Coal and Mining Sector

Coal and Mining Sector

Fired up and plugged in

Note4Students

From UPSC perspective, the following things are important :

Prelims level : COP-28:

Mains level : indigenize supply chains for clean energy

Unlocking the co-benefits of decarbonising India's power sector | TERI

Central Idea:

India aims to balance economic growth and environmental concerns as it strives to become the fastest-growing economy, focusing on decarbonizing the power sector, ensuring development, and securing energy needs. Coal remains crucial, but strategies involve managing existing assets, enhancing coal fleet flexibility, incentivizing energy storage, and promoting domestic manufacturing of renewable energy technologies.

Key Highlights:

  • India is actively involved in climate action, reducing fossil fuel subsidies, and planning a threefold increase in renewable power capacity by 2030.
  • Coal, despite being essential, is slated to persist until India attains developed country status.
  • Strategies include better managing thermal plant outages, increasing coal fleet flexibility, incentivizing energy storage, and promoting domestic clean energy manufacturing.

Key Challenges:

  • Balancing economic growth with the imperative to phase down unabated coal.
  • Uncertainty in predicting India’s coal reliance due to rising electricity demand.
  • Adapting existing coal plants for flexibility in integrating renewable energy.
  • Compensating entities for energy storage services and boosting domestic value and job creation in clean energy.

Key Terms:

  • COP-28: The 28th Conference of the Parties, relevant to global climate change negotiations.
  • Unabated Coal: Coal burning without a reduction in carbon emissions.
  • Renewable Power Generation: Electricity from sustainable sources like wind, solar, and hydropower.
  • Atmanirbhar: A Hindi term signifying self-reliance, commonly used in promoting domestic manufacturing.

Key Phrases:

  • “Decarbonizing the power sector while ensuring economic development and energy security.”
  • “Reducing overall fossil fuel subsidies” and “tripling installed renewable power generation capacity by 2030.”
  • “Managing thermal plant outages during peak demand periods.”
  • “Increasing the flexibility of the existing coal fleet to integrate more renewable energy into the grid.”
  • “Indigenizing supply chains for battery storage and renewable energy technologies.”

Key Quotes:

  • “India has reduced overall fossil fuel subsidies by 76% between FY14 and FY22.”
  • “Coal will remain a vital energy source until India reaches the status of a developed country.”
  • “Entities deploying batteries must be compensated for the value they bring to grid operation.”
  • “Boosting domestic value and job creation in clean energy will mitigate concerns associated with disruptions in the global supply chain.”

Key Statements:

  • “To keep the economy powered while decarbonizing, India must use existing assets better and invest in energy storage capabilities.”
  • “Improving availability and utilization of existing plants can mitigate the need for investments in new thermal assets.”
  • “Indigenizing supply chains for clean energy will support exports and domestic value additions, mitigating concerns of global supply chain disruptions.”

Key Examples and References:

  • “In 2023, coal-based power plants in India witnessed unplanned outages during peak demand days.”
  • “The PLI scheme committed funds to solar manufacturing, supporting domestic value additions.”

Key Facts and Data:

  • “India reduced overall fossil fuel subsidies by 76% between FY14 and FY22.”
  • “India produced coal worth substantial amounts in FY22, providing significant revenues to the government.”
  • “The PLI scheme committed funds to solar manufacturing, supporting potential domestic value addition.”

Critical Analysis:

  • The article underscores the tension between economic growth and environmental concerns in India’s energy strategy.
  • Emphasizing strategies for managing existing assets and enhancing coal fleet flexibility reflects a pragmatic approach to the transition to renewables.
  • Highlighting the importance of incentivizing energy storage services and promoting domestic manufacturing underscores the need for a comprehensive and sustainable energy policy.

Way Forward:

  • Prioritize transparent assessments of long-term opportunity costs of conventional power sources.
  • Focus on affordable electricity for all segments of the economy.
  • Build on the success of the PLI scheme to further indigenize supply chains for clean energy.
  • Implement policies encouraging flexibility in the coal fleet and compensating entities for energy storage services.
  • Continue investing in renewable energy and storage technologies to align with global decarbonization commitments while ensuring energy security.

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Coal and Mining Sector

KABIL acquires 5 lithium blocks in Argentina

Note4Students

From UPSC perspective, the following things are important :

Prelims level : KABIL, Lithium

Mains level : Read the attached story

kabil

Introduction

  • Khanij Bidesh India Limited (KABIL), has taken a significant step towards securing its strategic mineral supply by acquiring five lithium blocks in Argentina.

About KABIL

  • Joint Venture: Khanij Bidesh India Limited (KABIL) is a Joint Venture Company established with the participation of three Central Public Sector Enterprises: National Aluminium Company Ltd. (NALCO), Hindustan Copper Ltd. (HCL), and Mineral Exploration Company Ltd. (MECL).
  • Formation: KABIL was founded in 2019 with the primary objective of sourcing critical minerals like lithium and cobalt from overseas locations.
  • Ministry Oversight: Under the purview of the Ministry of Mines, KABIL’s equity participation is distributed in the ratio of 40:30:30 among NALCO, HCL, and MECL, respectively.

Mission and Functions

  • Strategic Mineral Security: KABIL’s core mission is to ensure India’s mineral security and achieve self-reliance in critical and strategic minerals. It identifies and acquires overseas mineral assets like lithium and cobalt.
  • Functions: KABIL conducts the identification, acquisition, exploration, development, mining, and processing of strategic minerals abroad to meet the country’s commercial requirements.
  • Exploration: It explores various avenues for sourcing minerals, including trading opportunities, governmental collaborations, strategic acquisitions, and investments in exploration and mining assets.
  • Global Partnerships: KABIL fosters partnerships with mineral-rich countries worldwide, such as Australia, Africa, and South America, leveraging India’s expertise in exploration and mineral processing to create mutually beneficial economic opportunities.

Key Developments

  • Argentina’s Lithium Resources: Argentina, along with Chile and Bolivia, forms the world’s “Lithium Triangle,” collectively possessing over half of the world’s lithium resources. Argentina stands out with its second-largest lithium resources, third-largest lithium reserves, and fourth-largest production globally.
  • Block Acquisition: KABIL, a state-owned entity, has acquired Exploration and Exclusivity Rights for five lithium brine blocks in Argentina.
  • Branch Office in Argentina: KABIL is gearing up to establish a branch office in Catamarca, Argentina, further emphasizing its commitment to the project.

Significance of this acquisition

  • Strategic Significance: This groundbreaking endeavour holds paramount importance for India’s transition towards green energy solutions. Lithium, often referred to as ‘white gold,’ is integral for various applications, including energy storage solutions, mobile phone batteries, and electric vehicles (EVs).
  • Reducing Import Dependency: India’s lithium requirements, valued at around ₹24,000 crore, are primarily met through imports, with a significant portion originating from China.
  • Unlocking Technical Expertise: The Union Minister for Mines, highlights that this initiative not only addresses India’s lithium sourcing needs but also brings valuable technical and operational experience in brine-type lithium exploration, exploitation, and extraction.

Conclusion

  • India’s acquisition of lithium blocks in Argentina through KABIL represents a monumental stride towards securing its strategic mineral supply.
  • This initiative not only strengthens India’s position in the global lithium market but also aligns with its commitment to sustainable and self-reliant energy solutions.

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Coal and Mining Sector

Strategic Auction of Critical Mineral Blocks  

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Critical Minerals, Types of Licences

Mains level : Read the attached story

Critical Mineral

Central Idea

  • The Centre is auctioning twenty blocks of critical minerals for commercial mining by the private sector.
  • These blocks contain lithium ore and 10 of the 30 minerals declared as “critical” by the government in July.

What are Critical Minerals?

  • Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.
  • These minerals are used in making mobile phones, computers, batteries, electric vehicles, and green technologies like solar panels and wind turbines.
  • Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
  • Many of these are required to meet the manufacturing needs of green technologies, high-tech equipment, aviation, and national defence.
  • List of critical minerals includes:
  1. Identified Minerals: The assessment resulted in a list of 30 critical minerals, including antimony, beryllium, cobalt, copper, lithium, nickel, rare earth elements, silicon, tin, titanium, tungsten, and others.
  2. Fertilizer Minerals: Two minerals critical for fertilizer production, phosphorous and potash, are also included.

Significance of Lithium Ore Auction

  • First Instance: This auction marks the first time that rights for lithium ore mining are being offered to private parties in India.
  • Other Critical Minerals: The blocks also include nickel, copper, molybdenum, and rare earth elements (REEs), crucial for various industries.

Location and Rights of Mineral Blocks

  • Distribution: The 20 blocks are spread across eight states, including Tamil Nadu, Odisha, Bihar, Uttar Pradesh, Gujarat, Jharkhand, Chhattisgarh, and Jammu & Kashmir.
  • Types of Licenses: Four blocks are for a Mining License (ML), allowing immediate mining post-clearance. The remaining 16 blocks are for a Composite License (CL), permitting further exploration before potentially converting to an ML.
  • Approvals Required: Licensees must obtain various approvals, including forest clearance and environmental clearance.
  • Forest Land: Approximately 17% of the total concession area, or 1,234 hectares, is forest land.

Reserve Estimates and Key Minerals

  • Lithium Reserves: The two lithium reserve blocks, one each in J&K and Chhattisgarh, are auctioned for CL.
  • Nickel and Copper Reserves: Nickel ore reserves are found in Bihar, Gujarat, and Odisha, with the Odisha block also containing copper reserves.

India’s Current Mineral Imports

  • Lithium Imports: In FY23, India imported 2,145 tonnes of lithium carbonate and lithium oxide, costing Rs 732 crore.
  • Nickel and Copper Imports: The country imported 32,000 tonnes of unwrought nickel and 1.2 million tonnes of copper ore, costing Rs 6,549 crore and Rs 27,374 crore, respectively.
  • Import Dependence: India relies entirely on imports for lithium and nickel, and 93% for copper.

Post-Auction Plans and Policy Initiatives

  • Future Auctions: A second tranche of critical mineral blocks, including new lithium reserves in Rajasthan and Jharkhand, is expected.
  • Geological Surveys: The Geological Survey of India is conducting 125 projects to explore critical mineral reserves.
  • Centre of Excellence: A recommendation to establish a Centre of Excellence for Critical Minerals aims to develop a complete value chain in the country.

Conclusion

  • The auction of critical mineral blocks is a significant step towards reducing India’s reliance on imported minerals, particularly lithium, nickel, and copper.
  • This initiative aligns with the #AatmanirbharBharat vision and is expected to bolster India’s position in vital industries like battery manufacturing and electric vehicles.
  • The success of these auctions will be crucial in shaping India’s resource independence and industrial future.

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Coal and Mining Sector

Understanding Rat-Hole Mining

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Rat-Hole Mining, Coal reserves in NE

Mains level : NA

rat-hole

Central Idea

  • The rescue operation in Uttarakhand using rat-hole mining, a method banned for its hazardous nature and environmental impact, brings to light the complexities and challenges of mining practices in India.

What is Rat-Hole Mining?

  • Description: A primitive and hazardous method of mining involving digging small tunnels, just large enough for a person to crawl through, to extract coal.
  • Types:
    • Side-Cutting: Following a visible coal seam on hill slopes.
    • Box-Cutting: Involves digging a pit and then creating horizontal tunnels.
  • Irony: Thecued workers from Assam, a region that lost lives to rat-hole mining in Meghalaya, were ironically saved using the same method.

Why is Rat-Hole Mining Banned?

  • Location: Prevalent in Meghalaya, a Sixth Schedule State where central mining laws don’t apply.
  • Risks: Asphyxiation, mine collapse, flooding, and severe environmental impacts.
  • NGT Ban (2014): Due to safety hazards and environmental degradation, including river pollution.
  • Continued Illegal Mining: Despite the ban, illegal mining and transportation persist, with significant loss of lives (e.g., 17 miners drowned in 2018 in East Jaintia Hills).

Factors Leading to the NGT Ban

  • Activism: Environmental and human rights groups highlighted the dangers for two decades.
  • Child Labor: Reports estimated around 70,000 children, mostly from Bangladesh and Nepal, were employed in these mines.
  • Official Acknowledgment: Under pressure, the State admitted to child labor in 2013, leading to the NGT ban in 2014.

Feasibility of such mining

  • Economic Viability: Thin coal seams in Meghalaya make rat-hole mining more economically feasible than open-cast mining.
  • Coal Reserves: Meghalaya has significant coal reserves dating back to the Eocene age.
  • Government Action: Meghalaya announced the approval of mining leases for ‘scientific’ mining in 2023.
  • Concerns: Skepticism remains among anti-mining activists about the implementation of sustainable and legal mining practices.

Conclusion

  • While the approval of ‘scientific’ mining offers a legal and potentially safer avenue, it remains to be seen how effectively it will replace the dangerous and unregulated rat-hole mining, especially in regions with unique geological and socio-political contexts like Meghalaya.

 

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Coal and Mining Sector

Tantalum Reserves found in Sutlej River

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Sutlej River, Tantalum

Mains level : Read the attached story

tantalum

Central Idea

  • Researchers from IIT-Ropar have found the presence of tantalum in Punjab’s Soil in Sutlej River Basin.
  • Although the source of tantalum in Sutlej is not clear yet. It could be due to movement of tectonic plates in the Himalayan region that is likely to contain the rare metal.

Sutlej River

 

  • Origin: Starts from Lake Rakshastal in Tibet, near Mount Kailash.
  • Length: About 1,500 kilometres (930 miles); Longest of the five rivers of Punjab.
  • Path: Flows through Tibet, India (Himachal Pradesh, Punjab), and Pakistan.
  • Tributaries: Major tributary includes the Beas River in India.
  • Indus River System: Part of this system, joins the Chenab River in Pakistan.
  • Economic Role: Crucial for irrigation, and hydroelectric power (e.g., Bhakra Nangal Dam).
  • International River: Governed by treaties like the Indus Water Treaty between India and Pakistan.

About Tantalum

  • A Rare and Valuable Metal: Tantalum, with the atomic number 73, is a rare metal crucial in electronics and semiconductors. It is a dense, hard, gray metal, known for being one of the most resistant to corrosion.
  • Exceptional Corrosion Resistance: Tantalum’s resistance to corrosion comes from its ability to form a protective oxide layer when exposed to air. This layer holds up even in very acidic environments.
  • Flexible and Durable: Pure tantalum is ductile, meaning it can be stretched into thin wires without breaking. It resists chemical damage below 150°C but is vulnerable to hydrofluoric acid and certain other substances.

Historical Background

  • Swedish Discovery: Tantalum was first identified by Swedish chemist Anders Gustaf Ekenberg in 1802 in Ytterby, Sweden. Initially, it was confused with niobium, a similar element.
  • Differentiating Tantalum and Niobium: In 1866, Swiss chemist Jean Charles Galissard de Marignac established that tantalum and niobium are distinct elements.
  • Behind the name: The metal is named after Tantalus, a character from Greek mythology, known for his eternal punishment of being unable to reach the water and fruit around him. The name reflects the metal’s property of being ‘tantalizingly’ insoluble in acids.

Uses of Tantalum

  • Tantalum capacitors are key in electronics, known for their ability to store a lot of electricity in a small space with minimal leakage. They’re used in smartphones, laptops, and cameras.
  • High melting point makes tantalum a substitute for platinum in various industries, including chemical and nuclear plants, aerospace, and missile systems.
  • Its non-reactive nature makes it perfect for surgical tools and implants, like artificial joints.
  • Tantalum carbide, when mixed with graphite, forms one of the hardest materials, used to enhance the cutting edges of high-speed machine tools.

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Coal and Mining Sector

Explained: Coal isn’t Easy to Exclude from Sustainable Development

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Flue-Gas Desulphurisers (FGDs) , Integrated Gasification Combined Cycle (IGCC)

Mains level : India's energy mix

coal

Central Idea

  • Globally, 80% of energy comes from fossil fuels like oil, coal, and gas. In contrast, renewable sources like solar and wind contributed only 2.4% in 2022.
  • India, with its energy supply per capita well below the global average, faces the dual challenge of meeting growing energy demands and pursuing sustainable development.

Need for Electricity Security

  • Stable and Affordable Power: Ensuring a reliable electricity supply that meets increasing demands at an affordable cost is crucial.
  • Renewables’ Minor Role: Despite India’s significant potential for renewable energy, it made up only a small portion of the energy mix in 2022.
  • Coal’s Predominance: In FY 2022-2023, coal-fired thermal power plants (TPPs) generated 74.3% of India’s electricity, driven by escalating demand and the need to support major industries.

