Coal India, the largest coal producing company in the world, recently announced plans to shutdown some mines that are no longer economically viable.

Government-owned Coal India recently informed the Bombay Stock Exchange that it will shut 37 underground mines as it is financially unviable to continue mining coal from them. The company plans to shut these mines by March 2018.

These mines comprise of about 9% of the total mines operational under Coal India. Media reports quoting industry sources stated that the company is expected to realise savings of Rs 800 crore ($124 million).

Coal India’s provisional production in 2016-17 was 554.13 million tonnes against a target of 598.61 million tonnes and recording a growth rate of 2.9 per cent. Of this underground mining contributed to around 31 million tonnes.

While underground mines have their own set of constraints and hurdles which significantly increase the cost of production, increased competition from renewable energy technologies, where fuel cost is nil, could also be a contributing factor.

Increased Competition From Renewable Energy

Earlier this year, solar power tariffs in India fell 26% over a period of 3 months as project developers placed extremely competitive bids for large-scale projects. The current lowest solar power tariff in India stands at Rs 2.44/kWh (3.8¢/kWh).

Wind energy tariffs in the first-ever auction organised by the Ministry of New & Renewable Energy were also substantially lower than the feed-in tariffs enforced by various states. The current lowest wind energy tariff bid in India is Rs 3.46/kWh (5.4¢/kWh) and is expected to fall further as 5-6 gigawatts wind energy capacity is planned to be auctioned every year till 2022.

Recent reports also stated that almost 14 gigawatts of planned coal-based power plants were shelved in India over financial viability concerns.

Renewable energy capacity addition, too, increased at a much faster rate in FY2016-17 compared to coal-based power plants.

A total of 6,990 megawatts of coal-based power capacity was added in India in FY2016-17 while the thermal power capacity addition during the financial year stood at 7,655 megawatts. In comparison, 14,140 megawatts of renewable energy capacity was added in the same period.

Coal India itself is planning to set up large-scale solar power projects. The company is expected to set up at least 1 gigawatts solar power capacity in the near future.

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