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Indian pledge to cut coal imports turning a dud

Coal News - Published on Tue, 24 Jul 2018

Image Source: NewIndianExpress
New Indian Express reported that 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 % at 217 million tonnes in 2017-18 after dropping by 5.6 % and 4.5 % respectively in 2015-16 and 2016-17. In the first quarter of 2018, imports rose over 15 per cent. Meanwhile, Coal India 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 have critical stock, 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 million tonne of coal, while Gujarat also plans to ramp up imports by 400,000 tonnes this year. Mr Ankur Agarwal, senior analyst, India Ratings and Research siad that “This is because the short-term tariffs are more than INR 4.5 per unit of electricity and the power plants, especially in the coastal areas, find it commercially viable to import coal.”

Similarly, data from American Fuels & Natural Resources shows Adani Enterprises accounted for about one-sixth of all the imports, buying 6.51 million tonne in the first three months of 2018. The Tata Group also imported 5.23 million tonne 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.

Mr Manish Aggarwal, partner and head, KPMG, India points out that “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.”

However, for all these to happen over the next two years is unlikely.Mr Aggarwal noted that “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.”

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Posted By : Amom Remju on Tue, 24 Jul 2018
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