India could face a ?coal shock? sooner than later if the power utilities do not wake up to the fuel security risks from stagnating domestic production and start planning long-term coal imports to meet the fuel shortage. Although big power producers like NTPC are already meeting domestic coal shortages with imports, they have not shown any urgency to get into long-term import contracts.
Meanwhile, China?s coal demand has overtaken its domestic production, forcing the world?s largest coal producer to import coal. Till 2006, China was a net exporter of coal.
The global coal production in 2008 was 6.8 billion tonne while consumption stood at 6.7 billion tonne. China produced 43% of the world?s coal. So there is a clear risk that if a big coal consumer like India suddenly enters the world market, it could send international coal prices soaring.
Currently, Indian power utilities importing coal use it with domestic coal in a certain mix. So there is also the risk that existing power plants could face difficulty in using a higher share of imported coal in case domestic coal supplies decline. Because of the specification issue, coal linkage for power plants is finalized keeping in mind the design of equipment.
The Planning Commission has suggested that Indian utilities import coal under long-term contracts to meet domestic coal shortages for their power plants. The commission has argued this would help port developers to upgrade their existing facilities for handling imported coal in the future. If the utilities act on the suggestion of the commission, the specification issue will also get addressed.
Harry Dhaul, director general, Independent Power Producers Association (IPPAI) agrees that power plants could face difficulty in using 100% imported coal. The sizing of boilers in India being different, very few of them can take 100% imported coal,? Dhaul told FE.
He also appreciated the suggestion of the Planning Commission in this regard. ?This is a good suggestion from the Planning Commission. A certain percentage of coal import should be made under long term contract while the balance can be sourced under short contract,? IPPAI director general said.
?This will take care of volatility in the international coal market,? Dhaul said. However, Indian utilities are reluctant to plan long-term coal imports to meet fuel shortages for their power plants on an assured basis. They are instead banking on public sector producers like Coal India Ltd (CIL) for the fuel security of their plants.
The government has envisaged ambitious coal-based power generation capacity addition programme to overcome the country?s fast-growing power shortage. That would entail a sharp rise in the Indian power sector?s coal requirement in the coming years. With the domestic coal producers struggling to raise production, power utilities would have to undertake coal import on a large scale for ensuring fuel security of their power plants in the coming years.