Business diversification at

Coal India Ltd.

“Looking Beyond Coal”

Presented By:
Ajay Gupta
Himanshu Pandey
Pankaj Chandra
Pratyush Vaidya
Rajnish Mishra
Shivank Kumar
Summary
CIL is a ‘Maharatna’ company. It has seven producing subsidiaries namely Eastern Coalfields

Limited (ECL), Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL),

Western Coalfields Limited (WCL), South Eastern Coalfields Limited (SECL), Northern

Coalfields Limited (NCL), and Mahanadi Coalfields Limited (MCL) and One mine planning

and consultancy company that is Central Mine Planning & Design Institute (CMPDI). In

addition, CIL has a foreign subsidiary in Mozambique namely Coal India Africana Limited

(CIAL). The mines in Assam i.e. North Eastern Coalfields (NEC) are managed directly by CIL.

CIL has incorporated two new subsidiaries i.e. CIL Navi Karniya Urja Limited for the

development of non-conventional/clean & renewable energy and CIL Solar PV Limited for

development of the solar photovoltaic module.

• Mahanadi Coalfields Limited has four (4) subsidiaries which are i) MJSJ Coal Limited

ii) MNH Shakti Ltd, iii) Mahanadi Basin Power Ltd iv) Neelanchal Power Transmission

Company Private Ltd

• SECL has two subsidiaries i) M/s Chhattisgarh East Railway Ltd (CERL) ii)M/s

Chhattisgarh East-West Railway Ltd (CEWRL)

• CCL has one subsidiary – Jharkhand Central Railway Ltd

▪ Indian coal majors have large reserves, unmatched experience and

strong balance sheets
▪ They must continue to invest in coal, and attract new investment,
given India’s twin needs:
‒ Growing energy demand, and
‒ Need to reduce cost of power

▪ The sector must also look beyond coal, considering:

‒ Expected slowdown in coal demand in 20-30 years
‒ India’s massive proven coal reserves of 150bn tons (R/P>150 yrs)
‒ India’s strategic need to reduce energy import dependence
‒ India’s economic need to reduce cost of power

▪ Two kinds of opportunities to make the most of this valuable national

resource:
‒ Maximise use while coal demand remains
‒ Use available assets and experience in new, evergreen areas

▪ Lessons learned by others in diversification must be carefully

considered
At the COP26 climate summit in Glasgow, Prime Minister Narendra Modi said India would
achieve net-zero emissions by 2070.With a view to ensure enhanced energy security CIL may
diversify into:
Related diversification:- New products that have technological and market synergies with existing
product, by means of Acquisition, internal development and joint ventures.
i) Coal to chemical industry (eg: Urea, Acetic acid etc)
ii) Diversification to non-fuel minerals (eg: Bauxite)
iii) Evacuation and logistics (Rail/waterway/port/coal handling infra)
iv) New & Renewable Energy (Solar Power Value Chain)
v) Forward integration into thermal power generation
vi) Unlock new market, new reserve, new value
New and Renewable Energy Resources
According to the International Energy Agency (IEA), coal consumption in India is projected
to peak from 2030-2035, after which there will be a decline. Getting itself future ready, Coal
India Ltd (CIL) is focusing on renewable energy — particularly solar — as a step towards
diversification.

The company plans to generate close to 3,000 MW of solar power by 2024 at an estimated
investment of ₹13,500 crore. While part of it would be funded through the company’s internal
accruals, the remaining would be met through the SPV and bank loans.

CIL will involve ingot wafer, cell, module and generation. It will have first facility of
polysilicon in India. Currently, China has about 90% monopoly in its manufacturing. Thus, this
is a major step towards Atma Nirbhar Bharat Abhiyan [Self-reliant India Initiative].

Solar power value chain:The main products of the manufacturing process are polysilicon,
wafers, cells, modules, mounting and tracking systems and electrical components. Services
include project development, wholesale distribution, design, engineering, construction and
maintenance.
Key success factors for new ventures:

• Benchmark with the best, and plan with high aspirations

• Engage external technical and business expertise, including partners selectively
• Create independent teams with the best of external and internal talent
• Give it time, be prepared for challenges
• Success story example: IOCL successfully diversified into petrochemicals business

CIL diversification journey:

In 2016, with a view to enhance food security of the nation, CIL Board accorded its approval
for formation of Hindustan Urvarak & Rasayan Limited (HURL), a JV company with NTPC,
IOCL, FCIL and HFCL for revival of three defunct fertilizer plants of FCIL and HFCL. Further
in December, 2020, with a view to enhance energy security and raw material security of the
nation, the CIL Board accorded its approval for diversification into the following business
areas:

i. Solar Power Value Chain (Ingot-Wafer-Cell-Module)

ii. New & Renewable Energy (Non-Conventional)
iii. Aluminium Value Chain (Mining-Refining-Smelting)

CIL has approved an aggregate investment of Rs. 2,295.96 Cr. as a part of its equity capital
towards setting up of total three natural-gas based fertilizer plants at Gorakhpur (UP), Barauni
(Bihar) and Sindri (Jharkhand).

