India steps up initiatives to cut coal imports

The moves outlined to Argus by coal secretary Anil Kumar Jain are aimed at increasing coal sales by government-controlled producer Coal India (CIL), which is sitting on record-high stocks of 75mn t.

The ministry is making fresh attempts to improve rail logistics to coastal utilities, given that many of CIL's mines are in the middle of the country. "The cost of transportation often works against the competitiveness of coal to some locations, especially the coastal power plants. We are talking to the railways," Jain told Argus. The transportation to coastal utilities will constitute an additional business for the railways, he said.

The ministry also plans to approach utilities whose boilers are designed for imported coal to check if the economics work well enough to migrate to domestic coal. "They can retrofit the boilers to use Indian coal," said Jain. He estimates that such utilities, along with those owning mines overseas, together import about 55mn t/yr.

The government has aspired to reduce coal imports in the past but with no success. The country's thermal coal imports grew by 8.4pc to 185.5mn t in 2019, data from shipping agency GAC show. In March, receipts fell by 1.3mn t on the year to 14.72mn t after a Covid-19 nationwide lockdown was imposed from 25 March, data from shipbroker Interocean show.

Jain says there is a "greater resolve" now to reduce imports because of the global economic downturn. "Our aim is to promote import substitution, retain sale proceeds within the country and help local employment," he said.

Jain said coal minister Pralhad Joshi has taken on import reduction as a "mission" following "direction from the top". At a meeting held on 30 April, prime minister Narendra Modi spoke about the need to substitute imported coal with domestic fuel. Earlier, on 28 April, the Indian power ministry issued an advisory to utilities to reduce coal imports that are used for blending. Public sector utility NTECL cancelled a tender to import 560,000t of mid-calorific value (CV) coal on 24 April.

The advisory was intended to "sensitise" coal-consuming industries to not import "mindlessly" as domestic coal is available, Jain said. "The government is a buyer of the power generated from these utilities and it has a role to play in their operations." The advisory was also necessary, given the economic downturn, he said.

CIL has been given a target to produce 710mn t of coal in the 2020-21 fiscal year ending 31 March, up from 602mn t in 2019-20. Besides this, the utilities have stocks of about 50mn t, enough to meet their requirements for 30 days. "Since demand will be lower, we will have enough coal in the country," said Jain, who says the ministry hopes to replace almost 100mn t of imports with domestic fuel in the current fiscal year. But he said the government will be sensitive to cases where utilities have contractual obligations to import.

Success on replacing imports will depend on the economic viability of doing so for the utilities. The issue of price competitiveness between domestic and imported coal is usually raised when import reduction is discussed, admits Jain. But he said he never saw a coal consumer turn down assured domestic supply in favour of imports.

Jain's team has evaluated the comparative economics of the Indonesian coal index and Indian domestic coal on a calorific value-parity basis. Most Indian coal consumers find Indian coal cheaper than imports, with the exception of some utilities in the southern part of the country that face high freight costs, he said.

By Ajay Modi