[vc_row][vc_column][vc_column_text]
Sometime ago in April this year, the Indian Minister for Coal and Power, Piyush Goyal made a statement that India will look at cutting down coal imports to zero by 2020 as the country’s coal behemoth Coal India Limited will produce enough coal to light up all homes by then. Since this statement was made quite nonchalantly, not many thought it would impact them until coal imports started falling month after month. A look at the figures published by the Ministry of Coal indicated that India’s imports fell from 238 million tons (MT) in the year 2014-15 to 227 MT in the year 15-16. This number is expected to further slide down to about 200 MT in the current financial year. As these numbers made their way in to the public domain, everybody from power producers, to private miners, steel and cement manufacturers and ports that import huge quantities of black gold started to sit up and take notice of what seemed the new normal. Coal imports were falling. Why? And how? Before we answer these questions it is import to understand how Indian consumes coal and the existing power generation capacity. Today, India has a capacity of around 186 GW in operational plants and another 65 GW under construction. Some 41 per cent of this capacity is in the private sector. The next biggest source of electricity, hydropower, comes a poor second with 43 GW. India has been increasing its coal power capacity from 5.6 GW per year in 2007-08 to 19.5 GW in 2014-15 with a compounded annual growth rate of 11 per cent, according to Greenpeace. However, it is important to note at this juncture that no new power plant has come to the fore after 2010. It is the old power plants that are getting commissioned over the last few years. This rate of growth, many in the sector say has dropped considerably since the early 2000s where power generation capacity growth was almost growing over 20 per cent a year. “There has been a dramatic change in the way India has consumed power after 2010,” says Mr Narsing Rao, Former Chairman of Coal India
Limited and the current Principal Secretary to the Telengana Chief Minister. Despite most of the rural homes not being powered up, there is an artificial surplus currently and the per capita consumption of power is 900 units per annum. Between April and October this year the Central Electricity Agency (CEA) reports India has commissioned just over 3600 megawatts of coal plant capacity, down almost by half on the year before. While the financial year still has four months to run, the coal sector may well fall short of the 13,000 MW of new plants expected to be commissioned this year. There are other reasons why the coal sector is feeling decidedly unwell. This week the CEA revealed in its draft National Electricity Plan (NEP) that for the five years to 2022 the country does not require any more coal-based capacity addition till 2022 above current levels. the country was facing a coal overcapacity crisis, and a Greenpeace analysis from October that showed that over 90 per cent of the plants currently under construction will remain unutilised by 2022. So, this clearly indicates that a drop in demand and insufficient growth is certainly one of the reasons why coal consumption in the country has taken a beating. The second reason attributed to a fall in absorption of indigenous coal is a rise in electricity generation from renewable sources. If we were to compare consumption of this eco-friendly source of energy in India between April and October, generation of wind and solar grew by over 43 per cent compared to the year before, massively outpacing the growth rate for thermal power. While generation from conventional sources – predominantly coal – grew by a larger amount in absolute terms, renewable generation’s growth at over six times the rate of conventional sources is none-the-less hugely significant. In all, 28 per cent or over a quarter of all new generation between April and October 2016 came from renewable sources. But be that as it may, India’s requirement for energy will increase. But a bulk of it will come from renewable sources of energy. The plan’s estimated growth of 187,000 megawatts (MW) in new capacity between 2017 and 2022 is huge. But the critical point is that the bulk of this – 115,000MW – consists of renewables. The draft NEP is clear that there is no need for a single additional MW of coal power till 2022. Moreover, considering the over 50,000 MW currently under construction, likely to come on stream in the next few years, there is also no need for additional coal power plants till 2027.
Perhaps these reasons of falling demand for thermal power and increase in renewable sources of energy generation explain the Why bit of the question. Coming now to the How corner. When the announcement of cutting down coal imports were made, Coal India Limited, the leviathan, it was said would increase its production of coal and compensate for any shortfall of coal from other countries. Coal India’s current production is about to reach about 560 MT in the current financial year after reporting back to back increases in the last couple of years. Data gathered by MG suggests that CIL had upped its output by 32 MT in 2015, the sharpest rise in 40 years. Assuming that the national excavator of black gold will maintain this rate of production year after year, the minister said CIL would aim to produce 900 MT of coal by 2020. “What led to this sharp rise in coal production is the auctioning of 31 coal mines by the Government of India and allocation of another 42 mines to the state entities in the year 2015,” Narsing Rao explained. Most of India’s coal is concentrated in the states of Jharkhand, Orissa, Bihar and Chhatisgarh and a majority of the new licences lie in these areas. There is said to be a substantial scope for increasing production in the Western, Eastern, Northern, Central and South Eastern Coalfields. Coal India has a total of eight subsidiaries and the others are Bharat Coking Coal, Mahanadi Coalfields and North-Eastern Collieries.
