BHUBANESWAR : India’s dependence on overseas reserves of coal to fire its power plants seems to be at the point of no return. The fact that India almost tripled its imports of the dry fuel from America in the first quarter of 2018 from a year earlier and that several state-owned power utilities have begun buying foreign coal due to domestic coal shortages undermines a pledge by the government to cut thermal coal imports to zero by March 2019.
The imports of coal have risen by over 14 per cent at 217 million tonnes (MT) in 2017-18 after dropping by 5.6 per cent and 4.5 per cent respectively in 2015-16 and 2016-17. In the first quarter of 2018, imports rose over 15 per cent. Meanwhile, Coal India (CIL) is struggling to step up production, in a setback for the country’s long-term plans to eliminate imports. The public sector coal producer produced 567 MT of coal in 2017-18 against a target of 600 MT. Notably, the coal ministry had initially targeted 660 MT of coal production in 2017-18. On the other hand, inability of domestic supply presents opportunities for miners in the US and Australia, who are struggling to find buyers at home.
Other factors such as regulatory changes and domestic logistic bottlenecks amid surging power demand have added to the woes. “Availability of coal remains poor for the last couple of months. And, this is primarily because there’s a shortage of trains to carry the fuel from its mines to the power plants,” pointed out a senior official of CIL, expecting the government to expand the rail networks. It may be noted that two key rail links that would have increased the transportation volume — Tori-Shivpur and Jharsuguda-Barpali — were slated to be completed by June 2016. The Mand-Raigarh rail link project was also targeted for commissioning by December 2017. However, none of these projects has become operational so far.
Consequently, the power plants are left with just 10 days of stock on an average, and 20 out of the 113 power stations listed by Central Electricity Authority (CEA) have critical stock (less than seven days), finds out a report by the CEA. More to that, officials in the state-run power utilities of Andhra Pradesh and Tamil Nadu have stated that the two states have imported a total of 1.6 million tonnes of coal since the beginning of this year.
To meet the growing power demand, Maharashtra too has floated a tender for obtaining 1 MT of coal, while Gujarat also plans to ramp up imports by 400,000 tonnes this year. “This is because the short-term tariffs are more than `4.5 per unit of electricity and the power plants, especially in the coastal areas, find it commercially viable to import coal,” said Ankur Agarwal, senior analyst, India Ratings and Research.
Similarly, data from American Fuels & Natural Resources shows Adani Enterprises accounted for about one-sixth of all the imports, buying 6.51 MT in the first three months of 2018. The Tata Group also imported 5.23 MT of coal during the period with Swiss Singapore, part of the Aditya Birla Group, taking in 2.92 million tonne and JSW Group bringing in 2.48 million tonne, the data showed.
The question is will India be able to wean off imports anytime soon?
“It largely depends on three factors — how fast and to what extent is the problem of stressed assets is resolved, how the commercial mining auctions pan out and how CIL managed to ramp up the supply,” points out Manish Aggarwal, partner and head (Energy & Natural Resources), KPMG, India.
However, for all these to happen over the next two years is unlikely. “In the short-term, India’s dependence on imports will continue to rise, while in the long term, it should reduce as more mines open up domestically,” Aggarwal noted.