India’s Coal Imports Expected to Grow

BRISBANE, Australia - July 9, 2013 - PRLog -- In mid-May, several media reports, including one by the popular business daily, Business Line, suggested that the combination of slowing demand from power plants, increased production from CIL and the higher level of stock at power plants meant that domestic coal supply would be in a comfortable position this fiscal year.

A senior officer at MMTC, the country’s leading coal importer for utilities, earlier confirmed to Indian Coal Report that MMTC was planning to focus more on other minerals as it did not see coal imports in India increasing significantly in the current financial

Several traders and analysts disagree and are making plans to continue growing imports in this fiscal year.

“Nobody can stop increasing volume of import in the near future. Though the thermal coal market and demand as of now is a bit dull, it will certainly pick up soon,” said V. P. Bindal, Managing Director of Indore-based Swastik Coal Corporation Private Limited, a domestic and international coal trader.  

Swastik imported about 2.5mt of thermal coal in the last financial year and is targeting a 15% increase in imports this year. India imported about 123mt of thermal coal last fiscal year.

Another trader located in the eastern state of Odisha and focused primarily on trading domestic coal produced in North-east India said that it was unlikely demand would be met from domestic supply sources. He anticipates that growth of thermal coal imports by power plants will be in the 15-20% range.

The growth of thermal coal imports could be even higher if the last year’s low levels of import at NTPC, the country’s largest power generation company, are taken into account. The company imported approximately 9mt last year, about half its target import volume because of delays in its tendering process.

Thermal coal imports for the current fiscal year are most likely to exceed 110mt and may be closer to 120mt, analysts have suggested.    

The depreciation of the rupee, however, could dampen imports.    

“There is no doubt about import increasing in the current financial year, but the rupee depreciation could slow the process slightly,” Mr Bindal said.

Indian Rupees continue to depreciate, having dropped about 5.5% since early May, declining to about Indian Rupees 56.5 against the US$. Such depreciation has impaired the viability of several upcoming power plants. In April, the Central Electricity Regulatory (CERC) agreed to hear a petition from Reliance Power on the Sasan power plant seeking an adjustment to its generation tariff to cover the loss resulting from the depreciation of the Indian Rupees.

In its petition, Reliance sought “compensation due to unprecedented, unforeseen and uncontrollable depreciation of the Indian Rupee." The exchange rate was approximately Indian Rupees 39 to 1 US$ in 2007 when it won the right to develop the plant.

Analysts also question the reported build-up of coal stock at power plants and the improved domestic supply outlook.

“It’s purely a short-term development, which cannot be sustained for a longer duration in any case,” said Rakesh Jain, Associate Director at Feedback Infra, a leading consulting firm on energy and infrastructure.

Mr Jain feels that power capacity addition will prompt an increase in import.

“Even if we achieve the target coal production growth, with so many power plants coming up in the near future, these plants will only ensure increased imports,” Mr Jain said.

However, Mr Jain feels that the import level envisaged by the Planning Commission and other similar bodies is too big a number to realise on practical grounds. Current planning reports estimate that India will import about 200mt by 2016-2017.  

“Import will never happen to that extent. We won’t import that much for several practical reasons as it has been in the past,” Mr Jain said.

Port-capacity, inland logistics and the willingness of distribution companies to buy higher cost power from imported coal have often been viewed as constraints to thermal coal imports. In the budget for this fiscal year, the government also pointed specifically to the growing strain from imported coal purchases on the country’s balance of payment.

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