Balancing Emissions and Development

  • India’s Global Emission Share: India’s cumulative emissions from fossil fuels and industry account for just 3.3% of the global total, highlighting its role in global development.
  • Sustainable Development Imperative: Catering to the energy needs of 17% of the world’s population, India must ensure that sustainable development is more than a slogan.

Challenges and Strategies

  • Dependency on Critical Battery Materials: Most materials for grid-scale battery storage are controlled by a few countries, posing energy security risks. Cost-effective batteries are expected post-2030.
  • Efficiency and Nuclear Expansion: India needs to improve TPP efficiency, expand nuclear energy, and enhance pumped storage to integrate more renewables.

Coal’s Role in Electricity

  • Future Projections: India’s national grid could absorb more renewable electricity by 2031-2032, but cost differences with coal-fired TPPs pose challenges.
  • Domestic Coal Dependence: With 96% of coal for TPPs sourced domestically, coal capacity in India is expected to grow significantly.

Concerns of Coal Transport

  • High Ash Content: Indian coal’s high ash content causes erosion and performance issues in TPPs.
  • Transportation Issues: Long-distance transport of unwashed coal strains transportation systems and raises environmental concerns.
  • Coal Washing: Requiring miners to supply only washed coal to TPPs over 500 km away can reduce emissions and pollution.

Flue-Gas Desulphurisers (FGDs) Dilemma

  • Sulphur Emissions: Despite Indian coal’s lower sulphur content, tall stacks and weather conditions lead to sulphur dioxide emissions.
  • Climate and Cost Implications: Installing FGDs in TPPs increases coal consumption, reduces efficiency, and requires significant investment.

Way forward

  • Advanced Technologies: Supercritical and Ultra-Supercritical technologies can lower carbon emissions.
  • IGCC for Carbon Capture: Integrated Gasification Combined Cycle (IGCC) plants can capture CO2, aiding in low-carbon electricity generation.
  • Government Incentives: Promoting IGCC or Advanced Ultra-Supercritical Technology (AUSC) before 2030 can foster low-carbon initiatives.

Conclusion

  • The challenge of global warming arises from all fossil fuels, not just coal.
  • The principle of “common but differentiated responsibilities” should guide global climate change efforts.
  • India’s journey towards low-carbon development is essential.

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Coal and Mining Sector

National Coal Index (NCI) surges this Month

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Coal Index

Mains level : NA

Central Idea

  • In a recent development, the National Coal Index (NCI) saw a substantial rise in September, marking its first increase since April 2023.
  • This surge in the NCI is linked to global coal price fluctuations and holds significant implications for India’s coal sector.

Understanding the National Coal Index (NCI)

  • What is it? The NCI is a price index which reflects the change in the price level of coal on a particular month relative to the fixed base year.
  • Release: It is released every month by the Ministry of Coal.
  • Launch: The NCI was introduced on June 4, 2020, as a tool to monitor coal price fluctuations relative to a fixed base year FY 2017-18.
  • Price Indicator: The NCI serves as a crucial price indicator that combines coal prices from various sources, including notified prices, auction prices, and import prices.
  • Basis for Premiums: It plays a vital role in determining premium rates, either on a per-tonne basis or through revenue sharing, using a market-based approach.

Components of NCI

  • Sub-Indices: NCI comprises five distinct sub-indices, encompassing three for Non-Coking Coal and two for Coking Coal. These sub-indices are amalgamated to derive the final Index for Non-Coking and Coking Coal, making them distinctly separate.
  • Customized Revenue Shares: Based on the coal grade associated with a mine, the relevant sub-index is employed to determine the revenue share.

Factors behind the NCI Surge

  • Global Price Impact: The recent uptick in the NCI is primarily influenced by a temporary rise in global coal prices, which has reverberated in the Indian coal market.
  • Seasonal Demand: With the festive season and winter approaching in India, the demand for coal has risen, prompting coal producers to boost domestic production to meet the growing energy needs.
  • Power Sector Growth: India has experienced a surge in coal demand, particularly from the power sector, driven by increased electricity requirements.
  • Continued Coal Imports: Power plants have continued to import coal as part of the coal blending mandate set by the power ministry.

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Coal and Mining Sector

A green transition, but not without the coal-rich states

green transition

Central idea

India’s green transition faces challenges as coal-rich states encounter fiscal implications and regional imbalances. The article emphasizes the need for inclusive development, addressing fiscal concerns, and reviving balanced regional developmentalism to ensure a fair and effective energy transition.

Key issues highlighted in the article

  • In August 2023, 5% of grid-connected RE generation came from eight states.
  • The Central Electricity Authority’s report projects solar and wind to constitute almost 51% of total generation capacity and nearly 31% of all generated power by 2030.
  • The massive RE build-out has mainly benefited western and southern states.
  • Research indicates that RE-poor, coal-rich states may face a double hit to state revenues due to declining coal royalties and increasing electricity imports.
  • The combined revenue impact could worsen budget deficits of RE-poor power-importing states by almost 8.66% on average.
  • Frictions exist between Union and state governments regarding central policies, transmission waivers, and financing struggles in the power sector.

Present Status:

  • Recent developments indicate a continued reliance on coal, raising questions about the trajectory of India’s energy transition.
  • The dominance of specific states in RE generation highlights regional imbalances.

UPSC mains relevance:

  • Ongoing debates on India’s energy transition and challenges in balancing fiscal interests.
  • Understanding the role of state finances in achieving national renewable energy goals.
  • Familiarity with the potential fiscal impacts of transitioning from coal to renewables in different states.

Key Challenges:

  • Declining coal royalties and increasing RE procurement costs pose a fiscal challenge for coal-rich states.
  • The combined revenue impact could exacerbate budget deficits of RE-poor states by almost 8.66%, breaching norms established by the Fiscal Responsibility and Budgetary Management Act, 2003.
  • Tensions between the Union and states regarding power sector policies, transmission waivers, and centralization of electricity markets.
  • The displacement of RE integration costs onto state transmission companies raises concerns.

Relevant Data from Article:

  • In August 2023, 92.5% of grid-connected RE generation came from eight states, primarily in the western and southern regions.
  • The Central Electricity Authority’s projection expects solar and wind to constitute nearly 51% of total generation capacity by 2030.

Way Forward:

  • Revive the philosophy of balanced regional developmentalism, ensuring that RE-poor states have a substantial stake in the energy transition.
  • Preferential lending for RE projects in such states by state lenders.
  • Reinforce institutions like the Inter-State Council to facilitate greater state participation in federal power negotiations.
  • Explicit financial transfers to RE-poor states through the Finance Commission.
  • Implement just transition mechanisms for collaborative industrial policies, ensuring a fair distribution of benefits and challenges.

Conclusion:

Ensuring a green transition in India necessitates addressing the fiscal and regional disparities. The revival of balanced regional developmentalism and inclusive policies is crucial to prevent the energy transition from exacerbating existing inequalities. The focus should be on collaborative federalism, just transition mechanisms, and empowering all states to actively participate in and benefit from the ongoing energy transformation.

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Coal and Mining Sector

New Royalty Rates for Strategic Minerals, Lithium and REEs

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Critical Minerals

Mains level : Read the attached story

minerals

Central Idea

  • The Centre has approved royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs).
  • These changes enable competitive royalty rates for these strategically vital minerals (critical minerals) and open the doors to private sector participation through concession auctions.

What are Critical Minerals?

  • Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.
  • These minerals are used in making mobile phones, computers, batteries, electric vehicles, and green technologies like solar panels and wind turbines.
  • Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
  • Many of these are required to meet the manufacturing needs of green technologies, high-tech equipment, aviation, and national defence.

Implications of the Amendment

  • Alignment with Global Benchmarks: The amendments, involving specifying new royalty rates, bring India’s royalty rates in line with global standards. This is crucial to attract bidders’ in future mineral auctions.
  • Competitive Royalty Rates: The Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957, previously set a 12% royalty rate for unspecified minerals, which was significantly higher than international benchmarks. The revised rates are 3% for lithium and niobium, and 1% for REEs, based on price benchmarks, enhancing the attractiveness of mining in India.
  • Domestic Mining Promotion: Lower royalty rates and commercial exploitation opportunities aim to encourage domestic mining, reduce imports, and stimulate related industries like electric vehicles (EVs) and energy storage solutions.
  • Energy Transition Commitment: Access to critical minerals is integral to India’s commitment to energy transition and achieving net-zero emissions by 2070, aligning with global environmental goals.

Economic significance of the move

(A) Lithium

  • Import Dependence: India currently imports all its required lithium. The government’s push for lithium mining extends beyond Jammu & Kashmir to explore lithium extraction from Rajasthan and Gujarat’s brine pools, as well as Odisha and Chhattisgarh’s mica belts.
  • Economic Offensive: This initiative is part of India’s economic strategy to reduce dependency on China for lithium-ion energy storage products, given China’s dominant position in the market.
  • EV Growth: With EVs on the cusp of disruption, securing a lithium supply chain is strategically vital. The global lithium battery market has seen significant growth in recent years.

(B) Rare Earth Elements

  • Global Supply Challenges: Rare earth elements, primarily sourced from or processed in China, pose challenges in the EV supply chain. Securing supplies can be difficult, and China’s dominance has raised concerns.
  • Usage in Motors: Rare earth elements are crucial in EV motors, particularly permanent magnet motors. Elements like neodymium, terbium, and dysprosium are used in magnets for generating a constant motor flux, enhancing motor efficiency.
  • Environmental Concerns: Mining rare earth elements often involves environmentally damaging open-pit operations, raising environmental and ecological concerns.

(C) Niobium for Industry

  • Corrosion Resistance: Niobium, known for its resistance to corrosion due to a surface oxide layer, is used in various industries. It strengthens alloys, particularly stainless steel, making them ideal for applications in aerospace, construction, and pipelines.
  • Superconducting Properties: Niobium’s superconducting properties find applications in magnets for particle accelerators and MRI scanners.
  • Global Sources: The main source of niobium is the mineral columbite, found in several countries, including Canada, Brazil, Australia, and Nigeria.

Conclusion

  • India’s decision to amend mining laws for strategic minerals is a significant step toward aligning with global standards, promoting domestic mining, and securing supplies for emerging industries like EVs and energy storage.
  • It underscores India’s commitment to sustainable energy transition and reduced import dependency while addressing environmental concerns in mining rare earth elements.

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Coal and Mining Sector

Mines and Minerals Bill 2023

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Mines and Minerals Bill 2023

Mains level : Read the attached story

mining

Central Idea

  • India’s Parliament recently passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023.
  • This bill aims to encourage private sector participation in mineral exploration and mining, thus addressing import dependencies and supply chain vulnerabilities.

Provisions of the Mines and Minerals Bill 2023

  • Expanding Exploration Rights: The Bill allows private sector engagement in the exploration of critical and strategic minerals previously reserved for government entities.
  • Exploration Licenses (EL): The Bill introduces a new type of license, EL, for private exploration activities. Exploration licenses will be granted through competitive bidding and will be issued for specified critical, strategic, and deep-seated minerals.
  • Revenue Model: ELs aim to generate revenue through a share of the premium paid by the miner after successfully auctioning a mined deposit.

Critical Minerals and their Importance

Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.

  • Recent categorization: Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
  • Global Supply Chain Vulnerabilities: The global supply chains for various commodities, including critical minerals like lithium, cobalt, graphite, and rare earth elements, have been shown to be susceptible to shocks, leading to shortages and rising prices.
  • Impact on Various Sectors: Critical minerals are essential for manufacturing, infrastructure development, and clean energy transitions. They are crucial for electric vehicle batteries, semiconductors, wind turbines, and other technological advancements.

Import Dependency and Vulnerabilities

  • Import Dependency: India heavily relies on imports for critical and deep-seated minerals, such as lithium, cobalt, nickel, and rare earth elements.
  • Supply Chain Disruption: The concentration of extraction and processing in a few geographical locations, like China’s dominance in cobalt and rare earth elements, can lead to supply chain vulnerabilities.
  • Projected Demand: A World Bank study anticipates a nearly 500% increase in demand for critical metals like lithium and cobalt by 2050.

Global Initiatives for Supply Chain Resilience

  • Mineral Security Partnership (MSP): Major economies like the U.S., UK, Japan, and the EU have established the MSP to ensure supply chain resilience for critical minerals. India joined this partnership to secure access to these resources.
  • Strategic Lists: Countries are compiling lists of critical minerals based on their economic needs and supply risks, aligning with their industrial strategies. This aims to secure stable access to these resources.

Private Sector Participation

  • Exploration and Mining: Mineral exploration is a multi-stage process, from reconnaissance to detailed exploration, before actual mining. India’s exploration efforts have been led by government agencies with limited private-sector involvement.
  • Resource Potential: India’s geological setting holds potential for mineral resources similar to mining-rich regions. However, only a fraction of its obvious geological potential has been explored.

Challenges and Concerns

  • Incentives and Risks: Private sector involvement in exploration requires substantial investments and carries inherent risks, making it necessary to create favourable conditions and incentives.
  • Revenue Generation Delays: Private explorers’ primary revenue source is a share of auction premiums, contingent on successful mine auctioning, which can take considerable time due to government clearances.
  • Auction Process Challenges: Auctioning ELs before exploration begins raises uncertainty regarding future revenue and value estimation.
  • Supreme Court Ruling: The Supreme Court’s 2012 ruling emphasized the significance of secure utilization of explored resources, which the new policy does not guarantee.

Conclusion

  • The recent legislation signals India’s commitment to attracting private sector investment in mineral exploration.
  • However, challenges such as revenue uncertainty, the auction method’s suitability, and the need for efficient mechanisms to incentivize private participation need careful consideration.
  • Balancing the interests of the private sector, resource availability, and the nation’s strategic goals will be pivotal for the successful implementation of these policy amendments.

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Coal and Mining Sector

Law passed allowing Auction, Mining of Lithium Reserves

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Read the attached story

Central Idea

  • The Union Cabinet approved amendments to the Mines and Minerals (Development and Regulation) Act to allow commercial mining of lithium and five more minerals.
  • This move is aimed at increasing the exploration and mining of these valuable resources from newly discovered mines by opening them to private sector participation.

Mining of Critical Minerals

  • Minerals Removed from Atomic Minerals List: The law removes lithium, beryllium, titanium, niobium, tantalum and zirconium from the list of atomic minerals, which previously restricted their exploration and mining to state-run companies only.
  • Private Sector Participation: With the removal of these minerals from the atomic minerals list, private companies can now participate in the exploration and mining processes.

Why such move?

  • New Lithium Reserves in J&K: Earlier this year, lithium reserves were discovered in the federally administered region of Jammu and Kashmir. The government plans to find more reserves later this year.
  • Expected Increase in Exploration and Mining: The government expects a significant increase in the exploration and mining activities of these minerals across the country due to private sector involvement.

Significance of Private Sector Involvement

  • Force Multiplier: The involvement of private companies is seen as a “force multiplier” as it is expected to boost the production of these critical minerals, meeting the growing demands of the country.
  • Increased Production Capacity: The participation of private players is likely to lead to increased production capacity, enabling India to meet the rising demand for electric vehicle batteries and other industrial applications.

Need for Vigorous Exploration and Production

  • Meeting Growing Demands: India’s increasing focus on electric vehicles and other technological advancements necessitates a robust supply of critical minerals. Vigorous exploration and production are crucial to fulfill the country’s requirements.

Conclusion

  • The passage of the law by India’s Parliament marks a significant step towards increasing the exploration and mining of critical minerals, including lithium, for electric vehicle batteries and other industrial applications.
  • By allowing private sector participation, the government aims to bolster the production capacity and meet the growing demands of the country, ensuring a sustainable and technologically advanced future.

Also read:

Discovery of Lithium Deposits in J&K

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Coal and Mining Sector

Deep Sea Mining permits may be coming soon

Note4Students

From UPSC perspective, the following things are important :

Prelims level : International Seabed Authority (ISA) , UNCLOS

Mains level : Deep Sea Mining

deep sea mining

Central Idea

  • The International Seabed Authority (ISA) is preparing to resume negotiations on deep sea mining, a process that involves extracting mineral deposits and metals from the ocean’s seabed.
  • These negotiations have raised concerns over potential impacts on marine ecosystems and habitats, highlighting the need for regulations and environmental safeguards.