So, does this mean India’s imports are set to fall in the next few years as envisaged by the government? This could be partly true if we threw a glance at how the ports are faring. Mostly it is ports on the east coast that import a major chunk of 15 percent of India’s requirements. A Paradip Port official said, “The import quantity of coal has sufficiently reduced and vessels are coming partially loaded.” With power generators such as National Thermal Power Corporation and private operator GMR Infra reducing their imports, there has been a fall of three lakh tons of coal handled at the eastern port. An Ennore Port official echoed his counterpart’s viewing saying the quantum of coal handled at the port could possible come down to 2MT compared to the 4MT it is handling. Ennore shores up almost 80 per cent of its revenues by handling coal and 80 per cent of this coal handled comes from destination overseas while only 20 per cent of it comes from coal fields in India.
India imports most of its coal from Indonesia, Australia, South Africa, Colombia and Russia. “This ratio is set to change,” the Ennore Port official said. The port Chairman, MA Bhaskarachar said, “Most of the central and state government owned and run power plants have begun using domestic coal because the calorific content or the useful heat value (UHV) from mines in the Eastern Coalfields has equalled that coming from mines overseas.” Tamil Nadu Generation and Distribution Company, one of India’s largest state-owned power producers says it is also looking at cutting down use of imported coal systematically. For Visakhapatnam Port too, the decision to reduce import of steam coal has hit its revenues with coal handled falling from 7.4 million tonnes in the last fiscal between April and November to around 5.7 million tonnes during the current fiscal. The Haldia Port Chairman had a similar story to tell saying most states have instructed their power generating arms to support CIL. G Senthilvel of Haldia Dock says, “The increase in prices of steam coal and coking coal have halted trading of coal in this part of the country. Currently, only captive power plants are importing coal,” he said.
If government regulation played a spoilsport in dampening imports, the increase in prices of this commodity is also to be blamed for a dip in imports. “Prices have increased from `52 per tonne to `82 per tonne in the last one year depending on the grade of coal and the country it is coming from,” Senthilvel added. The increase in price has also reflected in falling coking coal prices where the steel industry and cement industry have migrated to pet coke due to subdued prices of this resource. Rakesh Dubey, Editor Coal Insights, a digital magazine dedicated to coal consumption analyses says the prices of coal are likely to remain high in the coming fiscal year as well. “Imports will remain under pressure until next year too as India INDIA IMPORTS MOST OF ITS COAL FROM INDONESIA, AUSTRALIA,
is a price sensitive market and will respond adversely to any increase in international prices,” he says. Also, with the winter months more favourable for mining, Coal India will probably increase its production in the next few months, thus enhancing the reserve stock at the power plants from 19 days to 27 days a month. is a price sensitive market and will respond adversely to any increase in international prices,” he says. Also, with the winter months more favourable for mining, Coal India will probably increase its production in the next few months, thus enhancing the reserve stock at the power plants from 19 days to 27 days a month.
With this trend set to continue most ports are bracing for impact. Haldia, Paradip, Vizag and Ennore are all concentrating on other cargo to supplement their revenues. While Haldia is banking on liquid cargo and increase in the number of berths, Visakhapatnam says it will follow suit too envisaging an increase in POL and container cargo. Paradip will handle more of ore, manganese and bauxite to make up for any shortfall in revenues coming from not handling coal. “But it will take more than the time estimated by the government to stop usage of imported coal completely,” avers Rakesh Dubey. We will continue to import at least 100 MT of coal if not more he says. Even if most of India’s power plants use domestic coal, those based on the coast will find it cheaper to use imported coal because of cheaper logistics cost. If power accounts for 70 per cent of coal consumption, about 10 per cent of coal is consumed by the steel sector and another five per cent by the cement sector. These sectors will continue to require coking coal and pet coke.
Anil Yendluri, Director & CEO, Krishnapatnam Port Company Limited says, “We need to have a balanced approach so that we do not depend totally on imported coal and also we should not exhaust our domestic reserves in a hurry. Especially for power plants located in coastal areas it is anyway cheaper to use imported coal rather than moving domestic coal. Coal per se is not the cost; coal transportation cost is sometimes more than the cost of coal. We need to compare the cost of inland movement vis-à-vis coastal movement vis-à-vis imports. Transportation and logistics cost should be taken into consideration while planning coal supplies to our power plants so that end users get power at the lowest possible cost.
This is an important consideration to bear in mind as only 400 MT of coal moves by rail currently with the rest of it transported either by road or by the coastal route. Although the Ministry of Shipping has been advocating for using the coastal route, this has not been proven as the most cost effective method given the cost of first mile and last mile transportation. “Savings from the coastal route have not resulted to be substantial either in terms of cost or time,” says Narsing Rao who was at the helm of Coal India and had considered short sea shipping. The Haldia Port Chairman says that most of the coastal shipping happens to Tamil Nadu and Andhra Pradesh alone from ports in West Bengal and Orissa. Many attempts made to ship coal to AP Genco from other ports had not proved to be viable. Therefore, an efficient railway system is perhaps the best mode of transport till such time the last and first mile connectivity are established. And here is where the problem lies too. “Coal India might ramp up its production many times, but rake availability will choke the transportation system,” says Rakesh Dubey. Transportation by rail is a crucial link in the India’s no-imports success story. And CIL is developing three major railways projects in Jharkhad, Odisha and Chhattisgarh. Until such time the connectivity infrastructure is in place, vessels from coal rich countries will continue to call Indian ports.
[/vc_column_text][/vc_column][/vc_row]
