1. Prologue
    1. Infra
    2. India Infrastructure Finance Company Limited (IIFCL)
    3. Elasticity of energy use
    4. Consumption pattern
  2. Energy Pricing
    1. Petroleum products pricing
    2. Gas pricing
    3. Coal Pricing
  3. Coal Sector
    1. Types of Coal
      1. Peat
      2. Lignite / Brown coal
      3. Bituminous/ Black-Coal
      4. Anthracite / hard coal
    2. SING-rauli vs reni
    3. PSUs under Coal Ministry
    4. Fuel Sharing Agreement
      1. FSA highlights
      2. TCI
      3. Charges made by TCI
    5. Coal Mining: Open pit vs underground
    6. Coal washing
    7. 12th FYP: Coal
  4. Petro and Natural Gas
    1. NELP
    2. Refineries in India
    3. Alternate Sources of Hydrocarbons
    4. Coal bed methane (CBM)
    5. Oil Shale
    6. Gas Hydrate
    7. Shale gas
    8. TAPI pipeline
    9. The Auto Fuel Policy
    10. Rajiv Gandhi Gramin LPG Vitaran Yojna
    11. Gas flaring
    12. 12th FYP: Oil n Gas
  5. Mock Questions


11th chapter is about infrastructure

Infra related to Example Comment
  • Road
  • railways
  • Shipping
  • Aviation
I’ve already covered this content under Ch.10 (and its 5 sub-articles)
  • Postal
  • Telecom
  • IT
  • Coal, gas, petroleum
  • Electricity
  • Renewable energy
  • Covered here. Although in two parts
  • Part 1 of 2: energy pricing, coal, crude oil
  • Part 2 of 2: electricity and renewable + brief on JNNURM.
Urban infra
  • urban infra (JNNURM)


  • India is the fourth largest consumer of energy in the world after USA, China and Russia but it is not endowed with abundant energy resources
  • 12th FYP Wants 1 trillion dollar investment (~56 lakh crore rupees) in infrastructure. This is nearly double of the investment made during the Eleventh Five Year Plan
  • Infrastructure projects take a long time to plan and implement.
  • Delays in land acquisition, municipal permission, supply of materials, tender process/award of work, operational issues, etc. continued to drag down implementation of these projects. here are some numbers to show the gravity of the situation.
Sector Total infra projects Pending
Coal 51 21
Petro 71 37
Power 98 45
Railways 127 40
Roads 146 86

Performance / production

Sector Performance compared to previous year
Coal, cement, petroleum refinery marginally higher
steel and power-sector production lower
Fertilizer, crude oil, and natural gas production lower

Among the infrastructure services,

Service Growth
Railways (freight) Positive
Civil aviation Negative
Cargo handling negative

Performance / production

  • coal, cement, petroleum refinery was marginally higher than previous year.
  • steel and power-sector production was comparatively lower
  • Fertilizer, crude oil, and natural gas production also declined during the first nine months of this financial year.
  • Among the infrastructure services,
    • growth in freight traffic by railways has been comparatively higher so far,
    • civil aviation sector=negative growth
    • cargo handled at major ports=negative growth

India Infrastructure Finance Company Limited (IIFCL)

  • was set up in 2006 for providing long-term financing for infrastructure projects that typically involve long gestation periods.

PPP initiatives

  • Public private partnership helps bringing private-sector efficiencies in creation of economic and social infrastructure assets and delivery of quality public services
  • According to a World Bank Report on Private Participation in Infrastructure (PPI), India has been the top recipient of PPI activity since 2006
  • By end December 2012 there were 900+ PPP projects in the infrastructure sector with total project cost (TPC) of more than 5 lakh crore rupees.
  • These projects are at different stages of implementation, i.e. bidding, construction, and operational.

Elasticity of energy use

  • defined as the amount of energy consumed (Kwh) for generating one unit of gross domestic production (GDP) (rupee)
  • Its unit= Kwh per rupee.
  • Another unit = Kilograms of oil equivalent/US$
  • for India, the Elasticity of energy use =less than 1.

Consumption pattern

  • Out of the total consumption from all primary sources of energy
  • Electricity > Coal > crude oil

Energy Pricing

  • At microeconomic level, when Government  provides subsidy on petrol, diesel, LPG=underpricing of energy

Underpricing of energy leads to

  1. This reduces consumer’s incentive for being energy-efficient,
  2. Increases fiscal deficit
  3. Leakages (e.g. diesel is subsidized for farmers but even drunk rich brats with SUVs also enjoy the benefits.)
  4. Inappropriate use e.g. Rickshawllas blending subsidized kerosene with petrol = more pollution.
  5. Increased reliance on imports = Trade deficit, CAD, BoP problems.