About International Seabed Authority

  • ISA is a Jamaica-based organization established under the United Nations Convention on the Law of the Sea.
  • The authority holds jurisdiction over the ocean floors outside of the Exclusive Economic Zones of its 167 member states.

What is Deep Sea Mining?

  • Deep sea mining is a process that involves extracting mineral deposits and metals from the seabed.
  • These deposits are rich in materials such as nickel, rare earths, and cobalt, which are crucial for renewable energy technologies and everyday devices like cellphones and computers.
  • Types of such Mining include-
  1. Polymetallic Nodule Collection: Harvesting deposit-rich nodules from the ocean floor.
  2. Seafloor Sulphide Mining: Extracting minerals from massive seafloor sulphide deposits.
  3. Cobalt Crust Stripping: Removing cobalt crusts from rocks on the seabed.

Evolution of Mining Technology

  • Vacuum Extraction: Companies exploring the use of massive pumps to vacuum materials from the seafloor.
  • AI-Based Robotics: Developing artificial intelligence-based technology to teach deep-sea robots how to collect nodules.
  • Advanced Machinery: Utilizing advanced machines to mine materials from underwater mountains and volcanoes.

Strategic Importance

  • Depletion of Onshore Reserves: Deep sea mining offers access to strategically important resources as onshore reserves diminish.
  • Growing Demand: Crucial minerals are in high demand due to the increasing reliance on renewable energy and technological advancements.
  • Regulating Deep Sea Mining: Balancing Interests and Environmental Concerns

Regulating Deep Sea Mining: Balancing Interests and Environmental Concerns

  • The governance of deep sea mining is currently guided by the United Nations Convention on the Law of the Sea (UNCLOS).
  • This framework aims to protect marine environments, facilitate economic benefits sharing, and support scientific research.

UNCLOS and Exploration Licenses

  • Maritime Territory Management: Countries govern their exclusive economic zones, while the high seas fall under UNCLOS jurisdiction.
  • “Common Heritage of Mankind”: The seabed and its mineral resources are considered global assets, requiring responsible management.
  • Exploration Partnerships: Mining companies collaborate with countries to secure exploration licenses, with focus in the Clarion-Clipperton Fracture Zone.

Pressure to Establish Regulations

  • Nauru’s Application: In 2021, Nauru and Nauru Ocean Resources Inc. applied to exploit minerals, triggering a clause that requires the International Seabed Authority (ISA) to establish regulations by July 2023.
  • Environmental Concerns: Urgency to address potential ecosystem impacts and safeguard marine habitats fuels the need for comprehensive regulations.

Environmental Concerns

  • Limited Knowledge: Only a small portion of the deep seabed has been explored, raising concerns about the potential damage to poorly understood marine ecosystems.
  • Impacts on marine ecosystem: Noise, vibration, and light pollution, as well as leaks and spills of chemicals, pose risks to marine life.
  • Sediment Plumes: Pumping slurry sediment back into the sea after extracting valuable materials can harm filter-feeding species and disrupt ecosystems.

Way Forward

  • Calls for Moratorium: More than a dozen countries, including France, Germany, and Pacific Island nations, advocate for a ban or moratorium until environmental safeguards are in place.
  • Research and Responsible Mining: Comprehensive research on deep-sea ecosystems is crucial to understand the potential implications of mining.
  • Sustainable Practices: Encouraging responsible mining practices, including minimizing pollution, reducing ecosystem disturbance, and implementing proper waste management.

Conclusion

  • Deep sea mining holds the potential to unlock valuable minerals critical for renewable energy and technological advancements.
  • However, the process raises significant environmental concerns and requires robust regulations to balance resource extraction with the protection of fragile marine ecosystems.
  • Continued research, responsible practices, and international cooperation are essential to ensure sustainable and environmentally conscious deep-sea mining operations.

 

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Coal and Mining Sector

Centre identifies 30 Critical Minerals: Why, how, and importance of the exercise

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Critical Minerals

Mains level : Not Much

critical

Central Idea

  • The Ministry of Mines has strategically identified 30 critical minerals, including lithium, cobalt, nickel, and graphite, crucial for the country’s economic development and national security.
  • The move aims to address supply chain vulnerabilities and ensure availability of these minerals for key industries such as clean technologies, information technology, advanced manufacturing, and defense.

What are Critical Minerals?

  • Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.
  • These minerals are used in making mobile phones, computers, batteries, electric vehicles, and green technologies like solar panels and wind turbines.
  • Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
  • Many of these are required to meet the manufacturing needs of green technologies, high-tech equipment, aviation, and national defence.

Three-Stage Assessment Process

  1. Analysis of Global Strategies: The expert team studied the strategies of major economies and identified 69 elements/minerals considered critical by these countries.
  2. Inter-Ministerial Consultation: Different ministries were consulted to identify minerals critical to their respective sectors.
  3. Empirical Formula for Criticality Evaluation: An empirical formula was derived considering economic importance and supply risk, similar to the methodology used by the European Union.

List of Critical Minerals for India

  • Identified Minerals: The assessment resulted in a list of 30 critical minerals, including antimony, beryllium, cobalt, copper, lithium, nickel, rare earth elements, silicon, tin, titanium, tungsten, and others.
  • Fertilizer Minerals: Two minerals critical for fertilizer production, phosphorous and potash, are also included.

Why are these resources critical?

  • Clean energy transition: Critical minerals are essential to the ecosystem that fuels the world’s transition towards clean energy and digital economy.
  • Strategic nature: Any supply shock can severely imperil the economy and strategic autonomy of a country that is over-dependent on others to procure critical minerals.
  • Rare availability: Supply risks exist due to rare availability, growing demand, and complex processing value chain.

What is the China ‘threat’?

  • Dominant role: China is the world’s largest producer of 16 critical minerals, including cobalt and rare earth elements.
  • Monopoly in processing: The country has a strong presence across the board in processing operations, with a share of refining around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements.
  • Control over offshore mines: China also controls cobalt mines in the Democratic Republic of Congo, from where 70% of this mineral is sourced.
  • Supply chain dominance: The country’s dominance in critical minerals production and processing raises concerns of a supply disruption in case of a geopolitical conflict.

Challenges in ensuring resilient critical minerals supply

  • Limited availability of critical minerals: The rare availability of critical minerals poses a challenge in meeting the growing demand for these minerals.
  • Geopolitical risks: Complex supply chains can be disrupted by hostile regimes or politically unstable regions, leading to supply chain disruptions.
  • Dominance of certain countries: A few countries, such as China, are the dominant producers of critical minerals, leading to concerns over supply disruptions in case of a geopolitical conflict.
  • Increasing demand for critical minerals: With the shift towards renewable energy technologies and electric vehicles, the demand for critical minerals such as copper, lithium, and rare earth elements is increasing rapidly.
  • Reliance on foreign partners: Countries with limited reserves and higher requirements for critical minerals may have to rely on foreign partners to meet their domestic needs, leading to supply chain vulnerabilities.
  • Environmental and social concerns: The extraction and processing of critical minerals can have negative environmental and social impacts, leading to challenges in meeting sustainability goals.

What are countries around the world doing about it?

Several countries are taking measures to ensure a consistent supply of critical minerals to their domestic markets.

  • US: It has ordered a review of vulnerabilities in its critical minerals supply chains and shifted its focus on expanding domestic mining, production, processing, and recycling of critical minerals and materials.
  • Australia: Its Critical Minerals Facilitation Office (CMFO) and KABIL had recently signed an MoU aimed at ensuring reliable supply of critical minerals to India.
  • UK: It has unveiled its new Critical Minerals Intelligence Centre to study the future demand for and supply of these minerals, and its critical mineral strategy will be unveiled later this year.

India’s Domestic and Global Outreach

  • Domestic Exploration Efforts: The Geological Survey of India conducted advanced mineral exploration in Jammu & Kashmir, identifying inferred lithium resources. Further exploration is planned in different parts of the country.
  • Joint Venture Company: Khanij Bidesh India Ltd. (KABIL) has been established to acquire overseas mineral assets, including lithium, cobalt, and rare earth elements, ensuring a reliable supply.
  • Mineral Security Partnership (MSP): India’s inclusion in the MSP, a collaboration of 14 countries, highlights the country’s focus on securing critical mineral supply chains globally and reducing dependency on China.

What should India do to ensure resilient supply?

  • Developing domestic sources of critical minerals: This can be achieved by promoting exploration and mining activities, both by public and private sector entities.
  • Encouraging responsible mining practices: The Indian government should encourage responsible mining practices that minimize the negative environmental and social impacts of mining activities.
  • Need for a Specialized Agency: The expert team proposed the establishment of a National Institute or Center of Excellence dedicated to critical minerals, similar to Australia’s CSIRO.
  • Promoting transparency in the supply chain: India should promote transparency in the critical minerals supply chain by ensuring the traceability of minerals from the point of extraction to the point of end-use.
  • Investing in research and development: India should invest in research and development to develop new technologies and processes for efficient extraction, processing, and recycling of critical minerals.
  • Developing a national critical minerals strategy: India should develop a national critical minerals strategy that identifies priority minerals, promotes domestic exploration and mining, and promotes sustainable and responsible mining practices.

Conclusion

  • India has a significant mineral geological potential, many minerals are not readily available domestically.
  • Hence, India needs to develop a national strategy to ensure resilient critical minerals supply chains, which focuses on minerals found to be critical in this study.

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Coal and Mining Sector

Rethinking Coal-Based Power Stations: A Pragmatic Approach

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Central Electricity Authority (CEA)

Mains level : Government's pragmatic approach on new coal-based power stations and way ahead

coal

Central Idea

  • The government’s contemplation of a ban on new coal-based power stations, while allowing those under construction to continue, has generated surprise and curiosity. The government’s acknowledgement of the need for an additional 16,000 MW of coal-based capacity to meet the power demand in 2029-30, alongside the existing 27,000 MW under construction, seems contradictory.

Central Electricity Authority (CEA) report

  • The Central Electricity Authority (CEA) report is a comprehensive document prepared by the Central Electricity Authority of India.
  • The CEA is a statutory organization responsible for overseeing and coordinating the development of the electricity sector in the country.
  • The CEA’s report, titled Optimal Generation Capacity Mix, presents two versions released in January 2020 and April 2023, respectively.
  • The second report, based on the 20th Electric Power Survey (EPS), adopts a more conservative approach to demand projections for 2029-30 compared to the first report.

Pattern of electricity demand In India

  • Diurnal Variation: The demand for electricity in India typically exhibits a diurnal pattern, with peaks and troughs occurring throughout the day. The morning peak is generally observed during the early hours of the day when residential and commercial activities commence. The evening peak, traditionally occurring around 7 pm, is typically higher due to increased industrial demand and domestic energy usage.
  • Seasonal Variation: During the summer months, particularly in regions with high temperatures, the demand for electricity tends to increase significantly due to the widespread use of air conditioning and cooling systems. This spike in demand places additional stress on the power grid and necessitates the availability of sufficient generation capacity to meet the heightened energy requirements.
  • Day of the Week Variation: Weekdays generally witness higher electricity demand compared to weekends. This difference can be attributed to increased industrial and commercial activities on weekdays, while weekends often involve reduced energy consumption in non-essential sectors.
  • Industrial and Commercial Demand: As economic activities and manufacturing processes ramp up during working hours, these sectors contribute significantly to the overall demand for electricity. Demand patterns in these sectors are influenced by factors such as production schedules, working shifts, and operational requirements.
  • Rural vs. Urban Demand: Urban centers, with higher population densities and greater industrial and commercial activities, tend to exhibit higher electricity demand compared to rural areas. However, rural electrification efforts and the increasing penetration of electricity in rural regions have led to a rise in demand from these areas as well.

Factors attributed to the decrease in the required capacity for coal-based stations

  • Conservative Demand Projections: The second version of the CEA report projections indicate a slightly lower peak demand and energy demand for 2029-30 compared to the earlier estimates. The government may consider these more realistic projections and adjust the required capacity accordingly.
  • Historical Overestimation: The CEA’s power demand projections have been known to be somewhat exaggerated in the past. This overestimation has led to higher capacity requirements being initially projected.
  • Changing Load Curve Dynamics: The load curve, representing the pattern of electricity demand throughout the day, has been evolving in India. Recent trends indicate a shift in the evening peak to around 4 pm. This shift aligns well with the availability of solar power during daylight hours, reducing the need for coal-based capacity.
  • Retirement of Older Units: A significant change in policy relating to the retirement of coal-based units after 25 years of operation has been considered. The revised CEA report mentions that a lower capacity of coal-based stations would be retired by 2030 compared to the earlier estimate.
  • Well-Maintained Old Plants: The government may view the continuation of well-maintained coal-based plants beyond the 25-year mark as a viable option. If generating units are properly maintained, the station heat rate remains unaffected by age. Continuing operations of such plants offers advantages such as pre-existing transmission links and maintained coal linkages, which can contribute to a more efficient use of resources.

Way ahead: Balancing Energy Sources

  • Promoting Renewable Energy: A significant focus should be placed on accelerating the development and deployment of renewable energy sources such as solar, wind, hydro, and biomass. This entails setting ambitious targets for renewable energy capacity addition and providing supportive policies and incentives to attract investments in these sectors.
  • Enhancing Grid Integration: Robust grid integration infrastructure is essential for effectively integrating and managing the variability of renewable energy sources. Developing smart grids, advanced energy storage systems, and grid flexibility mechanisms can facilitate the integration of renewable energy into the grid, ensuring smooth and stable power supply.
  • Energy Storage Technologies: Expanding the use of energy storage technologies, such as advanced batteries, pumped hydro storage, and emerging technologies like hydrogen storage, can help address the intermittent nature of renewable energy sources.
  • Demand-Side Management: Promoting energy-efficient appliances, implementing time-of-use pricing, and raising awareness about energy conservation can incentivize consumers to shift their electricity usage to non-peak hours, thus reducing the strain on the grid.
  • Distributed Generation: Encouraging distributed generation through rooftop solar panels, community-based renewable energy projects, and microgrids can help diversify the energy mix and reduce transmission losses. Distributed generation enables localized generation and consumption, enhancing grid resilience and reducing dependence on centralized power plants.
  • Flexible Power Purchase Agreements (PPAs): Implementing flexible power purchase agreements that allow for the integration of variable renewable energy sources can attract investments in clean energy projects. These agreements should provide a fair and stable pricing mechanism for renewable energy developers, ensuring long-term viability and encouraging their participation in the energy transition.

Conclusion

  • The government’s contemplation of a ban on new coal-based power stations, while allowing ongoing construction projects, reflects a pragmatic approach to energy planning. By reassessing the need for additional coal-based capacity, the government demonstrates a commitment to optimizing energy resources. However, it is essential to strike a balance and prioritize investments in solar and wind power to achieve a sustainable and reliable energy future for India.

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Also read:

A call to ban use of fossil fuels

 

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Coal and Mining Sector

India coal imports surge to 162 MT in FY23

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Types of coal

Mains level : India's coal import

Central Idea

  • India’s coal imports increased by 30% to 162.46 million tonnes in the 2022-23 financial year compared to 124.99 MT in the previous year, according to a report.
  • The report was released by mjunction, a B2B e-commerce platform that is a joint venture between Steel Authority of India (SAIL) and Tata Steel.

India’s coal production and consumption

  • India is among the top five coal-producing countries in the world.
  • Despite being a major producer, India also imports coal to meet some of its demand.
  • India is a significant consumer of coal, which is used for power generation and industrial processes.

Import of Coking Coal

  • Coking Coal: The import of coking coal rose by 5.44% to 54.46 MT over 51.65 MT in FY22, as per the report by mjunction. Coking coal is a key raw material used in steel making.
  • Non-coking coal: In March 2023, non-coking coal import stood at 13.88 MT against 12.61 MT in the same month last year.
  • Other imports: The total imports of various types of coal like anthracite, pulverised coal injection (PCI coal), met coke and pet coke, along with coking and non-coking coal, were at 249.06 MT in FY23, up from 200.71 MT in FY22, a rise of over 24%.

Key inferences from this

  • The high demand for steam coal in India and the weakening of seaborne prices led to increased volumes during March.
  • This trend might continue in the coming months due to above-normal average temperatures expected during the summer.

Why does India import coal?

