Going underground: India must dig deep to keep lights on

Piparwar, run by the state miner, produces some of the lowest-cost coal in India, just what's needed for a country struggling to get enough of the "black diamond" to fix a power crisis that recently plunged half a billion people into darkness and chokes economic growth.

With oil and gas output disappointing and hydropower at full throttle, Asia's third-largest economy still relies on coal for most of its vast energy needs. About 75 percent of India's coal demand is met by domestic production and, according to government plans, that won't change over the next five years.

The hitch is that India is running out of cheap open-cast coal from existing mines like Piparwar. Unless it starts investing now in underground mines, within a decade it will face a huge leap in energy import costs that could derail industrial projects, crimp economic growth and drive up inflation.

"With the ballooning demand for coal in India, open-cast mining has become the easy option, albeit at a great cost to the environment and society," said a senior executive at a power company, speaking on condition of anonymity.

"This easy option is likely to be exhausted within the next 10-12 years when the shallow seams amenable to open-cast mining dwindle."

WRONG DIRECTION

Coal India Limited , the state-run miner that produces 80 percent of the country's coal, recognises the need to raise the amount that underground mining contributes to total output from just one tonne out of every 10.

But the higher costs and lower output of deep mining - Coal India's chairman has said its existing underground mines are loss-making - are pushing it in the wrong direction.

Its plans for new mines target a contribution from underground of only about 7 percent.

That would be disastrous, argues DC Panigrahi, director of the Indian School of Mines in Dhanbad, a mining town in the heart of Jharkhand, the country's most productive coal state.

He says that unless Coal India cuts its dependence on open cast mining by around 5 percentage points per year, overall output will start to stagnate around the end of this decade.

If India is going to meet its output targets of 750 million tonnes by 2016-17 - a rise of nearly 40 percent from the current financial year - it needs to act soon. It takes on average six years from planning to production for an underground mine.

India used to mine most of its coal underground, just as the world's biggest producer, China, currently does for its huge output of more than 3.5 billion tonnes a year. But it was not getting enough out of the ground fast enough to meet demand.

"When everything was underground, the growth rate was less than 2 percent per annum. We needed more than 5-6 percent growth and that could only come from open cast," said Partha Bhattacharyya, a former chairman and managing director of Coal India.

Open-cast mining strips away topsoil, or "overburden", to expose the seams underneath. It is much more economical than underground mining, where up to 70 percent of the coal must be left to act as support for the tunnels and galleries.

But while India has ample coal reserves - at about 286 billion tonnes, they are the world's fifth-largest, according to BP - not all of that is accessible by simply removing topsoil.