CIL has floated a tender to set up a coal to liquid (methanol) plant at in investment of Rs 6,000
crore in tandem with the government’s methanol economy programme for reducing oil imports.
The plant would come up at the Dankuni Coal Complex in West Bengal with CIL leasing out
land for the project’s life assessed to be 25-30 years. The plant would come up on build-own-
operate model and produce 6.76 lakh tonne of methanol a year. This would be used for blending
with petrol to up to 15% for marketing in West Bengal, Odisha, Jharkhand and Bihar.
Surface coal gasification, converting coal to syngas and subsequently to chemicals, has
prompted CIL to explore possibilities of setting up five plants in ECL, SECL, WCL and CCL
areas, for which pre-feasibility and marketability studies are underway. CIL envisions
producing 1.3 million metric standard cubic metres of CBM a day from Ranigunj and Jharia
coalfields for which it is to invest of `2,400 crore.

The company plans to set up eight more washeries — 5 for coking coal in the BCCL area and
3 for non coking coal in the MCL area to wash an additional 47 mts, taking up CIL’s washing
capacity from present 34.63 mts a year to 81.63 mts a year from 20 washeries.

CIL will set up three specific-purpose vehicles (SPVs) for an about ₹45,500-crore integrated
solar wafer manufacturing facility, a ₹38,000-crore green-field aluminium project, and an
about ₹23,400-crore aluminium smelting unit with state-run National Aluminium Company
Ltd (NALCO).

Challenges in diversification at CIL:

As India plans to transition away from coal for its energy demand, it needs to look for

alternative revenue and livelihood sources for those associated with the industry,

especially states for whom coal forms a major part of their revenues.

The diversification of revenue sources for such states and their workforce can be

undertaken by establishing industrial parks, solar parks, and battery energy storage

projects.
For major coal mining states – including Madhya Pradesh, Chhattisgarh, West

Bengal, Jharkhand, Maharashtra, Uttar Pradesh, Odisha key findings related to

vulnerability of livelihoods and coal-dependent revenue are as follows:

• It has been estimated that nearly 60% of the people residing in the state
of Chhattisgarh lie in the bottom 40% of the income class or the lowest
two wealth quintiles. Similarly, the estimates for West Bengal, Odisha,
Jharkhand and Madhya Pradesh have been reported at 53%, 63.8%, 68%
and 54.7% respectively.

• Coal workers may face long spells of unemployment with income

reduction by up to 30% over the next 15-20 years

• Share of coal workers very less among the 400,000 people skilled annually
under govt. programmes

• Royalty paid from coal mining in India has increased from INR 99.73 billion
in 2014-15 to INR 147.46 billion in 2018/19 with a CAGR of 8.14%

• Coal royalty provided 4.2% of tax revenue receipt while 14% of non-tax
own revenue receipt for most coal states from 2014-18

• Coal companies also contribute 26% of their profits into the District
Mineral Fund

• Royalties received in Chhattisgarh, Odisha, Telangana and Madhya

Pradesh from coal mines – 15% of total royalty collected

"Transition to a low-carbon economy and towards clean energy is important, but growing
concerns related to labour displacement, revenues of states, and of the power
sector need to be addressed.”

For post-coal economic revitalisation, we recommend promotion of rural enterprise,

micro-credit financing, increasing energy access through renewable energy
development, infrastructure financing through off budget borrowing mechanism,
strengthening human capital through a multi-stakeholder partnership, consistent social
dialogue building, and suitable policies.
Focus on training in new technologies related to floating solar, EV charging, rooftop

solar, biomass etc.

Conclusion

The entry of renewable energy sources would not destabilise coal in immediate
future. coal continues to stoke many non-power industries including cement,
fertilizers, sponge iron, aluminium and others. Besides diversification, Coal India
will continue expansion of its existing projects to meet country’s coal demands. The
company has a plan to invest ₹2.45 lakh crore in next two-three years to expand its
business, which includes the ₹1 lakh crore diversification plan.

The future holds challenges for the coal sector but also presents an opportunity of
never-realised-before potential. Can we convert the fuel of the past to fuelling the
future? We are already on our way”