India’s economy requires energy to drive and sustain its high trajectory growth. Though the country has huge reserves of coal, much of it can’t be extracted because of the reserves’ intricate location. According to an energy market research report, the government-owned Coal India Ltd, which controls 18 billion tonnes of coal reserves—much of it is proven, is responsible for production of the country’s 80 percent of the coal. The demand-supply gap from coal power production, however, is increasing. The electricity generation, steel production, cement manufacturing and other industrial processes requires more coal than before to run their operations—and meet the needs of their consumers.
Analysts observe that beneath the excitement circling around new and renewable sources of energy, the age-old coal industry is anticipated to contribute more than 50 percent of the primary commercial energy requirements of India till 2032 and beyond. Even though the domestic coal reserves are vast, the demand-supply deficit of coal is estimated to grow at a CAGR of 17.2 percent till FY 2017. The domestic coal industry’s challenges such as exploration, technical, environmental, high-ash in domestic coal and logistical issues have compelled India to import 11 percent of total coal consumption, which is expected to rise to 15 percent for power sector alone by FY 2017. India’s planned investments of more than INR 2 lakh crore over the entire coal value chain may not be sufficient to secure future coal requirements, points an energy market research report.
InfralineEnergy’s “Global Coal Acquisitions and Imports: Opportunities and Sustainability Assessment for India” report suggests that coal import is bound to rise. The analysis is based on the recent Central Electricity Authority’s notification to design boilers with a 70:30 coal blending ratio (indigenous vs. import). The report states that apart from blending requirements and superior quality parameters, the coal industry is likely to see converging price trends of imported and domestic coal. Consequently, Indian companies would rely more on imports. The inclination for global hunt for coal has started. Indian companies have acquired overseas coal assets at lucrative locations such as Mozambique, Indonesia and Australia.
As for the future, the report advises that the efforts require a planned politico-economic strategy to effectively counteract aggressive players such as China and de-risking from the rising coal prices and escalating price tag of overseas coal deposits. Australian floods and Japan earthquake have resulted in structural changes in global coal industry’s trade pattern, along with disruptions from pirate attacks to coal vessels which has resulted in a loss of around $ three billion in global seaborne trade in 2010.
The report details new frontiers such as New Zealand and Kazakhastan, which require proactive approach to reap the early mover advantage. Certain nations have been identified which offer a favourable prospect for clinching long-term import deals without owning the coal mines and there are others which require infrastructural development to encourage foreign investment.
The rising import of coal would attract investment in infrastructure related to coal logistics. The port sector in India needs a complete overhaul with fluctuating global freight rates and growing need for panamax and supramax vessels to manage the rising coal imports. A lot of action is waiting to happen.
Analysts observe that beneath the excitement circling around new and renewable sources of energy, the age-old coal industry is anticipated to contribute more than 50 percent of the primary commercial energy requirements of India till 2032 and beyond. Even though the domestic coal reserves are vast, the demand-supply deficit of coal is estimated to grow at a CAGR of 17.2 percent till FY 2017. The domestic coal industry’s challenges such as exploration, technical, environmental, high-ash in domestic coal and logistical issues have compelled India to import 11 percent of total coal consumption, which is expected to rise to 15 percent for power sector alone by FY 2017. India’s planned investments of more than INR 2 lakh crore over the entire coal value chain may not be sufficient to secure future coal requirements, points an energy market research report.
InfralineEnergy’s “Global Coal Acquisitions and Imports: Opportunities and Sustainability Assessment for India” report suggests that coal import is bound to rise. The analysis is based on the recent Central Electricity Authority’s notification to design boilers with a 70:30 coal blending ratio (indigenous vs. import). The report states that apart from blending requirements and superior quality parameters, the coal industry is likely to see converging price trends of imported and domestic coal. Consequently, Indian companies would rely more on imports. The inclination for global hunt for coal has started. Indian companies have acquired overseas coal assets at lucrative locations such as Mozambique, Indonesia and Australia.
As for the future, the report advises that the efforts require a planned politico-economic strategy to effectively counteract aggressive players such as China and de-risking from the rising coal prices and escalating price tag of overseas coal deposits. Australian floods and Japan earthquake have resulted in structural changes in global coal industry’s trade pattern, along with disruptions from pirate attacks to coal vessels which has resulted in a loss of around $ three billion in global seaborne trade in 2010.
The report details new frontiers such as New Zealand and Kazakhastan, which require proactive approach to reap the early mover advantage. Certain nations have been identified which offer a favourable prospect for clinching long-term import deals without owning the coal mines and there are others which require infrastructural development to encourage foreign investment.
The rising import of coal would attract investment in infrastructure related to coal logistics. The port sector in India needs a complete overhaul with fluctuating global freight rates and growing need for panamax and supramax vessels to manage the rising coal imports. A lot of action is waiting to happen.
The quest for overseas coal is bound to rise.But India should trade cautiously as country specific risks are high in overseas destinations.There may not be policies favorable for foreign countries as demonstrated by Indonesia.Banning exports or linking the pricing to trade index by host countries may dampen the prospects of utilities in our own countries.
ReplyDeletethough India should continue its quest in exploring new destinations and avenues for coal import and acquisition of coal blocks, it should simultaneously look for alternatives like increasing production domestically and also from the captive coal blocks. the private giants should exploit the opportunities in india and give their best try for inhouse production.
Also, the upcoming competitive bidding in coal blocks would pave the way for more private players joining the fray and we hope that the vast reserves of coal in India will get exploited for the benefits of common masses.