India imports coal primarily due to the following reasons:

  • Lack of good quality coal: India’s domestic coal reserves have limitations in terms of quality, and the country does not have sufficient reserves of good quality coking coal, which is used in steelmaking and allied industries. Therefore, India imports coal to compensate for the lack of good quality coal.
  • Growing energy demand: India’s energy demand is continuously increasing due to population growth and rapid urbanization. Coal is a significant contributor to India’s energy mix, and the country needs to import coal to meet its growing energy demand.
  • Infrastructure constraints: India’s domestic coal production is limited due to various factors such as geological constraints, land acquisition issues, and environmental regulations. Moreover, India’s domestic coal transport infrastructure is insufficient, and many power plants are located far away from the coal mines, making imports a more viable option.
  • Better quality and cost-effectiveness: Importing coal from other countries can sometimes be more cost-effective than producing it domestically, especially when the quality of imported coal is better than domestic coal.

 

Key terminologies

Coking coal: a type of coal that is used in the production of steel.

Anthracite: a hard and compact type of coal that has a high carbon content.

Pulverised coal injection (PCI coal): a method of injecting pulverized coal into a blast furnace to improve the efficiency of the iron-making process.

Met coke: a type of coke made by heating coal in the absence of air, which is used as a fuel in blast furnaces to produce iron.

Pet coke: a carbon-rich solid material that is derived from oil refining. It is used as a fuel in industrial processes.

 

Try this PYQ from CSP 2012:

Despite having large reserves of coal, why does India import millions of tonnes of coal?

  1. It is the policy of India to save its own coal reserves for the future, and import them from other countries for the present use.
  2. Most of the power plants in India are coal-based and they are not able to get sufficient supplies of coal from within the country.
  3. Steel companies need a large quantity of coking coal which has to be imported.

Which of the statements given above is/are correct?       

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Post your answers here
4
Please leave a feedback on thisx

 

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Coal and Mining Sector

Critical Minerals and India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Critical Minerals

Mains level : Read the attached story

critical

Central idea

  • A recent working paper from Centre for Social and Economic Progress (CSEP) extends the earlier minerals assessment for 23 minerals by assessing the criticality levels of 43 select minerals for India.
  • This is based on their economic importance (demand-side factors) and supply risks (supply-side factors) which are determined through the evaluation of specific indicators.

What are Critical Minerals?

  • Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.
  • These minerals are used in making mobile phones, computers, batteries, electric vehicles, and green technologies like solar panels and wind turbines.
  • Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
  • Many of these are required to meet the manufacturing needs of green technologies, high-tech equipment, aviation, and national defence.

Why are these resources critical?

  • Clean energy transition: Critical minerals are essential to the ecosystem that fuels the world’s transition towards clean energy and digital economy.
  • Strategic nature: Any supply shock can severely imperil the economy and strategic autonomy of a country that is over-dependent on others to procure critical minerals.
  • Rare availability: Supply risks exist due to rare availability, growing demand, and complex processing value chain.

What is the China ‘threat’?

  • Dominant role: China is the world’s largest producer of 16 critical minerals, including cobalt and rare earth elements.
  • Monopoly in processing: The country has a strong presence across the board in processing operations, with a share of refining around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements.
  • Control over offshore mines: China also controls cobalt mines in the Democratic Republic of Congo, from where 70% of this mineral is sourced.
  • Supply chain dominance: The country’s dominance in critical minerals production and processing raises concerns of a supply disruption in case of a geopolitical conflict.

Challenges in ensuring resilient critical minerals supply

  • Limited availability of critical minerals: The rare availability of critical minerals poses a challenge in meeting the growing demand for these minerals.
  • Geopolitical risks: Complex supply chains can be disrupted by hostile regimes or politically unstable regions, leading to supply chain disruptions.
  • Dominance of certain countries: A few countries, such as China, are the dominant producers of critical minerals, leading to concerns over supply disruptions in case of a geopolitical conflict.
  • Increasing demand for critical minerals: With the shift towards renewable energy technologies and electric vehicles, the demand for critical minerals such as copper, lithium, and rare earth elements is increasing rapidly.
  • Reliance on foreign partners: Countries with limited reserves and higher requirements for critical minerals may have to rely on foreign partners to meet their domestic needs, leading to supply chain vulnerabilities.
  • Environmental and social concerns: The extraction and processing of critical minerals can have negative environmental and social impacts, leading to challenges in meeting sustainability goals.

What are countries around the world doing about it?

Several countries are taking measures to ensure a consistent supply of critical minerals to their domestic markets.

  • India: It has set up Khanij Bidesh India Ltd. (KABIL), a joint venture of three public sector companies, to ensure a consistent supply of critical and strategic minerals to the Indian domestic market.
  • US: It has ordered a review of vulnerabilities in its critical minerals supply chains and shifted its focus on expanding domestic mining, production, processing, and recycling of critical minerals and materials.
  • Australia: Its Critical Minerals Facilitation Office (CMFO) and KABIL had recently signed an MoU aimed at ensuring reliable supply of critical minerals to India.
  • UK: It has unveiled its new Critical Minerals Intelligence Centre to study the future demand for and supply of these minerals, and its critical mineral strategy will be unveiled later this year.

What should India do to ensure resilient supply?

  • Developing domestic sources of critical minerals: This can be achieved by promoting exploration and mining activities, both by public and private sector entities.
  • Encouraging responsible mining practices: The Indian government should encourage responsible mining practices that minimize negative environmental and social impacts of mining activities.
  • Developing recycling capabilities: This can be achieved by promoting research and development in recycling technologies and incentivizing the adoption of recycling practices.
  • Promoting transparency in the supply chain: India should promote transparency in the critical minerals supply chain by ensuring the traceability of minerals from the point of extraction to the point of end-use.
  • Investing in research and development: India should invest in research and development to develop new technologies and processes for efficient extraction, processing, and recycling of critical minerals.
  • Developing a national critical minerals strategy: India should develop a national critical minerals strategy that identifies priority minerals, promotes domestic exploration and mining, and promotes sustainable and responsible mining practices.

Conclusion

  • India has a significant mineral geological potential, many minerals are not readily available domestically.
  • Hence, India needs to develop a national strategy to ensure resilient critical minerals supply chains, which focuses on minerals found to be critical in this study.

 

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Coal and Mining Sector

CSIR scientists identify Rare-Earth deposits in AP

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Rare earth elements

Mains level : Not Much

rare

Scientists at the National Geophysical Research Institute (NGRI) in Hyderabad have discovered the presence of rare-earth elements (REEs) in Anantapur district, Andhra Pradesh.

What are Rare-Earth Elements?

  • Rare-earth elements (REEs) are a group of 17 elements, including lanthanum, cerium, praseodymium, neodymium, yttrium, hafnium, tantalum, niobium, zirconium, and scandium.
  • These elements are widely used in modern electronics, such as smartphones, computers, jet aircraft, and other products, due to their unique magnetic, optical, and catalytic properties.
  • These elements are crucial components in various electronic devices and have industrial applications in sectors like imaging, aerospace, and defense.

SHORE Project and discovery of REEs

  • The discovery was part of a study funded by the Council of Scientific and Industrial Research (CSIR) under a project called ‘Shallow subsurface imaging Of India for Resource Exploration’ (SHORE).
  • NGRI scientists found enriched quantities of REEs in “whole rock analyses”.
  • Drilling for at least a kilometer deep will help ascertain the consistency of the elements’ presence underground.

Significance of the discovery

  • The discovery of REEs in Anantapur district is significant as these elements are in high demand worldwide, and their supply is limited.
  • REEs have become a subject of geopolitical concern due to their increasing demand and limited supply.
  • China is currently the world’s largest producer and exporter of rare-earth elements (REEs), accounting for more than 80% of global production.
  • The country has significant reserves of REEs and has invested heavily in mining and processing infrastructure.

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Coal and Mining Sector

Big Lithium find: Risks and Rewards

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Lithium

Mains level : Geostrategic considerations of the issue

lithium

Central idea: The discovery of 5.9 million tonnes of lithium in Jammu & Kashmir is a major boost for India’s electrification plans but mining is a high-risk, high-reward game in the ecologically sensitive Himalayas.

India’s lithium treasure

  • Huge deposits: Authorities have found 5.9 million tonnes of lithium reserves in Reasi district of Jammu & Kashmir.
  • One of the largest mines: This may be the seventh largest deposit of the rare element, accounting for roughly 5.7% of all the reserves in the world.
  • High grade quality: They are also said to be of a higher grade—550 parts per million (ppm) against the average 220 ppm—making it highly lucrative, given how lithium prices have soared in the last few years.

Game-changing prospects for India

  • White gold: Due to its ability to pack energy, it has utility across a range of sectors and has gained the moniker ‘white gold’.
  • Soaring prices: According to the International Energy Agency, lithium prices went up more than seven-fold between the start of 2021 and May 2022.
  • Battery economy: It is now primarily used to build the batteries that power modern appliances.
  • EV push: They also power electric vehicles, a segment that will corner most of the global lithium production in future.
  • Import cut: Currently, India does not have its own lithium resources and like crude oil, it is dependent on imports. In fiscal 2022, India imported lithium and lithium ion worth almost ₹14,000 crore.

Will batteries be made of lithium from India now?

  • There is still some way to go before miners can extract lithium for industrial use.
  • The discovery is ‘inferred’ or preliminary, the lowest of the three levels of estimations of a mineral deposit and the second of the four stages of exploration, as per the UN Framework Classification of mineral resources.
  • There is much analysis to be done before its true value is confirmed.

Pitfalls of lithium mining

  • Pollution in the valley: Open-pit-mining, refining, and waste disposal from these processes substantially degrades the environment, including depletes and contaminates waterways and groundwater, diminishes biodiversity, and releases considerable air pollution.
  • Water intensity: Extracting lithium from its ore is highly water-intensive, taking about 2.2 million litres of water for one tonne of lithium.
  • Seismicity threats: The Himalayas are a highly fragile and eco-sensitive region and as the recent Joshimath subsidence shows, it is vulnerable to long-term adverse consequences of unplanned development works.
  • Displacement issues: Mining in the region could displace local communities and have significant social impacts. The region is home to a number of indigenous communities who could be negatively impacted by mining in the region.
  • Undue activism over Kashmir: Mining in the region can attract opposition from environmentalists and so-called separatists disguised as national leaders.

Geostrategic considerations

  • Sensitive location: The new lithium discovery in J&K has significant geostrategic implications due to the geopolitical sensitivity of its location.
  • Neighborhood hostility: The Union territory of J&K has a history of cross-border tensions, domestic insurgency, and terrorism.
  • Resentment of local population: Lack of meaningful engagement with the local populace in the Li extraction project could introduce new frontiers of socio-environmental conflict.

China factor

  • China currently dominates the global lithium-ion battery manufacturing industry.
  • Dependence on China for Li and other crucial metals and their derivatives is a source of energy security risks.
  • Major economies such as the E.U., the U.S., Canada, and India are seeking alternative supplies to challenge China’s geopolitical dominance.

Indian initiatives in this regard

  • Undeterred trade with China: India’s security considerations are more immediate due to the growing geopolitical rivalry with China and longstanding territorial disputes.
  • Rare Earths Mission: The Indian government and industry are pushing for a ‘Rare Earths Mission’ to reduce dependence on China and exploit the country’s critical mineral reserves.

Conclusion

  • In effect, the proliferation of EVs could mean India becoming dependent on China, just like it is reliant on the Middle East for crude oil today.
  • J&K’s reserves, however, provide a major opening for India to be self-reliant.

 

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Coal and Mining Sector

Discovery of Lithium Deposits in J&K

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Lithium

Mains level : Read the attached story

lithium

The Geological Survey of India found “inferred resources” of 5.9 million tonnes of lithium in the Salal-Haimana area of Reasi district in Jammu and Kashmir.

What is Lithium?

  • Lithium is a chemical element with the symbol Li and atomic number 3.
  • It is a soft, silvery-white alkali metal and is the lightest metal on the periodic table.
  • It is used in a variety of applications, including batteries, lubricants, pharmaceuticals, and nuclear weapons.

What are Inferred Resources?

  • According to the mines and minerals act, the exploration for any mineral deposit involves four stages: reconnaissance survey (G4), preliminary exploration (G3), general exploration (G2) and detailed exploration (G1).
  • Resources identified after G4 are called ‘reconnaissance mineral resource”, those identified after G3 are “inferred mineral resource”, G2 leads to “indicated mineral resource” and G4 precedes “measured mineral resource.”

Applications of Lithium

  • Lithium-ion batteries: Lithium-ion batteries are widely used in consumer electronics such as laptops, cellphones, and portable music players due to their high energy density and low self-discharge rate.
  • Pharmaceuticals: Lithium is used in the treatment of bipolar disorder and other mental health disorders. It can be used to treat symptoms such as depression, anxiety, and aggression.
  • Heat transfer fluids: Lithium is used as a heat transfer fluid in nuclear power plants, as it can absorb and store large amounts of heat.
  • Air conditioning: Lithium-based compounds are used in air conditioning systems to absorb and store heat, which helps to cool air.
  • Alloy production: Lithium is used to produce lightweight alloys for aircraft and spacecraft, as well as components for other vehicles.
  • Grease lubricants: Lithium-based grease lubricants are used in automotive and industrial applications due to their high temperature and pressure tolerance.

Significance of this discovery

  • Clean energy goals: This has raised hopes of India possibly developing its own source of a metal key to its clean energy goals.
  • Import cuts: It would reduce the need for imports. The government was taking several measures to secure minerals, including lithium, from Australia and Argentina.
  • Enhance battery production: The find is a major boost to the manufacture of rechargeable batteries for smartphones, laptops and electric cars.

Back2Basics: Mines and Minerals (Development and Regulation) Act, 1957

  • It is an Act of the Parliament enacted to regulate the mining sector in India.
  • It regulates all activities related to the prospecting for, extraction and disposal of minerals in India.
  • The Act was amended in 2015 to incorporate the changes brought about by the Mines and Minerals (Development and Regulation) Amendment Act, 2015.
  • The amendment Act has been enacted to ensure that the mining sector is developed in a sustainable and efficient manner, taking into account the interests of stakeholders including the local communities.
  • The Act also provides for the sharing of revenues between the Union and the States.

Types of Minerals Covered

  • Metallic Minerals: Iron ore, manganese ore, chrome ore, bauxite, copper ore, gold ore, lead ore, zinc ore, etc.
  • Non-Metallic Minerals: Mica, limestone, dolomite, gypsum, phosphorite, graphite, quartz, sandstone, etc.
  • Atomic Minerals: Uranium, thorium, and other radioactive minerals.
  • Fossil Fuels: Oil, natural gas, coal, etc.
  • Minor Minerals: Building stones, gravel, ordinary clay, ordinary sand, etc.

 

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Coal and Mining Sector

What is National Coal Index (NCI)?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Coal Index

Mains level : NA

The Ministry of Coal has launched the sixth round of commercial coal mines’ auction for 141 coal mines.

What is the news?

  • As per the provisions of the tender document, the Performance Bank Guarantee (PBG) to be submitted for each successfully auctioned coal mine is to be revised annually based on the National Coal Index (NCI).

What is National Coal Index (NCI)?

  • Ministry of Coal has started commercial auction of coal mines on revenue share basis.
  • In order to arrive at the revenue share based on market prices of coal, one National Coal Index (NCI) is conceptualized.
  • The NCI is a price index which reflects the change of price level of coal on a particular month relative to the fixed base year.
  • The base year for the NCI is FY 2017-18.
  • NCI is a price index combining the prices of coal from all the sales channels- Notified Prices, Auction Prices and Import Prices.
  • It is released every month.

Components of NCI

  • The concept and design of the Index as well as the Representative Prices have been developed by the Indian Statistical Institute, Kolkata.
  • NCI is composed of a set of five sub-indices: three for Non-Coking Coal and two for Coking Coal.
  • The three sub-indices for Non-Coking Coal are combined to arrive at the Index for Non-Coking Coal and the two sub-indices for Coking Coal are combined to arrive at the Index for Coking Coal.
  • Thus, indices are separate for Non-coking and Coking Coal.
  • As per the grade of coal pertaining to a mine, the appropriate sub-index is used to arrive at the revenue share.

Implementation of NCI

  • The amount of revenue share per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of a defined formula.
  • The Index is meant to encompass all transactions of raw coal in the Indian market.
  • This includes coking and non-coking of various grades transacted in the regulated (power and fertilizer) and non-regulated sectors.
  • Washed coal and coal products are not included.

