/------85


Group V
Non-Coking F,G------2.5/-------25/---------50/------65


Group VI,
Coal
Produced in Andhra---5/--------70/---------75/------90

(Source: Ministry of Coal Annual Report 2006-07)


Fixing Royalty Rates

The Royalty rates on Coal/ Lignite are fixed by the Study group constituted by the Ministry of Coal. The Study Group interacts with and takes views of all the stakeholders, viz. the producing States, the consuming States and the consumer sectors such as power, iron and steel, cement etc. After taking into account the views of all the stakeholders and other relevant factors, the Study Group makes its recommendations to the Ministry. The Ministry, after considering the recommendations, moves a proposal for Government decision (CCEA). The consequent decision is then notified and the new rates of royalty come into effect from the date of such notification. The above process is objective, transparent and has served the purpose well.


Fresh Revision of Royalty Rates

A Committee was constituted on 02.06.2005 under the Chairmanship of Additional Secretary, Ministry of Coal to consider revision of rates of royalty on Coal and lignite. The Committee submitted its report on 14.07.2006 after detailed deliberations with all stake-holders.

• The incidence of cess levied by some State Governments together with the enhanced royalty rates tends to have a cascading effect on the coal consuming sectors and this has caused disparities across the States. This issue was discussed in a meeting under the chairmanship of Secretary (Coal) held on 10.10.2006 with the representatives of the coal producing States. The views of the State Governments on the matter have been obtained.

• Based on the report of the Committee on royalty and the consultations held with the State Governments. A decision will be taken shortly.


State Wise & Company Wise Royalty Paid
by CIL(2006-07) (Million Rupees)
up to Nov. 2006


Comp/W.Ben./Jhark./Orissa/Ma.Pr./Chhat./Mahar./U.Pr./Assam/Total

ECL/-----7.86/45.61--/--------/---------/--------/---------/-------/--------/53.47
BCCL/----0.11/142.69/--------/---------/--------/---------/-------/--------/142.8
CCL/----------/157.78-/--------/---------/--------/---------/-------/--------/157.78
WCL/---------/---------/--------/40.20-/---------/200.81/-------/--------/241.01
SECL/--------/---------/--------/94.79-/384.36-/--------/-------/--------/479.15
MCL/---------/---------/340.02/---------/---------/---------/-------/-----/340.02
NCL/---------/---------/---------/242.42/---------/---------/41.54/------/283.96
NEC/---------/---------/---------/---------/---------/---------/-------/12.37/12.37
-
Total/7.97/346.08/340.02/377.41/384.36/200.81/41.54/12.37/1710.56
(Source: Ministry of Coal Annual Report 2006-07)

The 1981 coal royalty rates are still continuing for the State of West Bengal on the ground that the Government of West Bengal is continuing to levy cesses on Coal which have been withdrawn by the other State Governments.



Royalty rates of Neyveli Lignite Corporation


Period/Amount (Million)
2003-04/ 960.2
2004-05/ 1078.4
2005-06/ 1022
2006-07
up to 31.12.2006)/ 698.7

Provisional for the period
January’2007 to
March’2007/ 270

(Source: Ministry of Coal Annual Report 2006-07)



Royalty rates of SCCL


Period /Amount (Million)
2003-04 / 3044
2004-05 / 3122.2
2005-06 / 3240
2006-07
(up to Nov.,2006)/ 1710

(Source: Ministry of Coal Annual Report 2006-07)


Coal Conservation

Conservation of Coal leads to the maximum recovery of the in-situ reserves of the Coal. The conservation of Coal is taken into account at the beginning, right from the Planning stage and it is ensured to be implemented during the excavation stage. This leads to the maximum recovery of the Coal from the original reserves.