In recent years, Government has taken several initiatives for rationalizing the energy prices in different sectors

Petroleum products pricing

  • Government dismantled the Administered Pricing Mechanism.
  • however, this decision was not fully implemented.
  • Government announced that the price of petrol was fully deregulated and the oil companies were free to fix it periodically.
  • However, diesel price deregulation was deferred
Sept 2012
  • Government  restricted the supply of subsidized cooking gas to 6 cylinders per household in a year.
January 2013
  • Government announced the new roadmap providing for a gradual price increase for diesel.
1st Oct 2013
  • Government  will give Direct Benefit Transfer (DBT) for LPG throughout the country using Adhar/UID card.
  • The annual subsidy per consumer is estimated at Rs 4,000.
  • 9 cylinders per year for a consumer. (earlier it was 6)

Gas pricing

  • Pricing of gas is presently done under the New Exploration Licensing Policy (NELP).
  • The Government provides the operator freedom to sell the gas produced from the NELP blocks at a market-determined price , subject to the approval of pricing formula.
  • The Government is reviewing pricing under the price sharing contract (PSC) to clarify the extent to which producers will have the freedom to market the gas.
  • For more on this go through Rangarajan Committee article click me

Coal Pricing

Under Integrated Energy Policy

Earlier=Before 2012 Now (from 2012)
On basis of useful heat value (UHV) on gross calorific value (GCV) basis
This even included heat trapped in ash content. No
  • This “price-reform” is likely to increase the prices of domestic coal to some extent
  • but this is a desirable adjustment because domestic thermal coal, continues to be underpriced.

Now let’s looks at the topics in segments: 1) coal 2) oil n gas 3) electricity 4) renewable

Coal Sector

Types of Coal

In ascending order of their quality (and price)

Type Note Carbon content %


  • Highest moisture content = smoke.
  • Most inferior.

Lignite / Brown coal

  • Important states:
  • TN (Neyveli), Gujarat, Rajasthan

Bituminous/ Black-Coal

  • Upon heating, it releases a liquid called Bitumin.
  • Used to make coking coal, gas coal, steam coal
  • Chattisgarh, Jharkhand, WB, MP, Odisha

Anthracite / hard coal

  • Short blue flame
  • Lowest moisture content.

SING-rauli vs reni

Coalfield Singrauli Singareni
State MP AP

PSUs under Coal Ministry

  • Coal India Limited (CIL)
  • Neyveli Lignite Corporation Limited (NLC)
  • Singareni Collieries Company Limited (SSCL)= a joint sector undertaking of Union + Andra state govt.
  • Coal deposits are chiefly located in Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Andhra Pradesh and Maharashtra.

Fuel Sharing Agreement

  • Why? To ensure fuel security to coal-based thermal power plants
  • When? Aug 2012
  • How? Indian Government issued a presidential directive to Coal India Ltd, asking them to sign fuel supply agreements (FSAs) with power companies.

FSA highlights

  • Fuel sharing agreements
  • Signed between coal India ltd (seller) and thermal power companies (buyer/customer)
  • Duration: The FSAs will be signed for a period of 20 years and will be reviewed after every five years.
  • If coal India doesn’t provide 80% of the assured supply, then they’ve to pay penalty to buyer.
  • If CIL cannot meet demand through domestic supplies, it can meet the shortfall through imported coal.
  • But, if a customer does not accept imported coal, CIL doesn’t need to pay any penalties.


  • The Children’s Investment Fund Management
  • UK-based hedge fund TCI, the biggest foreign investor in Coal India ltd (CIL)
  • It is a minority stakeholder in Coal India. (although largest investor in Coal India after Government of India)

Charges made by TCI

  • TCI accuses that Coal India doesn’t protect the interest of minority stakeholders, they just do things to please their political masters (after all Government of India owns the majority shares). It had initiated legal action against CIL in Kolkata High Court.
  • Politically connected companies are receiving fuel supply agreements (FSAs) at half market price or a third of market price for coal.
  • It is a system that encourages corruption because not everybody can get coal at half price. So obviously there is a massive incentive for companies to pay bribes in order to get FSA contracts.
  • The thermal power companies that get cheap coal from Coal India (under FSA)- they don’t sell electricity  at cheap rates. So the benefits are not trnasfered to the final consumer (aam admi).
  • These thermal companies just extract monopoly and profit margins from the benefit of the cheap coal.

In case you wonder why should a UK  based investor worry about all this?