 

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Coal and Mining Sector

FMC Projects to push coal out of mines quicker

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FMC Projects for Coal

Mains level : Read the attached story

coal

The coal ministry has announced several first-mile connectivity (FMC) projects, in line with the government’s coal logistics policy.

What is first-mile connectivity in coal?

  • FMC refers to transportation of coal from pitheads to dispatch points from where it would be transported to consumers.
  • Under FMC, coal producers adopt alternate transport methods—such as mechanized conveyor systems and computerized loading on to railway rakes—to replace road transport.
  • FMC projects reduce manual intervention and loading time.
  • It also quickens the evacuation process or the movement of coal from pitheads.

What does the coal logistics policy say?

According to the draft, the policy is aimed at developing a “technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem in the country for accelerated and inclusive growth”.

  • Optimal infrastructure: In other words, it aims to create an optimal infrastructure for coal transportation at the origin and destination points for quicker transport.
  • Integrated evacuation: It also seeks to develop an eco-friendly, multi-modal integrated national coal evacuation infrastructure.
  • Dedicated corridors: The other goal is to establish smart coal logistics corridors to ensure complete oversight from the mine to the consumption point.

Why is the government emphasizing on FMC?

There are several missing links in the coal supply chain, which would now be plugged through planned projects.

  • FMC is part of the government’s plans to achieve energy security and end import dependence.
  • FMC would also lower carbon emissions since it reduces dependence on road transport for evacuation of coal.

Economic significance of FMCs

  • Artificial shortages: Last year, India witnessed a power crisis due to a shortage of coal.
  • Low availability of railway rakes: Along with the scarcity of domestic coal, the low availability of railway rakes added to the crisis. Post that, the government made efforts to boost the availability of rakes.
  • Logistics boost: Noting that power demand is set to increase with growing economic activity, a robust logistics ecosystem for coal has become imperative.
  • Last-mile energy connectivity: In addition to first mile connectivity, India is keen to strengthen the last mile as well.

Progress till date

  • Under the draft policy, setting up FMC would be made part of the mine allocation process. So, more such projects are set to come up.
  • The coal ministry has taken up additional 19 FMC projects for Coal India and Singareni Collieries with a capacity of 330 million tonne per annum (MTPA).
  • These projects will be implemented by FY27.

 

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Coal and Mining Sector

What is SHAKTI Policy?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Shakti Policy

Mains level : Not Much

Ministry of Power has launched a scheme for procurement of aggregate power of 4500 MW for 5 years under SHAKTI Policy to help states that are facing power shortages and help generation plants to increase their capacities.

SHAKTI Policy

  • SHAKTI is an acronym for Scheme for Harnessing and Allocating Koyala Transparently in India.
  • It was launched in 2018 to provide coal to stressed power units which lack coal supply.
  • It seeks to provide coal linkages to power plants which lack fuel supply agreements (FSAs) through coal auctions.

Need for such policy

  • SHAKTI is a policy designated by the government for the allocation of coal among thermal power plants in a transparent and objective manner.
  • It aims to transfer the benefits of linkage coal to the end consumers.
  • The scheme is supposed to be beneficial not just for the infrastructure sector, but also for the public sector banks which have huge loans unpaid at the end of the power companies.
  • The companies, which did not have coal linkages before the introduction of the Shakti Scheme, would benefit when they would get domestic fuel supplies through auction at competitive rates.
  • The scheme also aims to reduce the dependence on imported coal and promote domestic industries.
  • With this policy, the government also aims to reduce dependence on imported coal.

Coal linkage scenario in India

  • Coal linkage to the power sector is governed by provisions of the New Coal Distribution Policy (NCDP), 2007.
  • Under the NCDP, a system of issuance of Letter of Assurance (LoA) was introduced.
  • The requests for Linkage/LoA are forwarded to the Ministry of Power for its recommendations.
  • The coal availability scenario has, now, emerged from scarcity to adequacy.

 

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Coal and Mining Sector

Industry urges govt. to establish ‘India Rare Earths Mission’

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Rare earth elements

Mains level : Not Much

To counter India’s reliance on China for imports of critical rare earth minerals, industry has urged the government to establish ‘India Rare Earths Mission’.

What are Rare Earth Metals?

  • The rare earth elements (REE) are a set of seventeen metallic elements. These include the fifteen lanthanides on the periodic table plus scandium and yttrium.
  • Rare earth elements are an essential part of many high-tech devices.
  • They have a wide range of applications, especially high-tech consumer products, such as cellular telephones, computer hard drives, electric and hybrid vehicles, and flat-screen monitors and televisions.
  • Significant defense applications include electronic displays, guidance systems, lasers, and radar and sonar systems.
  • Rare earth minerals, with names like neodymium, praseodymium, and dysprosium, are crucial to the manufacture of magnets used in industries of the future, such as wind turbines and electric cars.

Minerals

Applications of REMs in various fields:

  • Electronics: Television screens, computers, cell phones, silicon chips, monitor displays, long-life rechargeable batteries, camera lenses, light-emitting diodes (LEDs), compact fluorescent lamps (CFLs), baggage scanners, marine propulsion systems.
  • Defense Sector: Rare earth elements play an essential role in our national defense. The military uses night-vision goggles, precision-guided weapons, communications equipment, GPS equipment, batteries, and other defense electronics. These give the United States military an enormous advantage. Rare earth metals are key ingredients for making the very hard alloys used in armored vehicles and projectiles that shatter upon impact.
  • Renewable Energy: Solar panels, Hybrid automobiles, wind turbines, next-generation rechargeable batteries, bio-fuel catalysts.
  • Manufacturing: High strength magnets, metal alloys, stress gauges, ceramic pigments, colorants in glassware, chemical oxidizing agent, polishing powders, plastics creation, as additives for strengthening other metals, automotive catalytic converters
  • Medical Science: Portable x-ray machines, x-ray tubes, magnetic resonance imagery (MRI) contrast agents, nuclear medicine imaging, cancer treatment applications, and for genetic screening tests, medical and dental lasers.
  • Technology: Lasers, optical glass, fiber optics, masers, radar detection devices, nuclear fuel rods, mercury-vapor lamps, highly reflective glass, computer memory, nuclear batteries, high-temperature superconductors.

DO YOU KNOW?

Metals such as cadmium, lead are often used in manufacturing plastic and over time can enter coastal waters. These are acutely harmful for coastal wildlife and humans.Different kinds of plastic releases different kinds of metals  that may release when exposed to water and UV lights.

What are the challenges in accessing Critical minerals?

  • Deposits in geopolitically sensitive regions: Reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective.
  • Controlled production:  A portion of existing production is controlled by geostrategic competitors. For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative.
  • Agreements in advance from outside: Future mine production is often tied up in off take agreements, in advance, by buyers from other countries to cater to upcoming demand.

MineralsA step taken by Indian government for sourcing strategic minerals

  • For sourcing of strategic minerals, the Indian government established Khanij Bidesh  India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market.

 India Rare Earths Mission

  • Industries in India have urged to set up a Mission, manned by professionals, like the India Semiconductor Mission and make their exploration a critical component of the Deep Ocean Mission plan of the government.
  • It would seek to encourage private sector mining in the sector and diversify sources of supply for these strategic raw materials.
  • The industry group has mooted making rare earth minerals a part of the ‘Make In India’ campaign, citing China’s ‘Made in China 2025’ initiative that focuses on new materials, including permanent magnets that are made using rare earth minerals.

Why such move?

  • Though India has 6% of the world’s rare earth reserves, it only produces 1% of global output, and meets most of its requirements of such minerals from China.
  • In 2018-19, for instance, 92% of rare earth metal imports by value and 97% by quantity were sourced from China.

What lies ahead?

  • There is a need to harness the potential of the country’s own rare earth reserves.
  • This would help build domestic capability and broad-base supply sources for such an important and strategic raw material.

 

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Coal and Mining Sector

Fly ash generation and Disposal

Note4Students

From UPSC perspective, the following things are important :

Prelims level : composition of fly ash

Mains level : environmental pollution

fly ashContext

  • India depends heavily on coal for power generation. This creates the problem of fly-ash generation and its proper disposal, usage.
  • The National Green Tribunal (NGT) noted September 19, 2022 that there was an urgent need to augment the utilisation and disposal of fly ash in Chhattisgarh.

What is fly ash?

  • Fly ash is a by-product of coal combustion. It contains Aluminium Silicate, SiO2, CaO, oxides of iron, magnesium and toxic metals like lead, arsenic, cobalt, and copper.
  • It can travel to far places. India is growing to double its power generation in the next decade and with coal being the biggest source of fuel for power generation, the problem of fly ash is going to increase too.

fly ash Environmental Problems with fly ash

  • A large quantity of fly ash dumped into poorly designed and maintained ash ponds. About a billion tonnes of this toxic ash lie dumped in these ponds, polluting land, air, and water.
  • All the heavy metals found in fly ash—nickel, cadmium, arsenic, chromium, lead, etc—are toxic in nature. They leech into the surrounding soil and can enter food-chains.
  • Fly ash gets easily ingested through respiration, which causes many diseases such as asthma, neurological disorders.
  • Suspended fly ash in the air acts as a global warming agent and heats the earth’s surface.
  • Fly ash settles on leaves and crops and reduces crop productivity.
  • It pollutes the groundwater.
  • There is a reduction in recharging of groundwater due to fly ash filled mine voids.
  • Reduces visibility by creating dense fog in the winter season.

fly ashIssues with fly ash management

  • The government mandates that all coal power plants (CPPs) reach 100% utilization of fly ash.
  • Along with it, CPPs should give a certain amount of fly ash free of cost for MSMEs to manufacture bricks, tiles and rest of the fly ash should be sold to other industries.
  • CPPs will have to maintain fly ash ponds to reduce its suspension in air.
  • But all these steps for utilization areas are problematic as they do little to mitigate these risks.
  • The pricing of fly ash is increasingly becoming a contentious issue that is hampering its gainful utilization.
  • The current approaches to evaluating risks with fly ash disposal are very limited, and they may underestimate the true risks
  • In spite of initiatives taken by the government, several nongovernmental and research and development organizations for fly ash utilization, the level of fly ash utilization in the country is quite low at only 38% which is less than the global standards.
  • Hence, rather than being utilized, fly ash is being stored despite warnings from regulators.
  • Deposition in storage places has negative influences on water and soil because of their mineral composition as well as morphology and filtration properties.
  • Ash-handling units are the biggest consumers of water in CPPs. The government advocates the designed ash-to-water ratios as approximately 1:5 for fly ash, but the observed ratios have been around 1:20.
  • Certain states have discouraged the use of blended cement and fly ash bricks in public works.

fly ashThe above issues can be addressed by

  • Greater regulatory oversight and price control,
  • Revision of cement blending standards,
  • Research in improving fly ash quality,
  • Reducing the cost of transportation,
  • Provisions for overcoming information asymmetries,
  • Incentivising use in brick kilns for producing fly ash bricks,
  • Overall sensitization of key decision-makers on the matter.
  • Instead of dumping it on ash ponds, can be used for construction due to its reuse as pozzolan, and replacement of portland cement by hydraulic cement
  • Due to its grain size distribution, enhanced strength permeability, it can be used to construct embankments at road construction, concrete dams like GHATGHAR DAM
  • Strong penalties for those production units who do not use proper filtration devices
  • Moving to renewable energy production away from coal-based thermal production.

Conclusion

  • Utilization of Fly Ash is not only possible but also essential. In this context “Fly Ash Mission of Government of India” is a slow but steady start, the pace of which needs to be ramped up. An honest effort is required by the concerned stakeholders to improve the perceptions of fly ash-based cement or concrete; increase its use, particularly for government works; and impart scientific knowledge about fly ash, its uses, and possible impacts.

Mains question

Q. What is fly ash? Discuss the environmental challenges it poses. Suggest how to address the situation.

 

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Coal and Mining Sector

How to increase production of coal

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Coal Index

Mains level : Paper 3- Need for increasing the domestic production of coal

Context

With inflation at unprecedented levels in many countries, concerns over energy security have gained centre stage.

National Coal Index to factor in the increased price of imported coal

  • This index was created to provide a benchmark for revenue-sharing contracts being executed after the auctions for commercial mining of coal.
  • The NCI had to be introduced as the wholesale price index (WPI) for coal has no component of imported coal.
  • For the last six months, the WPI for Coal has been stable at around 131.
  • Over the same period, the NCI has jumped from about 165 to about 238 reflecting the sharp increase in international coal prices.

Needs to increase domestic coal production

  • High prices of coal and coal-based generation will only encourage imported coal and expose the country to price risks from international energy prices.
  • The domestic coal industry has responded to increasing internation prices with an increase of over 30 per cent in coal production from April to June this year.
  • Anticipating these problems, a big effort toward permitting commercial mining has been made to get the private sector to produce more coal.
  • Gradual transition: Looking at coal from a singular focus on GHG emissions will give a myopic view of energy requirements for a growing economy like India.
  • The path to achieving 500 GW of renewables needs to be gradual, ensuring an orderly transition as coal is unavoidable in the near future.
  • Reducing coal imports and increasing domestic production of coal needs focused attention

Suggestions to increase domestic production of coal

1] Sensitising the financial community

  • The financial community has to be sensitised to the need of increasing domestic coal production to meet the growing energy demand.
  • The draft National Electricity Policy released in May 2021, recognised the need to increase coal-based generation.
  •  This policy has not yet been finalised.
  • It should clearly articulate the importance of domestic coal-based generation.
  • Holistic approach in ESG criteria: Apart from the government, the industry should also take up this issue with the financial community in adopting a more holistic approach toward environmental, social, and governance (ESG) criteria.

2] The regulator needs to facilitate  greater role of private sector

  • There is the need for a regulator to address the issues arising from a greater role of the private sector.
  • The current arrangements were put in place at a time when the public sector dominated.
  • There are several issues where new private commercial miners would need help.
  • Single point of contact: A single point of contact for the industry in the form of a dedicated regulator would give great comfort to private players and would help to overcome problems that could arise in due course.

3] Diversifying the production base

  • Increasing domestic production of coal and diversifying the production base are both needed.
  • This must be complemented with efforts to improve the quality of the coal produced.

4] Remove financial burden due to cross subsidies

  • The undue financial burden on the coal sector due to various cross subsidies needs attention.
  • The regime needs to be reformed.

Conclusion

Action on the issues discussed above will only help to deepen and strengthen these reforms which are needed to overcome the challenges that have resurfaced over the past few months.

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Coal and Mining Sector

Coal Shortages in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : CERC

Mains level : Paper 3- Power crisis

Context

The recent power crisis due to the coal shortage in India underscores the need for measures to avoid a repeat of episodes in the future.

Factors contributing to power crisis

  • Spike in power demand: With the sudden early onset of summer in 2022, power demand spiked, riding on the back of the post-Covid economic recovery.
  • Increase in price due to Ukraine crisis: The matter was further exacerbated by the Ukraine conflict, which led to a sharp increase in the price of imported coal.
  • Consequently, power stations designed on imported coal stopped importing because it was no longer economical for them to generate, given their contract price with the distribution companies.
  • Availability of railway rakes: It’s not that domestic coal was not available since enough stock had been built in the mines.
  • The issue was of availability of railway rakes for transportation.

What were the measures taken by the government ?

  • 1] Import of coal to 10 per cent: First, all generators have been asked to import coal to the extent of 10 per cent (as against 4 per cent earlier) and that half of this should be physically available by the end of June.
  • CIL as aggregator: Coal India will function as the aggregator on behalf of the generators.
  • CIL functioning as the aggregator is a better idea and it may be able to import at a cheaper cost by accumulating demand as well as standardising the coal grade to be procured.
  • Moreover, it would be easier for regulators to calculate the revised energy charge since the price at which coal was imported would be well-documented.
  • 2] Section 11 of the Electricity Act 2003 (Act) invoked: Under this section, the government directed imported coal-based plants to run at full capacity with the assurance that their enhanced cost of operation would be compensated.
  • 3] Tolling: The government invoked the concept of tolling, which allowed states to transfer their allotted coal to private generators located near the mines instead of transporting it to far away state generators.
  • This move would ease the burden on the availability of railway rakes.
  • 4] Seeking the consent of beneficiaries for hike: the government issued policy directions to the Central Electricity Regulatory Commission (CERC) overriding CERC’s regulations that made it mandatory to seek the consent of beneficiaries if the tariff went up by more than 30 per cent, if some alternate fuel is used.
  • 5]  Committee to rework the energy charge: A committee of officials was set up to rework the energy charge for imported coal-based generators.
  • 6] Additional working capital: The government is cognisant of the fact that there is a need for additional working capital and has advised REC/PFC as well as commercial banks to arrange for this.

