India needs to reduce its dependence on imported coal

first_imgThough more coal is to be imported into India, generating electricity from imported coal is set to become expensive as India removes duty concessions, granted in last year’s budget. India’s coal production failures and plans for the future are detailed in the International Mining magazine April issue on this country’s underachieving mining industry. Mineweb now reports India’s Finance Minister P Chidambaram saying last Thursday that the country needs to reduce its dependence on coal generated power. “Currently it is expected that India’s coal imports will rise to 185 Mt by 2016-17, driven primarily by the needs of the power sector,” Mineweb reports. “Chidambaram, while presenting the Budget to Parliament on Thursday, said that the needs of the current power projects and those that would come up by 2015-16, leave the country with no alternative but to import coal and blend it. In order to boost domestic production, Chidambaram also advised the house that the public private partnership (PPP) model should be followed to raise coal production. He said Coal India could be roped in as one of the partners in order to increase production.“In the annual budget speech to Parliament, he said price pooling of imported coal is under consideration of the Indian government. However, many state governments are not in favour of price pooling as it would affect power rates. Earlier this month, the government had given in-principle approval for coal price pooling that would ensure higher fuel supplies to stranded power projects.“Incidentally, coal supply from Coal India and its subsidiary companies increased by 8% during April 2012 to January 2013. The Coal Ministry said that during these 10 months, 380 Mt of coal were supplied by Coal India, compared to 351 Mt last year. Over the same period, production too increased 5.8%  compared to the previous year. In January 2013, Coal India produced 46.42 Mt of coal against 44.6 Mt in the same month last year, an increase of about 4%.“Though Coal India has been flagged for not being able to supply fuel for power generation, the company has supplied coal to NTPC at 107.5 Mt as against a target of 102.5 Mt. This indicated a growth rate of 16.4% over the same period last year.“Also in the budget, the government has imposed a 2% customs duty on thermal coal and a countervailing duty of 2%. Earlier, it was just 1% countervailing duty which could be claimed back by the company importing the coal.“Analysts said generating electricity from imported coal would become expensive with the removal of duty concessions granted in last year’s Budget.”One coal importer told Mineweb, “The cheapest variety of Indonesian coal, which is ruling at $42/t, will see a rise of costs by Rs 45 ($0.82) and the costliest category which is ruling around $70/t will see a Rs 75 ($1.37) rise.”“Meanwhile, companies with coal blocks have also been allowed to sell their surplus coal under a public private partnership model in the market, instead of selling only to Coal India. Under the Coal Mines Act in India, all coal produced in the country, except those produced by captive mines, have to be sold only to designated end users, while any surplus has to be sold to Coal India. The process has made mining for coal unremunerative as the public sector company is often unable to pick up the produce from the mines which pile up for years.“In 2012, the Indian government got embroiled in a major controversy as it was found that, of the 192 mines allocated over the years to private parties since 1993, only 29 had come into production.Domestic coal production has the potential to reach 785 Mt by 2016-17. Of this, more than a tenth could be from the captive blocks, though production from these blocks has been declining.last_img

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