The occurrence of lignite in Gujarat has opened new avenue for industrial development. Precise figures for the total estimated reserves of lignite in Gujarat are not available but latest investigations suggest about 700 million metric tons (MMT) which may be revised upwards to as much as 2000 MMT with future explorations. The present annual production is around 3-4 MMT, the bulk of which comes from Kutch, followed by a small production from South Gujarat. Currently, it has been estimated that lignite occurs in about 1200 sq.km area in Kutch, about 1000 sq. km in Saurashtra and 800 sq. km. in South Gujarat (Anon., 1996a).

Kutch has lignite deposits of the order of 210 MMT occurring chiefly at Panandhro, Akrimota, Umarsar, Mata-no-Madh-Lefri and Lakhpat-Dhedhadi in Lakhpat Taluka. Kutch lignite is favourable for utilisation in power generation because of its high calorific value and low moisture content (Anon., 1996a).

Gujarat Mineral Development Corporation (GMDC) has been mining lignite from Kutch since 1974 at Panandhro. The production of lignite from Kutch, which began with a modest 0.013 MMT in 1974-75, now stands at 3.48 MMT in 1994-95.