India’s coal reserves, the world’s fourth largest, are fast depleting and only imports can help solve the crisis, reports Shantanu Guha Ray
COAL INDIA chief AK Sarkar’s cryptic reaction on the sidelines of a recent coal conference that his company would not be able to bridge the entire 81 million tonne demand-supply gap startled those present at the event. In short, it means the world’s largest coal mining company must import thermal coal for at least five years. The Kolkata-based company is already shaping global alliances to reduce the burgeoning demand-supply gap and seeking advice from the Central Electricity Authority (CEA) on how much to buy.
Faced with growing power needs to run homes and factories, New Delhi is expected to import 35 million tonnes of coal this year. Worse, the figure will reach 81 million tonnes in a year. Crisil Limited, a unit of Standard & Poor’s, said last week that India’s demand for coal could be 1.4 billion metric tonnes by 2020, exceeding domestic supply of 1.1 billion tonnes. “Only alliances can help us survive,” Sarkar told TEHELKA.
CIL officials — who refuse to be quoted — say as many as 10 producers from the United States, Indonesia and Australia have been short-listed for imports. Besides CIL, National Thermal Power Corporation (NTPC), the country’s biggest power producer, expects galloping demand as it expands capacity and hence, is seeking additional imports from mines in Mozambique and Indonesia.
CIL officials say the company was increasingly scaling down its supplies to local buyers and encouraging many to import directly. In West Bengal, CIL once had over 1,700 dedicated buyers, but today it supplies to just 200 clients.
In India, where coal meets more than half of the nation’s energy demand, imports are likely to rise 21 percent this year. Analysts say demand will increase because factory output increased by 17 percent in Asia’s third-largest economy that is poised for a 7.2 percent growth this fiscal. This means India’s coal reserves, the world’s fourth largest, is simply not enough to meet the demand of Asia’s third-largest power producer.
“If you want to solve chronic power problems, then you must import and acquire stake in international coal mines,” says TK Chatterjee, an executive director at NTPC, which accounts for a fifth of India’s 155,000 MW power generation and needs 126 million tonnes of coal. Company officials say NTPC’s requirement may rise to 300 million tonnes in seven to eight years’ time when it more than doubles its current output of about 31,000 MW. “We want to produce 75,000 MW by 2017.
Now, we are importing 10 million tonnes. Next year, we must import 13.5 (million tonnes),” Chatterjee told TEHELKA.
Along with CIL and NTPC, the stateowned Minerals and Metals Trading Corporation (MMTC) is also seeking to increase its current coal imports to 35 million tonnes this year. Besides, a host of private Indian companies are also looking for coal resources across the world. Taking the lead from Tata Power and Reliance Power, the Mumbai-based Essar group has now agreed to buy the Trinity Coal Corporation, UK, for $600 million in a bid to shore up supplies. The Jindal Group is also on the lookout for mines in South Africa, that have relatively low-ash and high-energy content. “Hence, it makes sense to enter mining,” says a top Essar official.
Steel maker Ispat Industries is seeking to buy mines in Indonesia for its plant in India while Gujarat NRE Coking Coal will invest $500 million in the expansion of its mines in New South Wales. Market analysts say coal supplies must continue from global markets, otherwise it will also impact domestic steel prices. Interestingly, steel prices are set to rise due to the recent 55 percent jump in benchmark international coking prices. Steel makers — in the last two months — have hiked prices twice by about Rs 600 a tonne.
And since global steel demand will improve from the current levels, raw material prices too will be on a high. And this frequent price resetting will obviously favour the miners. The global deals must happen fast.