Extraction of thick seams is done at a shallow depth by the commonly adapted technology of mechanised opencast mining. The percentage recovery by this method is 80%-90% which helps in the conservation of the resources too. The total Coal production is 85% due to this new adapted method of mining. The thick seams which were earlier developed by the Bord & Pillar method or other underground methods of mining and have been standing on the pillars for long in absence of a suitable technology for extraction, but, now as the technology has been improved therefore it can be extracted out by HEMM mining equipments of suitable types as it is in use in some of the mines of WCL, BCCL, CCL and ECL under shallow cover.

In case of underground mining, the introduction of mechanisation has resulted in increased percentage of extraction thereby leading to better conservation of coal. Replacement of the prevalent manual Bord and Pillar method of mining by semi-mechanised method of extraction (with SDL/LHD) has improved the percentage of extraction. In underground mining of thick seam where earlier the extraction percentage was very low, new methods of mining with relatively higher recovery such as Blasting Gallery and Cable Bolting have been successfully adopted.

Long wall mining technology yields higher percentage of recovery (70% to 80%) with higher rate of output compared with other methods of underground mining. This method has been implemented in some mines of SECL, ECL and BCCL of Coal India Limited as well as in SCCL. There is a problem of geological conditions in India due to which adoption of these mining techniques is not been possible.



Sources• Annual Report 2005-2006, Central Mine Planning & Development Institute
• Annual Report 2006-07, The Ministry of Coal
• XI Planning Commission Report on Mineral Reserves, Exploration & Future of Indian Minerals
• Infraline: Consumption in the Power Sector
• Home pages of the Companies:
http://www.coalindia.nic.in
http://www.coal.nic.in
http:// www.bccl.cmpdi.co.in
http:// www.ccl.cmpdi.co.in
http:// www.mahanadicoal.nic.in
http:// www.ncl.gov.in
http:// www.tinsukia.nic.in
http://www.westerncoal.nic.in
http://www.secl.nic.in
http://www.scclmines.com
http://www.nlcindia.co.in
http://www.rsmm.com
http://www.jkminerals.com

COAL

PART - I

Coal is a combustible solid. It usually stratified and formed by the burial of the partially decomposed vegetation in the past geological years, which is for more than about 300 million years. After the pressure and temperature, former due to standing mass of the crust above and later due to the heat of the Earth’s interior, continued to rest in the absence of air, changing the physical as well as chemical property of the substances buried under.
Variation in the proportions of various plant components causes the different type of Coal. Chemically, Coal is highly complex organic matter with varying amount of water, with the presence of nitrogen and sulphur in the form of organic and in-organic matter. The contents of impurities in the Coal make different grades of Coal. On the basis of origin, Coal may be Humic or Banded Coal (derived from forests on the land) and Sapropelic Coal (derived from the aquatic plants).

There are different types of Coal according to the time period, pressure and composition:

i) Peat

Peat is the product of anaerobic decomposition of various vegetable remains under moist conditions. Peat is the first stage of the Coal formation from cellulose. It is neither Coal nor Wood in the proper manner but something intermediate between the two, which is formed by the gradual decaying of the vegetable matter in the moist places through an incomplete transformation of plant to Coal. The composition of the organic matter in Peat depends upon the Degree of Decomposition. Greater the decomposition greater will be the Carbon and lesser the Oxygen. The ash content of the Peat is not so high and it is not an economical fuel due to the cost involved in the drying and handling. Destructive distillation of Peat is also done which results in coke, hydrocarbon oils, fuel gases, wax and tar etc.

ii) Lignite

Lignite or Brown Coal is an immature Coal and has composition intermediate between the Peat and Bituminous Coals. Lignite may be amorphous, fibrous or woody in texture. They are usually brown in colour but become dark on exposure to air. Lignite absorbs Oxygen when exposed to air and gets ignited spontaneously.

iii) Pulverised Coal

Pulverised Coal is obtained by grinding fossil Coal or Oil shale. Pulverised Coal burns quickly and completely considering the adequate mixture of pulverised Coal and air for the combustion. The pulverised ore can easily be handled like a liquid fuel and can be transformed through pipes. The fineness of the pulverised coal depends upon the concentration of combustible volatile and ash, density of the coal and the volume of combustion chamber available. Fuels with the low concentration of volatiles should be ground more finely. The Process of Pulverisation consists of Crushing, Drying and Grinding.

