3 minute read
Making Indian coal competitive
Sumit Maitra
When the Indian government wanted to device policies to revive the economy post the pandemic-induced lockdown, it turned to coal giving rise to two major policy steps: encouraging more domestic usage of coal to substitute imports and conducting auction of mines for commercial use.
Advertisement
But the success of both of these initiatives depends, to a large extent, on making Indian coal competitive to imports.
Dynamics of imports of coal by Indian consumers have been evolving.
From imports forced by lack of availability, today it is more about economics, says Vinay Prakash, Director, Adani Enterprises Ltd, CEO-Natural Resources.
“There was a deficit as consumers were not getting coal. Because of this, there were imports. Today, India is in a dictating situation, saying to the world that it would import for its coastal areas only if it makes sense economically,” Vinay Prakash said at the 14th Indian Coal Markets Conference.
Poor quality of coal, high costs and lack of a free market also restrict many of the users from using domestic coal and force them to import a part or all of their requirements.
“India was compelled to import about 250 million tons of coal in FY20 because of various grade issues and steelmakers need coking coal, which is not so easily available in India,” M C Thomas, MD, Tata Steel Mining Ltd said.
Indian government and the coal sector can overcome these shortcomings through adequate policy measures, interventions and by changing faulty industry practices, better research and development and also other steps which were discussed threadbare in the two-day virtual conference.
“While the historic and hugely successful coal block auction held in November was just the first step towards self-sufficiency, it opens up numerous other exciting possibilities such as dynamic pricing, a new distribution mode, exchange-based trading, coal exports, gasification and many more,” mjunction MD & CEO Vinaya Varma said.
The big changes in the domestic coal sector come at a time when dynamics of global coal trade is changing fast.
“For the past 2-3 months, China is not importing any Australian coal which is now coming to India while South African coal is now going to China. These changes in matrix are changing the look of the global trade,” the top Adani official said.
A key to making Indian coal competitive is proper pricing discovery. A robust spot market would help, says PS Reddy, MD & CEO, Multi Commodity Exchange (MCX).
“We have built the edifice of futures market without a strong foundation of spot exchanges. We hardly find any regulated spot exchanges in the country except for India Energy Exchange. This leads to power price distortions,” he said.
Strategy to reduce imports
Higher domestic production
India has grand plans to raise domestic coal production which will come mainly from Coal India’s strategy to touch 1 billion tons by 2023-24, increased production by Singareni Collieries to 80 million tons by that time, and about 50 million tons that would potentially come into production by that time from the recently auctioned commercial coal blocks.
Concurrently, production from existing captive mines, which can now partly sell coal commercially, would also rise adding some decent numbers to the domestic coal kitty. But there is also an urgent need to raise coking coal production by exploiting the 17 billion tons of proven coking coal reserves.
Coking coal is being largely imported and its size would only go up in coming days considering the projections for rise in steel capacity.
