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The Imports of Coal in India

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Words: 980 |

Pages: 2|

5 min read

Published: Jan 4, 2019

Words: 980|Pages: 2|5 min read

Published: Jan 4, 2019

India is the 3rd largest coal producer in the world after China and the US. The total coal production in India was around 612 million tons (MT) in FY 2015, which has increased to 626 MT in FY 2016. Ninety percent of the domestic production comes from public sector coal producers while only 10% is produced by the private sector.

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In spite of sufficient coal reserve, we have not been able to meet our demand from our own production. The supply of high quality coal in the country has been more limited than the low quality coal. Therefore, to bridge the demand-supply gap as well as sweeten indigenous production, we have no option but to resort to import of coal, especially low-ash coal.

As per India’s Import Policy 1993-1994, coal has been put under Open General License (OGL) and therefore consumers are free to import coal based on their requirement. Superior quality non-coking coal is imported mainly by coast-based power plants and other industrial users viz., paper, sponge iron, cements and captive power plants, on consideration of transport logistics, commercial prudence, export entitlements and inadequate availability of such superior coal from indigenous sources.

The imports of coal in India have increased at a rate of around 25% annually over the past five years.

The biggest consumer of coal in India is the power sector. Coal powers 61% of the installed capacity and more than 84% of electricity generated. On the thermal power generation growth, there is uncertainty about the actual thermal capacity expected online by 2020. Growth of plant capacity (a supply of plants analysis) is contingent on sensitivity against the contributing hurdles (statutory clearances, land and environmental approvals, funding etc.).

On the other hand, electrification of new areas would inevitably lead to increase in demand (power demand side analysis). The translation of the demand for additional electricity into installed capacity would require attributing value to additional consumption and to variables like plant efficiency values (33%-38%), Plant Load Factors (PLFs, 64.46% was the 2014-15 thermal average) and the cost of generation.

At present 8% of coal production is through underground mining technology. If CIL has to produce 900 MT by 2020 it would need to plan for an increased share of production from underground mining. As shallow resources deplete, coal would be mined from greater depths, and it would pose a challenge in the form of technical capabilities and a longer development time period. The costs of underground mining would be substantially higher and the price of such coal will need subsidizing to compete with the imported coal.

Underground mining infrastructure takes longer to develop (around six-seven years) because of which an open cast mining or contractual mining is the only eventuality to improve production drastically in a shorter time frame.

India was the 1st country in the world to set up a ministry of non-conventional energy resources, in the early 1980s. India’s overall installed capacity has reached 329.4 GW, with renewables accounting for 57.472 GW as of 14 June 2017. Wind contributed to 61% of the renewable power, while solar contributed nearly 19%.

Draft National Electricity Plan, 2016 prepared by the Government of India states that India does not need additional non-renewable power plants till 2027 with the commissioning of 50,025 MW coal based power plants under construction and additional 100,000 MW renewable power capacity. The improvements in solar thermal storage power technology in recent years has made non-polluting and cheaper solar power plants undisputed choice to replace all fossil fuel fired power generation

During the fiscal year 2016-17, the energy availability was 1,135.334 billion KWh with a short fall of requirement by 7.595 billion KWh (-0.7%) against the 1.1% surplus anticipated. Reliable generation and supply of electricity is essential for addressing India’s water pollution and associated environmental issues.

To understand the requirement of coal in real term, the planning commission of India has been estimating demand for each year in advance. However, the actual supply (Dispatch + Import – Export) has been showing variance from these estimates. The estimated production, demand, import and export of coking coal and non-coking coal are given in statement 17 and Statement 18 respectively

v Coal demand in 2020 is likely to be anywhere near 1,500 MT for domestic coal

v Imports cannot be wished away, not only coking coal, or even distant coastal plants, but even other plants that have been designed for higher quality coal (and even a specific coal)

v Demand for power is likely to be more a bottleneck for coal demand than capacity of power plants. If all the upcoming power plants actually are built, even accounting for slippages, the PLF would have to be low. PLFs are a major issue for finances of thermal power plants, a situation that may become worse with the growth of renewable power

v The Government of India plans to achieve a domestic coal production target of 1.5 billion tons by 2020–an ambitious growth from 2015’s production of 612.4 million tons

v The macro environment also raises questions on the recently auctioned mines from coming into production in light of depressed commodity prices which have made it cost effective to import than mine locally. This in all likelihood will reduce the foot off the accelerator if not apply brakes on additional captive capacity coming online and also negatively impact further auctioning of mines for end-use plants, spilling into lower price realization from domestic coal which is suffering from over supply at the moment. It is quite possible there could be a price cut in CIL coal. This implies the private sector targets for 500 million tons of coal may remain a non-starter

v The assumptions on the non-power sector coal imports need to be adjusted for the future based on parity prices of imported coal and also on import substitution of finished products in each of these sectors

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The total coal demand has been calculated taking into account the requirements of the power sector as well as the non-power sector.

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The imports of coal in India. (2019, January 03). GradesFixer. Retrieved March 29, 2024, from https://gradesfixer.com/free-essay-examples/the-imports-of-coal-in-india/
“The imports of coal in India.” GradesFixer, 03 Jan. 2019, gradesfixer.com/free-essay-examples/the-imports-of-coal-in-india/
The imports of coal in India. [online]. Available at: <https://gradesfixer.com/free-essay-examples/the-imports-of-coal-in-india/> [Accessed 29 Mar. 2024].
The imports of coal in India [Internet]. GradesFixer. 2019 Jan 03 [cited 2024 Mar 29]. Available from: https://gradesfixer.com/free-essay-examples/the-imports-of-coal-in-india/
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