After oil and gold, it?s now coal that is likely to inflate India?s im port bill and widen the trade gap as curbs on mining in some states and slow output growth at Coal India make rising demand far outstrip supply.
Though the import bill for the hydrocarbon has been slightly subdued so far this fiscal due to a sharp decline in global prices, analysts warn that India?s reliance on imported coal is set to rise in coming years and put more pressure on trade and current account deficit once demand starts rising as industrial growth picks up.
While global prices have fallen almost 50% since 2011, India?s coal import bill was down just 8.4% year-on-year to $12.4 billion during April-December. The price of Newcastle 5,500 kcal/kg thermal coal in global markets fell from $142 per tonne in January 2011 to $95 per tonne in April 2012 and slid to close to $70 by December 2012, due to a slowdown in China and India and a shale gas output spurt in the US.
Coal imports had almost doubled to $17.5 billion in 2011-12 from $9.8 billion in 2010-11. Its share in trade deficit has risen to 9.2% in 2011-12 from 7.5% in the previous fiscal. Coal imports as a proportion of the current account deficit (CAD) rose stood at 22.2% at the end of September as compared to 22.4% at end of March 2012 and 21.3% in 2010-11.
?Overall, coal imports are going to rise as output from domestic sources gets constrained. There is an urgent need to rev up domestic coal mining,? said DK Joshi, chief economist, Crisil.
The increasing dependence on imports comes in the wake of faltering production at Coal India, the world’s biggest miner and a monopoly in the country. While demand is rising, it is quite likely that CIL will miss its production target for 2012-13 by 5-6 million tonne as heavy rains in October-November and cyclone Neelam have had a bearing on CIL?s output. Production was also hit as many workers went on leave during the festive season of October-December.
CIL, which accounts for about four-fifths of the country’s total coal output, has been able to raise output by just 6.1% during April-December and its stockpile is now lower compared to what it was in March 2012.
Lack of forest clearances, problems in land acquisition and lack of adequate technology have delayed capacity expansion plans of Coal India.
Moreover, many private players with captive mines have not started excavating coal and many have, in fact, been barred from mining on the charge that they bought the mines in an unfair manner.
The current supply of coal will not be able to fire many of the existing power plants at full capacity and may even choke some of the greenfield projects.
The government is trying to hasten forest clearances for mines and ensure fuel linkages for power plants. But the country has to keep importing coal in coming years. Although the Centre is trying to work out a mechanism for price pooling of imported coal, it has met with stiff resistance from states such as West Bengal.
The International Energy Agency has said in a report that India will increase its influence in coal markets in coming years. ?Endowed with large coal reserves, a population of more than 1 billion, electricity shortages and the largest pocket of energy poverty in the world, India makes the perfect cocktail to boost coal consumption. Domestic industry?s performance will allow India to be the largest seaborne coal importer by 2017 with 204 mtce and the second-largest coal consumer, surpassing the US,? it said.