The demand for coal in India is set to rise in coming years as the country is not producing enough of the fossil fuel. Consequently, the import of coal — to make up for the shortfall — will also go up over the next few years. The bulk of the indigenous and imported coal is supplied to power and fertiliser sectors.
While India is enhancing production and supply, mainly through public sector Coal India Ltd and its subsidiaries, it continues to fall well short of the total demand for coal in the country.
The figures for the last fiscal and the current year indicate just how critical coal is to fuel power plants on one hand and economic growth on the other.
In 2012-13, India produced 558 million tonnes and supplied 570 million tonnes but still had to import nearly 140 million tonnes to meet the total demand for coal.
In the current year, India is likely to produce 615 million tonnes against an estimated demand of 770 million tonnes of coal while the shortfall of 155 million tonnes will be met through imports.
In fact, imports will hold the key to narrowing the demand-supply gap for many years, at least until India becomes self-sufficient in coal production, say industry experts.
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“India imported 138 million tonnes of coal last fiscal and it will continue to import coal in the near term. The demand for coal in India in FY14 is around 769.69 million tonnes. This is against the domestically available coal of 614.55 million tonnes, a shortfall of 155.14 million tonnes,” James O’Connell, Editorial Director – Coal, Platts, said at the ‘Commodity Week’ held in Mumbai recently.
He continued, “India has the potential of becoming the largest importer of thermal coal in the next three to five years. However, India will witness reliance on import of low calorific coal in the coming years.”
Platts is a leading global provider of energy, petrochemicals and metals information, and a premier source of benchmark prices for those markets.
India imports nearly 140 million tonnes of coal on an annualised basis and this is underpinned by demand from the power sector. Higher the power demand, higher the coal imports.
“By a conservative estimate, India could import 132 million tonnes in 2013, 141 million tonnes in 2014, 151 million tonnes in 2015 and 153 million tonnes in 2016, though it could be much higher,” O’Connell predicted.
According to the Ministry of Coal, Indonesia remains the leading exporter of coal to India, accounting for 80 millions tonnes of 138 million tonnes imported in 2012-13 followed by Australia with 30 million tonnes (mostly coking coal), South Africa with 17.6 million tonnes, USA with 6 million tonnes, and the balance 5 million tonnes from other countries.
Weakening rupee
Of immediate concern is the impact of the depreciating rupee on coal imports. “The falling rupee is making imports of coal frightfully expensive,” Platts quoted a New Delhi-based trader as saying. As a result, no one would be able to afford to buy unless the rupee climbed back to 60-61 against the US dollar which, at the time of writing this report, was valued at Rs.64.
“There is an atmosphere of uncertainty and panic due to the crashing rupee,” Platts quoted a second New Delhi-based trader. “There were no inquiries and even end-users that had been thinking of buying had shelved their plans.”
The weakening rupee is forcing Indian buyers to look for low calorific coal to save costs even as end-users are considering other alternatives like domestic coal and pet coke, and bagasse, as well as other fuel options.
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In view of the shortfall in the current fiscal, the Ministry of Power has advised power utilities to import 50 million tonnes of coal for plants designed on domestic coal. The ministry has estimated imports of 82 million tonnes for 36 power plants which includes 50 million tonnes for 27 power plants designed on domestic coal and 32 million tonnes for nine power plants designed on imported coal. Total imports, however, will be far in excess of 82 million tonnes in 2013-14. This will come at an estimated cost of $6,560 million (Rs.41,300 crore).
“Both US and global coal demand continue to grow and we expect the seaborne market to exceed 1.2 billion tonnes this year, as China and India set new import records. While seaborne coal supplies remain at elevated levels, the world’s largest producers, China and the United States, have reduced production, and we expect additional cutbacks in the second half of the year,” said Gregory H. Boyce, Chairman and CEO, Peabody Energy, the world’s largest private-sector coal company and a global leader in sustainable mining and clean coal solutions.
Peabody Energy is expecting 450 GW — China 220 GW and India 70 GW — of new coal-fired power generation to come on globally by 2017, which will require an additional 1.4 billion tpa of coal.
In spite of China and India driving record seaborne coal demand, industry supplies are likely to remain high with elevated output from Indonesia and Australia. Indonesia, in particular, is expected to meet any shortfall in Indian demand for coal in the next few years.