Issues with the measures

  • Use of Section 11: The government invoked Section 11 to give  direction to private generators to import coal at a higher cost.
  • Section 11(1) allows the government to give direction to a generation company to operate and maintain a generating station in extraordinary circumstances.
  • Section 11(2) of the Act mentions that the adverse financial impact on generating compacy due to directions referred to in sub-section (1) would be offset by the regulator.
  • Going by Section 11(2), the government should have left the job of working out the energy charge to the regulator instead of setting up a committee of officials to do so though, of course, the CERC was represented in the committee.
  • 2] No transparency: The committee has already worked out the revised energy costs for six of the plants but there is no transparency regarding the coal cost assumed, its calorific value, transportation cost, etc.
  • 3] Additional rakes: We have to bear in mind that the coal problem arose because of the non-availability of rakes.
  • With 38 MT of coal to be imported by October this year, and half of that by end of June, the need for rakes will not only go up but would be front-loaded.
  • We need the requisite number of rakes otherwise, we are back to where we began.

Conclusion

While the government is taking steps to increase coal imports and addressing the other issues, it must ensure that domestic production does not dip during monsoon season.

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Coal and Mining Sector

Looming Power Crisis in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Pithead and Non-pithead plants

Mains level : Coal shortage and Power Crisis

Temperatures have shot up across many parts of the country with the early onset of summer, leading to a rise in the demand for power. Instances of power outages have been reported in several states.

Why is there a concern around power supply?

  • The demand for power has soared.
  • Several states, including Andhra Pradesh, Madhya Pradesh, Punjab, Haryana, Telangana, and Maharashtra, are facing power outages.
  • The coal stock with power generation companies (gencos) is not adequate to meet the rising demand.

How bad is the coal shortage?

  • Normally, a power plant must maintain 26 days of coal stock.
  • However, at present, several power plants are reporting critical levels of coal stock.
  • Data from the Central Electricity Authority (CEA) shows that 97 power plants out of the 173 that the CEA tracks have critical levels of coal inventory.
  • Of the 173, there are 155 non-pithead plants or power plants that are not near coal mines.
  • These have an average of 28% of the stock compared to the normal scenario.
  • The 18 plants that are near coal mines have an average stock of 81% of the normal requirement.

Note: Non-pithead plants are power plants where the coal mine is more than 1,500 kilometres away.

Is coal shortage the only reason for a power crisis?

  • The lack of railway rakes to transport coal is also a major problem.
  • The state power distribution companies (discoms) have also not been able to clear their dues to power generation companies.
  • The covid-19 pandemic has now weakened the finances of many states, raising doubts about the ability of state-owned discoms to clear their dues.

What has led to the coal shortage?

  • Several factors have led to the shortage, including the stagnation of production by Coal India Ltd (CIL) after the bumper production in FY15 and FY16.
  • There seems to be a tussle between the Centre and coal-rich states, which delay environment and land acquisition clearances.
  • High dues of discoms towards gencos and the eventual delay in gencos paying CIL has complicated the scenario.

How has the Centre responded?

  • CIL has made efforts to raise supply to the power sector by reducing its dispatch to other industries.
  • The power ministry said that to avoid long-distance transport, a ‘tolling’ facility would be allowed.
  • In this system, state gencos can allow other thermal power plants near a coal mine to utilize their coal linkages to generate and transmit power back.
  • This is an easier alternative compared to transportation.
  • Further, the states need to ensure that imported coal-based plants operate at reasonable tariffs.

Try answering this PYQ:

Consider the following statements:

  1. Coal sector was nationalized by the Government of India under Indira Gandhi.
  2. Now, coal blocks are allocated on lottery basis.
  3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self- sufficient in coal production.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 3 only

(d) 1, 2 and 3

 

Post your answers here.
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Coal and Mining Sector

Land protests over Deocha Pachami Coal Block

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Deocha Pachami Coal Block

Mains level : NA

The West Bengal government’s ambitious Deocha Pachami coal block mining project in Birbhum district has run into hurdles over land acquisition and other issues.

Deocha Pachami Coal Block

  • The State government is planning to start mining at the Deocha Pachami coal block, considered to be the largest coal block in the country with reserves of around 1,198 million tonnes of coal.
  • It is spread over an area of 12.31 sq. km, which is around 3,400 acres.
  • There are around 12 villages in the project area with a population of over 21,000, comprising Scheduled Castes and Scheduled Tribes.

Why are locals upset?

  • The project is facing protests over land acquisition of which a significant part is forest land.
  • Locals, mostly Santhal tribals, have close affinity with the land, with forests and waterways, and rely on it for their needs.
  • The tribals were harassed and had been arrested under false and serious charges for protesting.
  • Also, the project details have not yet been made public; and the environment clearance is awaited.

Back2Basics:

Coal

  • This is the most abundantly found fossil fuel. It is used as a domestic fuel, in industries such as iron and steel, steam engines and to generate electricity. Electricity from coal is called thermal power.
  • The coal which we are using today was formed millions of years ago when giant ferns and swamps got buried under the layers of earth. Coal is therefore referred to as Buried Sunshine.
  • The leading coal producers of the world include China, US, Australia, Indonesia, India.
  • The coal-producing areas of India include Raniganj, Jharia, Dhanbad and Bokaro in Jharkhand.
  • Coal is also classified into four ranks: anthracite, bituminous, sub-bituminous, and lignite. The ranking depends on the types and amounts of carbon the coal contains and on the amount of heat energy the coal can produce.

 

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Coal and Mining Sector

Places in news: Deucha Pachami Coal Mines

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Deucha-Pachami Mines

Mains level : Not Much

Thousands of Tribals fear displacement following the implementation of the project to mine coals and basalts from the Deucha-Pachami coal block in West Bengal’s Birbhoom district.

Deucha-Pachami Mines

  • Deucha-Pachami-Dewanganj-Harinsinga coal block is the second-largest coal block in the world; it is the largest in India.
  • It is located in Deucha and Panchamati area under Mohamad bazar community Development Block of Birbhum district, West Bengal.
  • The block has a thick coal seam trapped between equally thick layers of rocks, mostly basalt. It has a great economic value.
  • The existence of these thick basalt layers, however, makes mining of coal difficult; foreign investment and technology will be hence needed for mining.

 

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Coal and Mining Sector

Places in news: Carmichael Mine in Australia

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Carmichael Mine

Mains level : NA

The Adani Group will begin exporting high quality, low sulphur coal from its Carmichael mine in Australia as early as this week, tapping a new multi-decade source to meet energy needs.

Carmichael Mine

  • The Carmichael mine is located in the North Galilee Basin, more than 300 kilometers from the Queensland coastline and approximately 160 km north-west of Clermont in regional Queensland.
  • The Carmichael project, proposed in 2010, had provoked a sustained campaign by climate activists in Australia and other places globally, forcing banks and insurers not to work with the Adani group.
  • The conglomerate run by India’s second-richest man Gautam Adani has planned an initial production of 10 million tonnes a year from the mines in the Galilee Basin.
  • The Coal mined here has low sulfur content and high calorific value.

 

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Coal and Mining Sector

[pib] Mineral Conservation and Development (Amendment) Rules, 2021

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Mineral Conservation and Development (Amendment) Rules, 2021

Mains level : Not Much

The Ministry of Mines has notified the Mineral Conservation and Development (Amendment) Rules (MCDR), 2021.

About the Amendment

  • The MCDR have been framed under section 18 of the Mines and Minerals (Development and Regulation) Act, 1957.
  • It aims to provide rules regarding conservation of minerals, systematic and scientific mining, development of the mineral in the country and for the protection of environment.

Key highlights of the amendments:

Digital aerial imaging of the mines

  • Digital mapping: All plans and sections related to mine shall be prepared by combination of Digital Global Positioning System (DGPS) or Total Station or by drone survey.
  • Drone Imaging: Lessees having annual excavation plans of 1 million tonne or more or having leased area of 50 hectare or more are required to submit drone survey images of leased area and up to 100 meters outside the lease boundary every year.
  • Satellite imaging: Other lessees submit high resolution satellite images obtained from CARTOSAT-2 satellite

This step will not only improve mine planning practices, security and safety in the mines but also ensure better supervision of mining operations.

Penalty Provisions

Penalty provisions in the rules have been rationalized. Amendment in the rules categorized the violations of the rules under the following major heads:

  • Major Violations: Penalty of imprisonment, fine or both.
  • Minor Violations: Penalty reduced. Penalty of only fine for such violations prescribed.
  • Decriminalization of Rules: Violation of other rules has been decriminalized. These rules did not cast any significant obligation on the concession holder or any other person

Financial Assurance

  • Amount of financial assurance increased to five lakh rupees for Category ‘A’ mines and three lakh rupees for Category ‘B’ mines from existing three and two lakh rupees, respectively.
  • Provision of forfeiture of financial assurance or performance security of the lease holder added in case of non-submission of final mine closure plan within the period specified.

Employment Opportunity

  • Allowed engagement of a part-time mining engineer or a part-time geologist for small mines which will ease compliance burden for small miners.
  • Diploma in mining and mine surveying is added in qualification for full-time Mining Engineer.

 

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Coal and Mining Sector

Need for Strategic Reserves of Coal and Gas

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Strategic Reserves

Mains level : Coal crisis in India

The Centre has stressed the need to build strategic reserves of imported coal and gas as was being done for petroleum products.

Why need strategic reserves for Coal and Gas?

  • Many countries have started keeping strategic reserves, because when it comes to a crunch, every country will meet its needs first.
  • Russia has curtailed gas supply to Europe because they want more gas to be consumed within their country.
  • There is a surge in power demand combined with a fall in imports due to high global coal prices have led to supply disruptions.

Do you know?

In 1998, the AB Vajpayee administration proposed building petroleum reserves as a long-term solution to managing the oil market.

What are Strategic Reserves?

  • Indian refiners maintain 64.5 days of crude storage, so India has overall reserve oil storage of 74 days
  • Indian Strategic Petroleum Reserves Limited (ISPRL) is an Indian company responsible for maintaining the country’s strategic petroleum reserves.
  • ISPRL is a wholly-owned subsidiary of the Oil Industry Development Board (OIDB), which functions under the administrative control of the Ministry of Petroleum and Natural Gas.
  • It maintains an emergency fuel store of total 5.870 million cubic meters of strategic crude oil enough to provide 9.5 days of consumption.

SPRs in India

S. No. Location Capacity
1 Visakhapatnam, Andhra Pradesh 1.33 million tonnes
2 Mangalore, Karnataka 1.5 million tonnes
3 Padur, Karnataka 2.5 million tonnes and an additional 2.5 million tonnes under construction
4 Chandikhol, Odisha 4 million tonnes (under construction)

 

Why were SPRs created?

  • Gulf War, 1990: It caused a sharp rise in oil prices and a massive increase to India’s imports.
  • Forex fluctuations: During the subsequent 1991 Indian economic crisis, foreign exchange reserves could barely finance three weeks’ worth of imports while the government came close to defaulting on its financial obligations.
  • Price volatility: India was able to resolve the crisis through policies that liberalized the economy. However, India continued to be impacted by the volatility of oil prices.

How are they constructed?

  • The crude oil storages are constructed in underground rock caverns and are located on the East and West coasts of India.
  • Crude oil from these caverns can be supplied to the Indian Refineries either through pipelines or through a combination of pipelines and coastal movement.
  • Underground rock caverns are considered the safest means of storing hydrocarbons.

 

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Coal and Mining Sector

The coal crisis and role of CIL in mitigation

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Coal Mines Nationalisation Act (CMNA)

Mains level : Paper 3- Coal crisis

Context

In India, coal-based power plants have witnessed rapid depletion of coal stocks from a comfortable 28 days at the end of March to a precarious level of four days by the end of September. Coal India Ltd (CIL) has been unfairly attacked, even as it gears up to play a crucial role in fighting the power crisis.

Reasons for crisis

  • The reasons for the crisis are structural as well as operational.
  • The Coal Mines Nationalisation Act (CMNA) in 1993 enabled the government to take away 200 coal blocks of 28 billion tons from CIL and allocate them to end-users for the captive mining of coal.
  • These end-users, mostly in the private sector, failed to produce any significant quantity of coal.
  • The cancellation of 214 blocks by the Supreme Court added to the problem.
  • Commensurate to the captive mines allocated to the end-user industries, the coal production today should have been at least 500 million tonnes per annum (mtpa).
  • In reality, this has never exceeded 60 mtpa.
  • On the operational side, power plants are required by the Central Electricity Authority (CEA) to maintain a minimum stock of 15 to 30 days of normative coal consumption.
  • The compliance with this directive by power plants has been severely lacking.
  • This enhances the vulnerability of power plants.
  • The persistent non-payment of coal sale dues by power plants to coal companies has created a serious strain on their working capital position.
  • A spurt in imported coal prices, mainly due to a major increase in coal imports by China, acted as a brake on imports of coal.
  • This escalated the demand for domestic coal.
  • The spurt in demand for coal is being linked to the post-Covid economic recovery.

CIL’s role in mitigating the shortage crisis

  • Growth in production in short duration: Despite many constraining factors, it is to the credit of CIL that it has achieved a growth of 14 million tonnes (mt) or 5.8 per cent in coal production during the first half of 2021-22.
  • Yet, the offtake was higher than the preceding year by 52 mt or 20.6 per cent.
  • This was possible by drawing down on the opening inventory of coal from 100 mt to 42 mt during April to September.
  • With the monsoons behind us and the onset of a good productive season, CIL has already stepped up coal offtake to more than 1.5 mt per day.
  • With efforts on the part of the railways in moving the coal, the crisis should dissipate in the near future, at least for power plants that pay timely for coal supplies.
  • Besides meeting the growing coal demand of power plants, CIL has been able to significantly replace the import of highly expensive thermal coal.
  • Cheaper coal: Even after bearing the highest tax and transport cost globally, the landed cost of CIL coal continues to be much cheaper than imported coal at almost all destinations.
  • Saving of foreign exchange: The resultant benefits are savings of foreign exchange, and generation of power at affordable tariffs.
  • The coal price charged by CIL, expressed in energy units, is at a deep discount of 60-70 per cent of imported coal.

Conclusion

In brief, CIL has been unfairly blamed for the coal crisis. It has played a stellar role, standing like a solid rock between light and darkness. It is striving to build comfortable stocks at the power plants, not in default of payment.

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Coal and Mining Sector

Coal Crisis in India

More than half of the country’s 135 coal-fired power plants are running on fumes – as coal stocks run critically low.  They have fuel stocks of less than four days, government data shows.

Coal shortage in India

  • In a country where 70% of the electricity is generated using coal, this is a major cause for concern as it threatens to derail India’s post-pandemic economic recovery.
  • Utilities are scrambling to secure coal supplies as inventories hit critical lows after a surge in power demand from industries and sluggish imports due to record global prices push power plants to the brink.

How did the crisis escalate?

  • As India’s economy picked up after a deadly second wave of Covid-19, demand for power rose sharply.
  • Power consumption in the last two months alone jumped by almost 17%, compared to the same period in 2019.
  • At the same time global coal prices increased by 40% and India’s imports fell to a two-year low.
  • India is the world’s second largest importer of coal despite also being home to the fourth largest coal reserves in the world.
  • Power plants that usually rely on imports are now heavily dependent on Indian coal, adding further pressure to already stretched domestic supplies.

What is the likely impact?

  • Experts say importing more coal to make up for domestic shortages is not an option at present.
  • India has seen shortages in the past, but what’s unprecedented this time is coal is really expensive now.
  • Businesses at the end of the day pass on these costs to consumers, so there is an inflationary impact – both direct and indirect that could potentially come from this.
  • If the crisis continues, a surge in the cost of electricity will be felt by consumers.
  • Retail inflation is already high as everything from oil to food has become more expensive.

