New Delhi, Nov 21 (IANS) The transition to clean energy sources led to subdued participation in the recently concluded first round of commercial coal mine auction, said India Ratings and Research.
Accordingly, in a report, the agency said that domestic coal mining has opened up at a time when the world is transitioning away from coal as a fossil fuel to cleaner energy sources.
“Hence, participation from the players in the recently concluded first round of commercial coal mine auction has remained limited,” the report said.
In the first round of commercial coal mines auction a total of 19 mines have been allocated to the bidders.
These mines have an estimated annual output production of 51 million tonnes (mt) with total reserves of 3,045 mt.
“Globally, the funding sources to fossil fuel has declined as large financial institutions and equity investors have stayed away from the sector. Additionally, the awarding of mines is just the first step and multiple challenges will still remain before the commercial production commences at these mines.”
Historically, the report cited a gap of three-to-seven years between the awarding of mines and the commencement of production.
“Thus, Ind-Ra believes the benefit from the auctioned mines would only be visible after a considerable time gap,” Ind-Ra said.
According to the report, global players did not participate at all in the first round of auction, despite the government of India (GoI) allowing 100 per cent foreign direct investment in commercial coal mining.
“Ind-Ra expects the participation of international players in coal auctions to remain weak in the future as well, owing to the overall transition towards cleaner fuels from fossil fuels,” the report projected.
During 2019, the share of renewables globally increased by 176 gigawatt (GW) yoy to 2,537GW and is likely to increase to 3,500GW-3,800GW by 2025, as per the International Energy Agency.
Additionally, large global lending institutions have pledged to reduce their exposure to fossil-fuel lending by 2030.
“This move has made it difficult for investors to secure funding for setting up new coal-based power plants and the development of coal mines,” the agency highlighted.
“The quality of domestic coal, as reflected through calorific value and ash content, is significantly inferior than international traded coal, hence, there exists limited export potential for the output produced.”
Besides, the report pointed out the low interest shown by the domestic private sector as only 19 mines could be auctioned out of the 38 on the block.
“Moreover, few very large mines like Chhendipada, Kurloi (A) North, Machhakata, Brahmanbil-Kardabahal, North Dhadu with average annual production of around 15mt received one or no bids and hence, were not eligible for being awarded,” it added.