Lignite basically is a fuel mineral found in four districts of Gujarat and Kutch possesses 15.2 percent of the total proved reserves in Gujarat. The tertiary rock belt in western Kutch mostly in the Lakhpat Taluka (in Panandhro, etc) has large deposits of lignite.

The quality of lignite found in Kutch has higher calorific value (3500-4500) compared to lignite found in other parts of Gujarat. Also the presence of sulphur content (dry basis 1% -6%) in the lignite adds to the quality of lignite.

Kutch is also a major lignite producer and it accounts for 89 percent of lignite production followed by Bharuch and Surat district. Gujarat is the second largest lignite producer in India after Tamil Nadu. In 2002, Tamil Nadu produced 78 percent followed by Gujarat’s 21 percent of India’s total production. Annual production of lignite in Kutch ranged from 3.7 to 5 million metric tonnes 5during 1995 to 2002 with a CAGR of 5 percent. Production has experienced a slump during 1999 and 2000 and thereafter has registered a 37 percent growth from 2000 to 2002 to regain its annual production figures experienced during 1996, 97 and 98. The consumption of lignite has increased in the last years with the commissioning of the second phase of power plant at Panandhro. Gujarat Mineral Development Corporation owns the sole license for mining and selling of lignite. But there are few public agencies with licenses to mine only for captive consumption.

Lignite is a basic source for thermal power plants. With accelerating industrialisation, the demand for power in Gujarat has been increasing. Based on lignite available at Panandhro and Akrimota in Lakhpat Taluka in Kutch GMDC6 has developed a power plant with 250 MW capacity at Chher Nani Village in the region.

Lignite has several other uses. It can be used as a solid fuel by briquetted and carbonisation with chemical by-products, as a feedstock for making urea and methanol. It also finds application in chemical and metallurgical industries as coke. Raw lignite is used in cement and other industries. Power industry consumes 43 percent, textiles 23 percent, and chemical industry 12 percent. Lignite produced in Gujarat is mainly consumed in the state itself by these sectors.