iv) Sub-Bituminous

It is a Dull Black coal. Sub- Bituminous coal is denser and harder than Lignite also has much lesser moisture content than Lignite. The calorific value is less than that of the Bituminous Coal. It ignites very easily.

v) Bituminous

It is a commonly used commercial rank Coal. It is harder than Lignite and Sub-Bituminous coal. A good bituminous coal is composed of alternate dull and bright bands. It is brittle in nature and easily breaks into thin blocks when strike, it also has a good concentration of Carbon in its composition. This type of coal is also used for the production of coal but not all Bituminous coal is used for the Coking. The coal used for the coking must be highly, Bituminous and contain very small proportion of sulphur and ash. For coking the coal must be washed in a special type of mechanical washery, so that to reduce the sulphur as well as ash content from the coal. Bituminous coals are easy to handle and have excellent heating qualities, this type of coal is the mostly been used throughout the World. There are two types of bituminous coals the Low Volatile coals (fuel ratio less than 2) and the High Volatile coals (fuel ratio more than 2). High volatile coal burns with long flames and used for gas industry, coal tar distillation and for the manufacturing glass etc.

vi) Anthracite

Anthracite is the final stage of the coal formation from the vegetable matter. It is very hard, compact with a semi-metallic lusture. Anthracite is the fossil coal with the highest percentage of fixed carbon. It burns with a very small flame which is not very strongly luminous. It contains the minimum volatile content among all form of coals. This type of coal is the most prised and don’t have coking properties. The ash content of such a coal is high making it not to be used in various industries.



S.No. TYPE CALORIFIC VALUE CARBON CONTENT
i Anthracite 14000-15000 *BTU 86-88 %
ii Bituminous 11000-15000 BTU
a) Low volatile 78-86 %
b) Medium volatile 69-78 %
c) High volatile < 69 %
iii Sub-Bituminous 7000-15000 BTU
iv Lignite 4000-6000 BTU


*BTU = 252 Calories


Coal is divided into different Grades depending upon the ash content, moisture content, calorific value, presence of volatile matter, coking property, carbon content and various other factors. These grades are:


For Non-Coking Coal

Grade K Cal/kg
A Exceed 6200
B Between 5600-6200
C Between 4940-5600
D Between 4200-4940
E Between 3360-4200
F Between 2400-3360
G Between 1300-2400

For Coking Coal
Grade % Ash
W-I Between 18-21
W-II Between 21-24
W-III Between 24-28
W-IV Between 28-35



Coking And Non-Coking Coal

A coal is said to be Coking if it has the tendency to soften, swell and stick together during combustion. Bituminous coals have the coking properties where as Anthracite, sub-Bituminous and Lignite coals are non-coking coals. Coking coals are generally of two types:

a) Firm Non-Swelling coking coals and
b) Excessively Swelling coking coals

The Firm Non-swelling coals are those which yield compact hard coke without any increase in the volume originally associated with the coal there fore are good to use in blast furnaces, where as excessively swelling type of coking coal swells excessively when coke is formed. All those type of coal are said to be a good coking coal which have a ratio of H:O above 58.

Roles of Sulphur and Ash in Coal

Sulphur in Coal is present as Iron pyrites, Calcium sulphate or gypsum and as Organic sulphate. Carbonisation is the process which expels sulphur as hydrogen sulphide, carbon sulphide and thiophene but still remains in coke. The sulphur present in the coal can be removed to some extent by washing the coal, resulting in the improvement of the grade and adding the economic value to the price of the coal.
Ash content effects the quality of the coal. The ash content depends upon the type of vegetation the coal is formend from. Thickness of ash decides the grade of coal, coal with thick ash considered to be a good quality of coal. The ash present in the coal can be removed to certain extent by washing the coal.