Other reasons for this crisis

  • In recent years, India’s production has lagged as the country tried to reduce its dependence on coal to meet climate targets.
  • Prices of power-generation fuels are surging globally as electricity demand rebounds with industrial growth, tightening supplies of coal and liquefied natural gas.
  • India is competing against buyers such as China, the world’s largest coal consumer, which is under pressure to ramp up imports amid a severe power crunch.
  • Rising oil, gas, coal and power prices are feeding inflationary pressures worldwide and slowing the economic recovery from the COVID-19 pandemic.

Challenges posed

  • The desire to cut its reliance on heavily polluting coal burning power plants has been a major challenge for the government in recent years.
  • The question of how India can achieve a balance between meeting demand for electricity from its almost 1.4bn people has to be answered.

What can the government do?

  • Experts advocate a mix of coal and clean sources of energy as a possible long-term solution.
  • It’s not completely possible to transition and it’s never a good strategy to transition 100% to renewables without a backup.
  • Long term investment in multiple power sources aside a crisis like the current one can be averted with better planning.
  • There is need for closer coordination between Coal India Limited – the largest supplier of coal in the country and other stakeholders.
  • For now, the government is working with state-run enterprises to ramp up production and mining to reduce the gap between supply and demand.

Way forward

  • This is a global phenomenon, one not specifically restricted to India.
  • It is unclear how long the current situation will last.
  • With the monsoon on its way out and winter approaching, the demand for power usually falls.
  • So, the mismatch between demand and supply may iron out to some extent.

Try answering this PYQ:

Consider the following statements:

  1. Coal sector was nationalized by the Government of India under Indira Gandhi.
  2. Now, coal blocks are allocated on lottery basis.
  3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self- sufficient in coal production.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 3 only

(d) 1, 2 and 3

 

Post your answers here.
8
Please leave a feedback on thisx

 

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Coal and Mining Sector

Govt. tells utilities to ship in coal as demand surges

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Coal mining in India

Mains level : Need for coal imports

The govt. has urged utilities to import coal despite having the world’s fourth-largest reserves, with several power plants on the verge of running out of fuel due to a surge in power demand.

Coal Mining in India

  • Coal in India has been mined since 1774 and is now the second fastest mined in the world, producing 716 million metric tons (789 million short tons) in 2018.
  • Due to high demand and poor average quality, India imports coking coal to meet the requirements of its steel plants.
  • Dhanbad city is the largest coal-producing city and is called the Coal Capital of India.
  • State-owned Coal India had a monopoly on coal mining between its nationalization in 1973 and 2018.

Consumption

  • Coal-fired power accounts for more than 70% of India’s electricity generation. Electricity generation makes up three-fourths of India’s coal consumption.

Quality of coal

  • The ash chemistry of Indian coal is such that it is high in silica and alumina.
  • The ash is also highly abrasive because of its high quartz content, which can lead to erosion of the syngas cooling system when it gets fused.
  • Indian coal’s sulfur content is low, about 0.5 percent.
  • So, from a gas clean-up perspective, the flue gas desulphurization (removal of SOx gases) and NOx removal system is not economically justifiable and, therefore, not important.
  • Also, in the Indian context, this is unnecessary to meet emission norms.

Coal reserves

  • India has the fourth-largest coal reserves in the world. It is the second-largest producer of coal in the world, after China.
  • Coal deposits are primarily found in eastern and south-central India.
  • Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana, and Maharashtra accounted for 98.09% of the total known coal reserves in India.
  • As of 31 March 2019, Jharkhand and Odisha had the largest coal deposits of 25.88% and 24.76% respectively.

Imports

  • Coking Coal is being imported by the Steel Authority of India Limited (SAIL) and other Steel manufacturing units mainly to bridge the gap between the requirement and indigenous availability and to improve the quality.
  • Coal-based power plants, cement plants, captive power plants, sponge iron plants, industrial consumers, and coal traders are importing non-coking coal.
  • Coke is imported mainly by Pig-Iron manufacturers and Iron & Steel sector consumers using mini-blast furnaces.

Try answering this PYQ:

Which of the following is/are the characteristics/ characteristics of Indian coal?

  1. High ash content
  2. Low Sulphur content
  3. Low ash fusion temperature

Select the correct option using the codes given below:

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

 

Post your answers here.
1
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Coal and Mining Sector

[pib] Gold Reserves in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Gold Reserves in India

Mains level : Not Much

The Minister of Mines and Coal has provided useful information regarding gold reserves in India.

Gold Reserves in India

  • As per National Mineral Inventory data, the total reserves/resources of gold ore (primary) in the country have been estimated at 501.83 million tonnes as of 2015.
  • Out of these, 17.22 million tonnes were placed under the reserves category and the remaining 484.61 million tonnes were under the remaining resources category.
  • In India, the largest resources of gold ore (primary) are located in Bihar (44%) followed by Rajasthan (25%), Karnataka (21%), West Bengal (3%), Andhra Pradesh (3% ), Jharkhand (2 %).
  • The remaining 2% resources of ore are located in Chhattisgarh, Madhya Pradesh, Kerala, Maharashtra, and Tamil Nadu.

Who takes up their mapping?

  • Geological Survey of India (GSI) is actively engaged in geological mapping followed by mineral exploration (survey) for various mineral commodities including gold.
  • GSI aims to identify potential mineral-rich zones and establish resources.
  • Every year, as per the approved annual Field Season Program, GSI takes up mineral exploration projects in various parts of the country for augmenting mineral resources.
  • Recently, GoI has amended the MEMC Rules to allow auction of composite license at G4 level for deep-seated minerals including Gold.

Answer this PYQ in the comment box:

Consider the following statements:

  1. In India, State Governments do not have the power to auction non -coal mines.
  2. Andhra Pradesh and Jharkhand do not have goldmines.
  3. Rajasthan has iron ore mines.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 3 only

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Coal and Mining Sector

Mines and Minerals (Development and Regulation) Amendment Bill, 2021

Note4Students

From UPSC perspective, the following things are important :

Prelims level : MMDR Amendment Bill, 2021

Mains level : Mining sector reforms

The coal and Mines Minister has introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 in Lok Sabha to streamline the renewal of the auction process for minerals and coal mining rights.

MMDR Amendment Bill, 2021

The Bill seeks to amend the Mines and Minerals (Development and Regulation) Act, 1957.  The Act regulates the mining sector in India.

(1) Removal of restriction on end-use of minerals

  • The Act empowers the central government to reserve any mine (other than coal, lignite, and atomic minerals) to be leased through an auction for a particular end-use (such as iron ore mine for a steel plant).
  • Such mines are known as captive mines.  The Bill provides that no mine will be reserved for particular end-use.

(2) Sale of minerals by captive mines  

  • The Bill provides that captive mines (other than atomic minerals) may sell up to 50% of their annual mineral production in the open market after meeting their own needs.
  • The central government may increase this threshold through a notification.  The lessee will have to pay additional charges for mineral sold in the open market.

(3) Auction by the central government in certain cases

  • Under the Act, states conduct the auction of mineral concessions (other than coal, lignite, and atomic minerals).
  • Mineral concessions include mining lease and prospecting license-cum-mining lease.
  • The Bill empowers the central government to specify a time period for completion of the auction process in consultation with the state government.
  • If the state government is unable to complete the auction process within this period, the auctions may be conducted by the central government.

(4) Transfer of statutory clearances

  • Upon expiry of a mining lease (other than coal, lignite, and atomic minerals), mines are leased to new persons through auction.
  • The statutory clearances issued to the previous lessee are transferred to the new lessee for a period of two years.
  • The new lessee is required to obtain fresh clearances within these two years.
  • The Bill replaces this provision and instead provides that transferred statutory clearances will be valid throughout the lease period of the new lessee.

(5) Allocation of mines with expired leases

  • The Bill adds that mines (other than coal, lignite, and atomic minerals), whose lease has expired, may be allocated to a government company in certain cases.
  • This will be applicable if the auction process for granting a new lease has not been completed, or the new lease has been terminated within a year of the auction.
  • The state government may grant a lease for such a mine to a government company for a period of up to 10 years or until the selection of a new lessee, whichever is earlier.

(6) Rights of certain existing concession holders

  • In 2015, the Act was amended to provide that mines will be leased through an auction process.
  • Existing concession holders and applicants have been provided with certain rights.
  • The Bill provides that the right to obtain a prospecting license or a mining lease will lapse on the date of commencement of the 2021 Amendment Act.
  • Such persons will be reimbursed for any expenditure incurred towards reconnaissance or prospecting operations.

(7) Extension of leases to government companies

  • The Act provides that the period of mining leases granted to government companies will be prescribed by the central government.
  • The Bill provides that the period of mining leases of government companies (other than leases granted through auction) may be extended on payment of additional amount prescribed in the Bill.

(8) Conditions for lapse of mining lease

  • The Act provides that a mining lease will lapse if the lessee: (i) is not able to start mining operations within two years of the grant of a lease, or (ii) has discontinued mining operations for a period of two years.
  • However, the lease will not lapse at the end of this period if a concession is provided by the state government upon an application by the lessee.
  • The Bill adds that the threshold period for lapse of the lease may be extended by the state government only once and up to one year.

(9) Non-exclusive reconnaissance permit

  • The Act provides for a non-exclusive reconnaissance permit (for minerals other than coal, lignite, and atomic minerals).
  • Reconnaissance means preliminary prospecting of a mineral through certain surveys.
  • The Bill removes the provision for this permit.

Why such a move?

  • The move would likely lead to greater transparency in the auction process.
  • There is a perception that states governments may in some cases prefer some bidders, and try to delay or cancel mining rights if their preferred bidders do not win mining rights.

Could the amendment face legal challenges?

  • The amendment, if passed, was likely to face legal challenges particularly from state governments.
  • If an act is passed in which any state government’s discretionary power is taken away or their rights or benefits are infringed, it is likely to be challenged in the Supreme Court.

(With inputs from PRS)

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Coal and Mining Sector

Issues with treating mineral sale proceeds as revenue or income

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Mineral Policy

Mains level : Paper 3- Issues with our mining policies and changes needed to make them sustainable

The rate at which we are extracting mineral and spending the proceeds from it without consideration for the future generation needs a rethink. The article deals with this issue.

The principle of Intergenerational Equity

  • We cannot compromise the ability of future generations to meet their needs, and this is reflected in the aim for the sustainable economy.
  • The principle of Intergenerational Equity would make it imperative for us to ensure future generations inherit at least as much as we did.
  • If we are successful in abiding by intergenerational equity, our children will be at least as well off as we are.

Issues with our mineral policy

  • India’s National Mineral Policy 2019 states: “natural resources, including minerals, are a shared inheritance where the state is the trustee on behalf of the people to ensure that future generations receive the benefit of inheritance.”
  • The extraction of oil, gas, and minerals is effectively the sale of this inheritance.
  • Unfortunately, governments everywhere treat the mineral sale proceeds as revenue or income which is basically a sale of inherited wealth.
  • This results in governments selling minerals at prices significantly lower than what they are worth, driven by lobbying, political donations, and corruption.

Error in accounting

  • Proceeds received by the government are treated as “revenue” and spent.
  • This is just not sustainable.
  • There is growing empirical evidence of large losses in mining from around the world.
  • There is also growing evidence from the International Monetary Fund that many governments of resource-rich nations face declining public sector net worth, i.e., their governments are becoming poorer.
  • Due to the high profits involved, the extractors are keen to extract as quickly as possible and move on.
  • More mining would make a bad situation significantly worse.
  • The Government Accounting Standards Advisory Board needs to correct this error in the standards for public sector accounting and reporting for mineral wealth.

Way forward

  • If we extract and sell our mineral wealth, the explicit objective must be to achieve zero loss in value; the state as trustee must capture the full economic rent.
  • Any loss is a loss to all of us and our future generations, and makes some rich; that is patently unfair.
  • India’s National Mineral Policy 2019 says: “State Governments will endeavor to ensure that the full value of the extracted minerals is received by the State.”
  • Like Norway, the entire mineral sale proceeds must be saved in a Future Generations Fund.
  • The Future Generations Fund could be passively invested through the National Pension Scheme framework.
  • The real income of a fund of this nature may be distributed only as a citizens’ dividend, equally to all as owners.
  • For the Indian economy, this is sustainable — capital has been maintained; the savings rate would rise, making available more long-term domestic capital; it diversifies risk while likely improving returns.

Consider the question “What are the issues with our mining policies? Suggest the changes to make it more sustainable.”

Conclusion

Through these changes, let us be the generation that changes the course of history for the better, not the one that consumed the planet.

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Coal and Mining Sector

New Single-window Clearance for Coal Mines

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Coal bidding in India

Mains level : Coal mining and legal hurdles

The Union government has announced a new online single window clearance portal for the coal sector to speed up the operationalization of coal mines.

Try this PYQ:

Q.Consider the following statements:

  1. In India, State Governments do not have the power to auction non -coal mines.
  2. Andhra Pradesh and Jharkhand do not have goldmines.
  3. Rajasthan has iron ore mines.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 3 only

What is a single-window clearance portal?

  • A single window clearance portal is aimed at allowing successful bidders for coal blocks to be able to obtain all required clearances.
  • It includes environmental and forest clearances, from a single portal with progress monitoring, instead of having to go to multiple authorities.
  • The portal should allow successful bidders to operationalize coal mines more quickly.
  • The Parivesh mechanism for forest and environment-related clearances would likely be merged into this mechanism.

Why need such a portal?

  • Presently, about 19 major approvals or clearances are required before starting the coal mine in the country.
  • In the absence of a unified platform for grant of clearances, companies were required to approach different departments, leading to delay in operationalization.

How will the portal help?

  • Industry sources said that the sector has long sought a single-window clearance system to help with quicker operationalization.
  • Obtaining the requisite clearances was taking over 2-3 years for successful bidders in many cases.
  • Some coal blocks auctioned as far back as 2015 has still not been operationalised due to delays in obtaining required clearances.

Must read:

[Burning Issue] The Mineral Laws (Amendment) Bill, 2020

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Coal and Mining Sector

Lithium deposits in Karnataka

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Lithium ion batteries and their significance

Mains level : Lithium reserves in India

Alongside a move to tap into the global lithium value chain, India has initiated a concerted domestic exploration in Karnataka’s Mandya district.

Lithium reserves in Karnataka

  • Preliminary surveys by the Atomic Minerals Directorate for Exploration and Research (AMD), an arm of the Department of Atomic Energy has carried out the exploration.
  • AMD is carrying out surface and sub-surface exploration for lithium in potential geological domains of the country.
  • Their research has shown the presence of 1,600 tonnes of lithium resources in the igneous rocks of the Marlagalla-Allapatna region of Karnataka’s Mandya district.

Must read:

Global producers of lithium

  • Australia and Chile have swapped positions as the world’s leading lithium-producing country over the past decade. In 2019, the world’s Top 5 lithium producers were:
  1. Australia – 52.9% of global production
  2. Chile – 21.5%
  3. China – 9.7%
  4. Argentina – 8.3%
  5. Zimbabwe – 2.1%
  • The U.S. ranked 7th with 1.2% of the world’s lithium production.

In 2019, the world’s Top 5 lithium reserves by country were:

  1. Chile – 55.5% of the world’s total

  2. Australia – 18.1%

  3. Argentina – 11.0%

  4. China – 6.5%

  5. U.S. – 4.1%

Why is the exploration significant?

  • India currently imports all its lithium needs.
  • The find in Mandya is extremely small in quantitative terms, but it marks some initial success in the attempt to domestically mine the silver-white metal by way of hard-rock extraction of the ore.
  • The domestic exploration push comes at a time when India has stepped up its economic offensive against China, a major source of lithium-ion energy storage products being imported into the country.
  • The Marlagalla-Allapatna area is seen as among the most promising geological domains for potential exploration for lithium and other rare metals.

What lies ahead?

  • India is seen as a late mover in attempts to enter the lithium value chain, coming at a time when EVs are predicted to be a sector ripe for disruption.
  • 2021 is likely to be an inflexion point for battery technology – with several potential improvements to the li-ion technology, and alternatives to this tried-and-tested formulation in advanced stages of commercialization.

Back2Basic: Li-Ion battery

  • Whittingham developed the first functional lithium-ion battery in 1976, Goodenough brought in a major improvement in 1980, while Yoshino made the first practical-use lithium-ion battery in 1985.
  • Commercially manufactured lithium-ion batteries, based on what Yoshino had developed, made their first appearance in 1991.