Ans. Because TCI is a minority shareholder in Coal India. And recall the debt vs. equity article = Since TCI is a shareholder, they will get more money (dividend) only if Coal India makes more profit. But coal India is a mess, just like Air India.

Coal Mining: Open pit vs underground

Open pit mining


  • Also known as opencast mining, open-cut mining, and strip mining.
  • to extract rock or minerals from open ground surface.
As the name suggests: underground, via tunnels.
no Require complex ventilation systems, structural support, lights, other safety measures = expensive. (and dangerous also for the laborers/miners)
Leads to more ecological degradation. Less
85% of India’s coal produced from open mines. (imagine the damage!) In China, 90% of the coal is digged from underground mines.

Coal washing

  • coal contains lot of dirt and incombustible material. This leads to increased transport cost (due to additional weight of those waste material) + pollution (due to the smoke)
  • In coal washing process, the coal is mixed with a liquid to separate and settle the impurities. The “washed” coal produces less pollution.
  • Coal washing= example of clean coal technologies.

12th FYP: Coal

  • Coal and lignite will continue to dominate the energy scenario
  • Therefore, Energy exploration, clean energy alternatives, energy conservation, and energy sector reforms will be critical for energy security.
  • 11th Five year plan wanted to augment domestic coal production from captive mines.
  • but there were problems like delays in forest and environmental clearances, land acquisition
  • In 12th FYP, Coal India ltd (CIL) will continue to play a major role for coal supply.
  • but CIL production alone will not be enough to meet the rising demand.
  • So need to ensure that additional captive coal blocks start producing in Twelfth
  • plan for larger imports of coal
  • setting up independent coal regulator

clean tech

  • Increase Underground mining of coal.
  • Encourage Coal washing


  • Coal Mines (Nationalization) Act, 1973 does not allow private companies to mine coal for sale to third parties
  • although it allows captive mining for specified end use sectors
  • hence coal sector doesn’t attract big investment.
  • There is need for large (foreign) investment and technology in the coal sector.
  • Because a host of small (desi) players would not increase coal production to desired levels.

Petro and Natural Gas

  • The Ministry of Petroleum and Natural Gas is looks after the matters related to
    • of exploration and production of oil and natural gas
    • import of Liquefied Natural Gas (LNG),
    • petroleum products: refining,marketing,distribution,import,export and conservation.
  • Government of India approved the New Exploration Licensing Policy (NELP) in 1997 and it became effective in February, 1999.


To attract private investment into oil and natural gas. There have been nine rounds of bidding, starting with a first in 1998

Government has prioritized allocation of gas produced from NELP blocks in the following order:

  1. Fertiliser plants producing subsidised fertilisers
  2. LPG plants
  3. Power plants
  4. City Gas Distribution (CGD) for CNG and domestic PNG
  5. Steel, petrochemicals, refinery, captive power plants and CGD for industrial and commercial customers

Assets abroad

  • We also have oil n gas assets in Russia (Sakhalin, Magadan), Sudan, Brazil, Syria, Vietnam, Venezuela and Colombia.
  • Production from overseas oil and gas blocks is presently about ~10 per cent of India’s domestic production

Refineries in India

Public sector 17
Private sector Three:

  • Reliance= Two refineries in Jamnagar
  • Essar= one refinery in Vadinar, Gujarat
Joint venture Two

  • Bina, MP= BPLC+Oman
  • Bhatinda, Punjab=HPCL+Mittal
Total 22

Reliance is largest refiner at any single location in the world. (capacity=~1.2 million barrels per day (MBPD).

Alternate Sources of Hydrocarbons

Important are four: CBM, Oil Shale, Gas hydrate, Shale gas

Coal bed methane (CBM)

  • The primary energy source of natural gas is a substance called methane (CH4).
  • Coal bed methane (CBM) is simply methane found in coal seams.
  • CBM is generated either from a biological process as a result of microbial action or from a thermal process as a result of increasing heat with depth of the coal.
  • Potential sites in India: Jharia and Raniganj coalfields

Oil Shale

  • from sedimentary rocks that contains “kerogen” (a type of fossil fuel).
  • Pyrolysis : under this process, above rocks are heated at extreme temperature without oxygen. Thus kerogen is released. It is further refined and thus we get shale oil.
  • Oil shale can be mined and processed to generate oil similar to oil pumped from conventional oil wells;
  • Challenge: extracting oil from oil shale is more complex than conventional oil recovery, hence more expensive

Gas Hydrate

  • also known as clathrate hydrates (methane ice, fire ice)
  • it is solid ice-like form of water.
  • it contains (methane, ethane etc.) gas molecules in its cavities
  • they are essentially natural gas in a “frozen” state.
  • Some estimates suggest that the total amount of natural gas bound in hydrate form may exceed all conventional gas resources – coal, oil and natural gas, combined.
  • Challenge: When gas hydrates are brought to the surface the pressure is reduced and the temperature rises. This causes the ice to melt and the methane to escape. Hence drilling, extraction, commercial use = difficult and expensive.

