Despite the country having substantial coal reserves, demand for the dry
fuel is much higher than domestic production resulting in increased imports. Acute
coal shortage in the country is hurting electricity generation and many power
producers are dependent on imported fuel to fire their plants. Coal fuels more
than half of India's power generation, but domestic production has not kept up
with demand from the power sector, leading to power cuts that crimp growth and
result in costlier imports.
Domestic coal demand touched 772.84 million tonnes (MT) during 2012-13
period whereas production was at 557.60 MT. Government had to import 113 MT of
coal during the April 2012 - January 2013 period, on top of a rise of 47 per
cent witnessed during the previous year. Country's coal imports in this fiscal
year could hit 165 million tonnes to meet the local supply shortfall, another
record after total imports crossed 135 million tonnes in 2012-13. Going by
estimates, the demand for coal is projected to be around 980 MT in the XII
Five-Year Plan period (2012-17) whereas domestic production is pegged at around
795 MT in the terminal year (2016-17). The gap would have to be met by way of
imports. Further, the dominance of coal is expected to continue in the power
sector. Nearly 60 per cent of country’s electricity generation is from
coal-based plants. At the end of June, coal-based power generation capacity
accounted for 1,32,288 MW of the total capacity of more than 2,25,793 MW.
State-run Coal India Ltd (CIL)
has decided to substitute its imported coal, it supplies to consumers with
high-grade output from its own mines, with the home variety becoming cheaper due
to the rupee's depreciation. As per the FSA provisions, the coal monopoly has
to meet 65-75 percent of the annual contracted quantity through domestic output
and supply another 15 percent of the agreed volume through imports. A few
months ago, the price of landed thermal coal at Indian ports had dropped 30-40
percent, erasing the price differential with Coal India's produce of the same
variety. Although the company had reduced the price of its premium quality coal
by 12 percent in May, imported coal continued to be cheaper or at a par,
keeping buyers away. However, with the rupee testing new lows over the past few
weeks, the imported variety has now become comparatively costlier.
Coal India (CIL), along with its
subsidiaries must ramp up the domestic productivity of coal to keep pace with
the existing demands of consumers. To increase productivity from existing
fields, it is important to deploy the latest technology and professional
assistance. Further, there is need to accelerate the process of land
acquisition and environmental clearances, to increase the total area under
exploration. Further, the government could adapt the NELP model (used for oil
and gas blocks bidding) and allow global mining majors to participate instead
of limiting the bidding to only end users (such as steel, cement and power
plants). This route, along with much needed investment, can be expected to
bring global technology and capabilities to the Indian mining sector. Thus, to
resolve the power crisis, CIL should take a holistic approach - considering the
interest of various stakeholders, eliminating roadblocks to increase domestic
coal production.
Coal India Ltd (CIL) would need
assistance from Government to recoup back the money from a total of 44 power
firms in the country, who owe CIL a staggering INR 10,967 Crore in non-payments.
For CIL, this money is enough to produce 68 million tonnes (mt) of coal this
financial year, a half of the country’s annual imports.
Infraline Energy Coal Knowledgebase Team
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