February , 2023
India trying to strengthen reliance on domestic coal production due to high inflationary pressures
17:50 pm

Kuntala Sarkar

Coal accounts for around 75% of India’s power generation at over 150 million tonnes (MT) annually. At present, India’s annual coal demand is around 950 MT. Along with its domestic demands in the energy sector; it has a large contribution in the steel industry. The country is the second-largest producer of crude steel; hence it requires a steady supply of coking coal. 

India has invested around Rs.2 lakh crore in foreign exchange for coal imports at an average rate of about $200 per tonne in FY23. The import costs are escalating gradually, in the wake of high inflationary pressures globally. Additionally, the Russia-Ukraine crisis has increased the price of fossil fuels, which is pushing the Union government to ramp up domestic coal productions.

Output of domestic coal accelerating

In November, 2022 the output of the core sector in India expanded sharply at 5.4%, while coal accelerated by 12.3% YoY. Its cumulative index has expanded by 0.7% during April – November, 2022, compared to the same period in 2021.  

The Union government recently set a target for coal production of more than one billion tonnes (BT) for the next financial year. Significantly, Coal India (CIL) that accounts for above 80% of domestic coal production has taken the target to produce 780 MT. Additionally, CIL is planning to surge raw coking coal production from existing mines by up to 26 MT.

Coking coal imports

Coking coal is the key raw material in the production of steel. At present, India imports around 90% of its coal demands, however the Union government is planning to increase domestic production of raw coking coal to 140 MT by 2030. Till date, Australia is the biggest coking coal exporter for India. However, the government is trying to divert its reliance from Australia as it is quite costlier. According to the Trade Ministry, India is gradually increasing coal imports from Indonesia, Russia, and the US. Significantly, Australian coking coal imports have fallen more than 18% from April – November, 2022 to 23.6 MT, which is a considerable drop of 5.3 MT YoY. During the same period, India increased imports from Indonesia, Russia, and the US by 187%, 138%, and 163% respectively. During the said period, Indonesia exported 1.84 MT; Russia exported 1.67 MT; and the US exported around 5.50 MT of coking coal. Additionally, India imported 26% higher coking coal from Canada to curtail import costs.

Escalation in commercial coal mining 

After the Union government opened coal to commercial mining, it has recently announced the biggest-ever auction. The government has put on the block 141 coal mines in 11 States, of which 71 are new mines, 62 are carried forward from earlier auctions, and eight are being put on offer for the second time. 

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