Shale gas

  • Basics of Shale gas already covered under https://mrunal.org/2012/07/enb-shalegas.html
  • India has several shale formations
  • In the sedimentary basins of Cambay, Gondwana, Krishna-Godawari and Cauvery.
  • USA and India have signed MoU for giving training to Indian geo-scientists and engineers for exploring shale gas.

TAPI pipeline

  • A 1680 km pipeline from Turkmenistan – Afghanistan – Pakistan – India (TAPI)
  • It’ll become operational by 2018.
  • It will carry 90 million metric standard cubic meters a day for a 30 year period.
  • India has to pay a transit fee to Pakistan and Afghanistan as the pipeline passes through these nations.
  • More on https://mrunal.org/2012/07/diplo-tapi.html

The Auto Fuel Policy

  • Approved by the Government,
  • for upgradation of the quality of auto fuels (Petrol and Diesel)
    • to Bharat Stage (BS) IV in 13 identified cities
    • to BS-III in the rest of the country.
  • During 2011-12, BS-IV fuels have been introduced in seven cities, namely, Puducherry (UT), Mathura (UP), Vapi (Guj), Jamnagar (Guj), Ankaleshwar (Guj), Hissar (Haryana) and Bharatpur (Raj) between January to March, 2012.
  • Efforts are being made to progressively expand coverage of BS-IV fuels with introduction of these fuels in 50 more cities by 2015.

Rajiv Gandhi Gramin LPG Vitaran Yojna

  • LPG ‘Vision-2015’: wants to raise LPG population coverage in rural areas and in the  areas where LPG coverage is low.
  • 2009: Rajiv Gandhi Gramin LPG Vitaran Yojana (RGGLVY) for small-size LPG distribution agencies.
  • Under this scheme 75 per cent population is to be covered by 2015 by releasing 5.5 crore new LPG connections.

Gas flaring

environment gas flaring

  • When the drilling company burns the natural gas that cannot be processed or sold= this is known as Gas flaring.
  • Gas flaring is also done during emergencies like power failures, equipment failures etc. to prevent any accident.
  • Currently ~3% gas produced by ONGC and OIL is flared.
  • 12th FYP seeks zero flaring of gas and use it for commercial purpose.

12th FYP: Oil n Gas

  1. Explore Alternate Sources of Hydrocarbons such as coal bed methane, gas hydrate, shale gas, oil shale
  2. National Gas Hydrate Programme
  3. 0% Flaring of Natural Gas
  4. Phasing out subsidies on domestic LPG and PDS kerosene.
  5. Reduce Kerosene supplies because RGGVY and LPG connections are being given in the rural areas.
  6. Rationalise tax structure in sales of petroleum products considering its thermal value for its use in transport, industry, power, households and other sectors.
  7. Give ‘Declared Goods Status’ for natural gas/ LNG so that it is available at uniform price in most of the States.

Mock Questions

  1. Elasticity of energy use means
    1. Amount of GDP spent for producing one unit of energy.
    2. Change demand of energy with change in price of energy.
    3. Amount of energy consumed for generating one unit of GDP.
    4. Change in the consumption pattern of energy with rise in income.
  2. At present, Coal pricing mechanism is based on
    1. useful heat value
    2. gross calorific value
    3. net calorific value
    4. none of above
  3. in terms of quality, which of the following is lowest?
    1. peat coal
    2. brown coal
    3. black coal
    4. hard coal
  4. in terms of price, which of the following is most expensive?
    1. brown coal
    2. lignite
    3. black coal
    4. hard coal
  5. Correct statements about fuel sharing agreements (FSA)
    1. they are to be signed between ONGC and fertilizer companies.
    2. Under the agreement, ONGC is liable to pay penalties for shortfall in supply of gas.
    3. both
    4. none
  6. Correct statements
    1. Singrauli mines are located in Andhra
    2. In India, majority of domestic coal supply comes from opencast mines.
    3. Reliance is the only private sector refinery in India.
    4. None of above
  7. which of the following reduces air pollution?
    1. Gas flaring
    2. Coal washing
    3. Both
    4. none
  8. Oil shale is obtained from
    1. coal bed methane
    2. Metamorphic rocks containing clathrate hydrates
    3. sedimentary rocks containing kerogen
    4. None of above