Its’ working

  • Batteries convert chemical energy into electricity.
  • A battery comprises two electrodes, a positive cathode and a negative anode, which is separated by a liquid chemical, called an electrolyte, which is capable of carrying charged particles.
  • The two electrodes are connected through an electrical circuit.
  • When the circuit is on, electrons travel from the negative anode towards the positive cathode, thus generating an electric current, while positively charged ions move through the electrolyte.

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Coal and Mining Sector

Rat Hole Mining in Meghalaya

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Hazards of rat-hole mining

Rat-hole coal mining had sucked the life out of a village in Meghalaya’s East Jaintia Hills district.

Q.Despite a ban, rat-hole mining continues to prevail as an important practice in Meghalaya. What are the issues associated with it? Discuss. (150W)

Rat Hole Mining

  • It is a primitive and hazardous method of mining for coal, with tunnels that are only 3-4 feet in diameter (hence, rat-hole), leading to pits ranging from 5-100 sq. mt deep.
  • It involves digging of very small tunnels in which workers, more often children, enter and extract coal.
  • Although the coal is of bad quality, people see it as a treasure chest.
  • In backward regions, where there is the loss of livelihood, lack of employment opportunities and under-education, people see rat-hole mines as an opportunity to earn daily bread.
  • A major portion of these employees are children, who are preferred because of their thin body shape and ease to access depths.

Despite a ban

The National Green Tribunal banned rat-hole mining in Meghalaya in 2014 on a petition that said acidic discharge from the mines was polluting the Kopili River. But the practice continues unabated.

Threats of such mining

  • Water from rivers and streams in the mining area has become unfit for drinking and irrigation and is toxic to plants and animals.
  • Layers of rock above the coal removed during mining contain traces of iron, manganese and aluminium that get dissolved from mining sites through the acid run-off or are washed into streams as sediment.
  • There are several mishaps where workers get trapped to death due to the sudden collapse of such mines.

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Coal and Mining Sector

India’s Deep Ocean Mission

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Deep Ocean Mission

Mains level : India's deep ocean mission

India will soon launch an ambitious ‘Deep Ocean Mission’ that envisages exploration of minerals, energy and marine diversity of the underwater world, a vast part of which still remains unexplored.

Deep Ocean Mission (DOM)

Nodal Agency: Ministry of Earth Sciences (MoES)

  • The mission proposes to explore the deep ocean similar to the space exploration started by ISRO.
  • Underwater robotics and ‘manned’ submersibles are key components of the Mission which will help India harness various living and non-living (water, mineral and energy) resources from the seabed and deep water.
  • The tasks that will be undertaken over this period include deep-sea mining, survey, energy exploration and the offshore-based desalination.
  • These technological developments are funded under an umbrella scheme of the government – called Ocean Services, Technology, Observations, Resources Modelling and Science (O-SMART).

 Mining PMN

  • One of the main aims of the mission is to explore and extract polymetallic nodules (PMN).
  • These are small potato-like rounded accretions composed of minerals such as manganese, nickel, cobalt, copper and iron hydroxide.
  • They lie scattered on the Indian Ocean floor at depths of about 6,000 m and the size can vary from a few millimetres to centimetres.
  • These metals can be extracted and used in electronic devices, smartphones, batteries and even for solar panels.

Where will the team mine?

  • The International Seabed Authority (ISA), an autonomous international organisation established under the 1982 United Nations Convention on the Law of the Sea, allots the ‘area’ for deep-sea mining.
  • India was the first country to receive the status of a ‘Pioneer Investor ‘ in 1987 and was given an area of about 1.5 lakh sq km in the Central Indian Ocean Basin (CIOB) for nodule exploration.
  • In 2002, India signed a contract with the ISA and after complete resource analysis of the seabed 50% was surrendered and the country retained an area of 75,000 sq km.

Which are the other countries that are in the race to mine the deep sea?

  • Apart from the CIOB, polymetallic nodules have been identified from the central Pacific Ocean. It is known as the Clarion-Clipperton Zone.
  • According to the ISA’s website, it has entered into 15-year contracts for exploration for polymetallic nodules, polymetallic sulphides and cobalt-rich ferromanganese crusts in the deep seabed with 29 contractors.
  • Later it was extended for five more years till 2022.
  • China, France, Germany, Japan, South Korea, Russia and also some small islands such as the Cook Islands, Kiribati have joined the race for deep-sea mining.
  • Most of the countries have tested their technologies in shallow waters and are yet to start deep-sea extraction.

India’s preparedness

  • India’s mining site is at about a depth of 5,500 metres, where there is a high pressure and extremely low temperature.
  • We have also deployed Remotely Operated Vehicle and In-situ Soil Tester in the depth of 6,000 metres and have a thorough understanding of the mining area at the Central Indian Ocean Basin.
  • The mining machine newly developed for 6000 metres depth was able to move about 900 metres and will be deployed soon at 5,500 metres.
  • Weather conditions and the availability of ships also play a role.
  • More tests are being conducted to understand how to bring the nodules up to the surface. A riser system comprising an umbilical cable or electromechanical cable and a hose is being developed.

What will be the environmental impact?

  • According to the IUCN, these deep remote locations can be home to unique species that have adapted themselves to conditions such as poor oxygen and sunlight, high pressure and extremely low temperatures.
  • Such mining expeditions can make them go extinct even before they are known to science.
  • The deep sea’s biodiversity and ecology remain poorly understood, making it difficult to assess the environmental impact and frame adequate guidelines.
  • Though strict guidelines have been framed, they are only exploration guidelines. A new set of exploitation guidelines are being worked out and discussions are on with the ISA.
  • Environmentalists are also worried about the sediment plumes that will be generated as the suspended particles can rise to the surface harming the filter feeders in the upper ocean layers.
  • Additional concerns have been raised about the noise and light pollution from the mining vehicles and oil spills from the operating vessels.

Is deep-sea mining economically viable?

  • The latest estimate from the ISA says it will be commercially viable only if about three million tonnes are mined per year.
  • More studies are being carried out to understand how the technology can be scaled up and used efficiently.

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Coal and Mining Sector

[pib] The Mineral Laws (Amendment) Bill, 2020

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Mining regulations in India

Parliament has passed The Mineral Laws (Amendment) Bill, 2020 for amendments in Mines & Mineral (Development and Regulation) Act 1957 and The Coal Mines (Special Provisions) Act, 2015. The bill will transform the mining sector in the country boosting coal production and reducing dependence on imports.

Acts to be amended

  • The MMDR Act regulates the overall mining sector in India.
  • The CMSP Act provides for the auction and allocation of mines whose allocation was cancelled by the Supreme Court in 2014.
  • Schedule I of the Act provides a list of all such mines; Schedule II and III are sub-classes of the mines listed in the Schedule I.
  • Schedule II mines are those where production had already started then, and Schedule III mines are ones that had been earmarked for a specified end-use.

Features of the Mineral Laws (Amendment) Bill, 2020 

Removal of restriction on end-use of coal

  • Currently, companies acquiring Schedule II and Schedule III coal mines through auctions can use the coal produced only for specified end-uses such as power generation and steel production.
  • The Bill removes this restriction on the use of coal mined by such companies.
  • Companies will be allowed to carry on coal mining operation for own consumption, sale or for any other purposes, as may be specified by the central government.

Eligibility for auction of coal and lignite blocks

  • The Bill clarifies that the companies need not possess any prior coal mining experience in India in order to participate in the auction of coal and lignite blocks.
  • Further, the competitive bidding process for auction of coal and lignite blocks will not apply to mines considered for allotment to:
  1. a government company or its joint venture for own consumption, sale or any other specified purpose; and
  2. a company that has been awarded a power project on the basis of a competitive bid for tariff.

Composite license for prospecting and mining

  • Currently, separate licenses are provided for prospecting and mining of coal and lignite, called prospecting license, and mining lease, respectively.
  • Prospecting includes exploring, locating, or finding mineral deposit.  The Bill adds a new type of license, called prospecting license-cum-mining lease.
  • This will be a composite license providing for both prospecting and mining activities.

Non-exclusive reconnaissance permits holders to get other licenses

  • Currently, the holders of non-exclusive reconnaissance permit for exploration of certain specified minerals are not entitled to obtain a prospecting license or mining lease.
  • Reconnaissance means preliminary prospecting of a mineral through certain surveys.
  • The Bill provides that the holders of such permits may apply for a prospecting license-cum-mining lease or mining lease.   This will apply to certain licensees as prescribed in the Bill.

Transfer of statutory clearances to new bidders

  • Currently,upon expiry, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) can be transferred to new persons through auction.
  • This new lessee is required to obtain statutory clearances before starting mining operations.
  • The Bill provides that the various approvals, licenses, and clearances given to the previous lessee will be extended to the successful bidder for a period of two years.

Reallocation after termination of the allocations

  • The CMSP Act provides for the termination of allotment orders of coal mines in certain cases.
  • The Bill adds that such mines may be reallocated through auction or allotment as may be determined by the central government.
  • The central government will appoint a designated custodian to manage these mines until they are reallocated.

Prior approval from the central government

  • Under the MMDR Act, state governments require prior approval of the central government for granting reconnaissance permit, prospecting license, or mining lease for coal and lignite.
  • The Bill provides that prior approval of the central government will not be required in granting these licenses for coal and lignite, in certain cases.
  • These include cases where: (i) the allocation has been done by the central government, and (ii) the mining block has been reserved to conserve a mineral.

Advance action for auction

  • Under the MMDR Act, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) are auctioned on the expiry of the lease period.
  • The Bill provides that state governments can take advance action for auction of a mining lease before its expiry.

With inputs from PRS India

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Coal and Mining Sector

[pib] SARAS Initiative

Note4Students

From UPSC perspective, the following things are important :

Prelims level : SARAS Initiative

Mains level : Not Much

Coal India’s flagship subsidiary NCL (Northern Coalfields Limited) has set up a centre named SARAS.

SARAS Initiative

  • SARAS stands for Science and Applied Research Alliance and Support.
  • It aims to promote innovation, R&D and skill development along with improving company’s operational efficiency and utilize resources at optimum level.
  • SARAS will help and enable the company in Integration of Innovation and Research for enhancing coal production, productivity, and safety in mines.
  • Besides, the SARAS would also help establish centres of excellence to ensure technical support to R&D along with thrust on quality skill development and employment to local youths in and around company’s operational area.

About NCL

  • NCL accounts for 15 per cent of India’s coal production and 10 per cent of thermal power generation of the country is met by the coal produced by this Miniratna Company of Govt. of India.
  • The company produces more than 100 million tonnes of coal every year.
  • It has planned to produce 107 million tonnes of coal in the current fiscal.

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Coal and Mining Sector

[op-ed of the day] Let’s not muddle along on how we share natural endowments

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Adoption of policy of auctioning of resources and periodic review of the policy.

Context

Governments regulations and restrictions in the markets, believing that policies could artificially restrict either supply or demand, or both, often results in unrealistic or unworkable prices.

Adoption of the auctioning process to allocate resources

  • Design of process makes the difference: While auctions may be the cleanest way to allot scarce natural resources to private parties, their design makes all the difference.
  • Three things needed to get the desired results from auctions:
    • Clear policy goal: Define clear policy goals for the allotment of the resource whether coal blocks, spectrum or land.
    • The proper process of periodic review: Define a proper process for periodic review of the design itself, since it may not be possible to get everything right in the first instance.
    • Make the process non-partisan: Make the political oversight process as non-partisan as possible, so that regime changes do not keep upending policies.

What went wrong in spectrum allocation case?

  • Arbitrary tweaks in policy: Arbitrary tweaks were made in the telecom licence and spectrum allocation policy.
    • Which is what forced the apex court to intervene and cancel those licences.
  • The claim of revenue loss: Cancellation followed a  claim by the CAG that the “presumptive” revenue losses may have been as high as ₹1.76.
  • Result of the two events-policy of revenue maximisation: The net result was that all subsequent auctions were designed to maximize spectrum bids.
    • Winner’s curse: The policy finally ended up becoming a winner’s curse, evident in the pile of debt incurred by the telecom sector.
  • Why did this happen? This happened because of the absence of a clear policy goal.

Real estate sector

  • High land prices: The same goes for real estate, which is struggling right now due to high land prices because the bureaucracy prevents price reduction in land.
    • Unaffordable to middle-income buyers: That make most properties unaffordable for middle and lower-middle-income buyers.
  • Low FSI issue: Urban land prices are high due to artificial constriction of supplies through the fixing of low floor space indices (FSIs) even in land-scarce localities.

Technology and periodic review of policy

  • Technology can lower costs: Spectrum or land or coal mines are not always in short supply, for new technology lowers costs.
    • Efficient spectrum use: The same spectrum can, with the use of newer technology, be used more efficiently.
    • 3D printing in construction: Better infrastructure and improved building technologies (even 3D printing techniques for mass housing projects in non-urban areas) can lower housing costs enormously.
    • Automated coal mining: Automated coal mining can lower coal production costs, enabling higher profitability even with relatively high auction bids.
  • Need for periodic policy review: Technology can reduce the prices of the resources and hence the periodic review of the prices at which the resources are allocated need to be taken to for balanced pricing.

Conclusion

  • Policies on the allocation of scarce resources need to evolve based on actual experience and changing technologies and processes.
  • The success or failure of a specific policy cannot be judged purely from a revenue or transparency point of view.

 

 

 

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Coal and Mining Sector

[op-ed snap] Mining deep

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3-Changes in policy and their effects.

Context

The government eased the regulations for coal mining in India.

What does the opening mean?

  • Removal of restrictions: Until now there were restrictions on who could bid for coal mines.
  • Only those in power, iron and steel and coal washery business could bid for mines.
  • The bidders needed the prior experience of mining in India.
  • Who can buy now?: The move will open up the coal mining sector completely, enabling anyone with finances and expertise to bid for blocks and sell the coal freely to any buyer of their choice.

Benefits of opening

  • More value extraction: The restrictions limited the potential bidders to a select circle of players and thus limited the value that the government could extract from the bidding.
  • Now the Government can extract more value from the auction of the blocks.
  • Development of coal market: Second, end-use restrictions inhibited the development of a domestic market for coal.
  • Job creation: Large investment will create jobs in the sector.
  • Increase in Demand: It will also set off demand in critical sectors such as mining equipment and heavy commercial vehicles.
  • Technology infusion: The country may also benefit from an infusion of sophisticated mining technology, especially for underground mines, if multinationals decide to invest.
  • Ease on Current account: In value terms, coal imports touched $26.18 billion in 2018-19, up from $15.76 billion in 2016-17.
  • This surge in coal imports, along with oil and electronics imports, has exerted pressure on the country’s current account in recent years.

Why the move matters

  • 70 % of energy production in India is coal-based.
  • Until now Coal India was the only commercial miner in the country for more than four decades accounting for 82 per cent of the coal production in the country.
  • The productivity of coal is still an issue in the country. Coal is a very crucial raw material that is used in the power sector and also in cement and metal sectors.

Way forward

The relaxation in regulations, along with previous initiatives such as allowing 100 per cent foreign direct investment through the automatic route in commercial coal production, can aid in boosting coal production in the country and help reduce imports.

Coal India Limited (CIL) has to be nurtured even as private players are welcomed.

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Coal and Mining Sector

FDI in coal mining

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FDI

Mains level : Implication of FDI in coal sector

The Union Cabinet has approved an ordinance to amend two laws to ease mining rules, enabling foreign direct investment in coal mining.

About the Ordinance

  • At a Cabinet meeting chaired by PM the ordinance to amend the Mines and Minerals (Development and Regulation) Act, 1957 and the Coal Mines (Special Provisions) Act, 2015 was approved.

Benefits of the proposed FDI

  • The decision would boost the ease of doing business and increase the growth avenues.
  • The Coal India would be strengthened and the government was aiming at achieving production of one billion tonnes by 2023-2024.
  • The “end-use restrictions” had been done away with allowing “anyone to participate in the auction of coal blocks”.
  • The ordinance would strengthen the auction process of those mines whose leases were expiring on March 31, 2020. Seamless transfer of clearances would also be facilitated.

Back2Basics

Foreign Direct Investment (FDI)

  • A FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
  • It is thus distinguished from a foreign portfolio investment by a notion of direct control.
  • FDI are commonly made in open economies that offer a skilled workforce and above-average growth prospects for the investor, as opposed to tightly regulated economies.
  • FDI frequently involves more than just a capital investment. It may include provisions of management or technology as well.

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