India Shocks Australia, To Stop Coal Imports In 2-3 Years

November 14th, 2014 by Anand Upadhyay

India has witnessed a steady increase of coal imports in recent times. As of last week, 60 of India’s 103 power plants had only enough coal for less than a week’s usage. With the domestic coal supply chain in shambles, imports have been an easy way out. As a result, imports have risen from 10% of domestic coal demand five years ago to well over 20% in the last year.

But now the future of coal imports in India looks unsteady. India’s Energy Minister Piyush Goyal, who is in Australia for the G20 meet, recently announced that India plans to completely stop coal imports within a period of 2 to 3 years.

China, the US and India together accounted for about ¾ of the world’s consumption of thermal coal in 2013. So this announcement combined with the news of falling coal imports in China has taken off the shine from Australian Prime Minister Tony Abbott’s mega plans to revive the coal economy, which he earlier claimed had a “big future, as well as a big past.”

Only last year, almost 70% of the delegates polled at the 33rd World Coal Conference organized by CoalTrans believed that the loss of the Labor Party in Australia’s election would have a positive impact on the nation’s beleaguered coal industry. But from the news coming in from all quarters, that does not seem to be happening any time soon.

India wants to cut down coal imports by growing its domestic industry. Coal India, the world’s largest miner of the fuel, has been asked to pull up its socks and more than double its output to 1 billion tonnes by 2019 to feed the existing as well as upcoming thermal power plants. Over the past five years, coal production in India has dragged its feet at a dismal growth of 2% a year.

According to Central Electricity Authority (India), as of now only about 55% of the Indian thermal power plants capacity is being utilised. So if India can streamline its supply chain and boost domestic coal production, it can help meet short-term electricity demand.

Of course, pure economics is a key part of India’s new goal. The cost of imported coal is easily 2–3 times as expensive as domestic coal. Results this week reflect a price of Indian domestic coal as $24/ton, as against this Newcastle (Port of Newcastle is the world’s largest coal export port by volume) thermal coal is $62/ton.

“I’m very confident of achieving these targets and am very confident that India’s current account deficit will not be burdened with the amount of money we lose for imports of coal,” Goyal told a conference.

The Modi government has promised round-the-clock power to all by 2022. Recently, it was announced that the nationalised coal industry would be opened up to allow private firms to compete with Coal India, which currently accounts for 80% of India’s output. But many familiar with Modi’s work style suggest that a major part of the goals could be achieved well before this, just in time for the 2019 national elections.

Amidst all of this, renewable plans have not been sidelined. Only last week we reported that India is eyeing to raise a sum of $100 billion to boost renewable energy growth. The government is seeking another $50 billion for transmission and distribution upgrades which would be critical for development of the electricity sector as a whole.

Back in India, the Ministry of New and Renewable Energy is believed to be working on a roadmap to push cumulative solar power installations to 100 GW by 2022. That is five times the target which was being pursued by the previous regime. If Modi can have his way, it would be 100 GW of solar and wind each! Lofty targets aside, can this really be achieved? A report, published by Bridge To India in association with Tata Power Solar tends to agree. It states that India has an achievable potential to install 145 GW of solar power capacity across various project sizes by 2024.

In a recent interview with the UK-based Guardian, Piyush Goyal also seems to agree with his boss. He said that, “for India to add 10 GW a year of solar, and six, seven or eight of wind every year is not difficult to envisage.” However, he cautioned that, “Coal will have to expand in a very rapid way. I would wish that the proportion of renewable energy was higher but my fear is that, even if I would want to do more, I may not be able to fund it.”

While some are sceptical if India can pull off its dependency on imported coal so fast, what matters is that its intentions and motivations are clear.

Photo Credit: State Library of New South Wales collection / Foter / No known copyright restrictions









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