The Hindu reports that India‘s coal import volumes are set to rise by over 30% over the next two years to 214 Mt in 2015-16, as domestic supply falls short of surging demand. The newspaper also notes that this may well be a fortuitous time for imports to rise with falling coal prices predicted to continue.
The Hindu says: “Miners in major coal exporting countries like Indonesia and Australia have significantly ramped up investments over the past five years, anticipating steady off take from major importers such as India and China. For example, coal mining investments in Australia are estimated to have doubled to about $50 billion over 2009 to 2013 from about $25 billion over 2003 to 2008. Moreover, domestic coal supply in China is also likely to increase as its railway capacity for hauling coal expands by nearly one-third to three billion tonne by 2020. This will ease transportation bottlenecks in that country.
“Thus, while coal supplies will grow, there are likely to be few takers.
“Even as miners stack up supplies, off take by major consumers including China, the U.S. and Europe is set to post a muted rise. Weak GDP growth, a gradual shift to cleaner fuels and rising energy efficiencies will curb demand.
“The most telling fact is that China, the world’s largest importer of coal, has placed import curbs, will further restrict demand. Over the last three months, it has banned imports of low-grade coal, while imposing import duties on both thermal (6%) and coking coal (3%). Global economic weakness and China’s measures to move away from an investment-led growth model will also halve the growth in coking coal imports over the next five years.
“Thus, oversupply in the global coal market, along with weakening currencies in exporting countries, is expected to drag down thermal and coking coal prices by 25% approximately over the next two years to $65/t and $115/t by 2015, respectively.”
For India, which has consistently struggled to mine coal efficiently, these “changing dynamics certainly bode well. India’s coal import volumes are expected to rise by 33% over the next two years, as domestic production lags demand. In such a scenario, falling global coal prices will help India Inc” The Hindu says.
“In the power sector, projects running on imported coal — including that of Tata Power, Adani Power and Essar Power — will benefit the most from sliding coal prices. These projects have incurred huge losses since 2012-13 when Indonesian coal prices almost doubled following a change in regulations. However, with imported coal prices plummeting, returns of such projects are expected to improve.”
Another report in The Hindu says inter-ministerial Government of India panel on fuel linkages has recommended providing coal to end-use plants linked to the blocks that have been cancelled by the Supreme Court. The Standing Linkage Committee (Long Term) recommended that “in view of the scarcity situation of coal, prioritisation of categories of coal supply be done…in case of the de-allocated/cancelled coal blocks,” according to an official document.
The first category is of those end-use plants (EUPs) which already had long-term linkages/LoAs (Letter of Assurances) but were later converted to tapering-linkage. The second category is of those EUPs which were granted tapering linkages.
Tapering linkages are interim supply arrangement made for power projects where production from linked captive coal blocks was delayed.
“The Committee recommended that coal be supplied to the EUPs subject to availability (of coal),” it said.
“For the purpose of supply of coal…CIL (Coal India Ltd) shall assess the quantity of coal that could be made available for this dispensation and keeping that in view, may enter into MoU with EUPs,” it added. The document said that tentatively, an additional 5-7 Mt of coal may be made available under current arrangement and until March 31, 2015. “Preference would be given to the running plants. Further, coal supply…shall be confined to EUPs under sponge iron/steel and cement sectors only….The Captive Power plants shall be excluded from the above arrangement (because of scarcity of coal),” it said.
EUPs linked with the operational blocks should not be covered under the current arrangements as they are entitled to receive coal till March 31, 2015. EUPs to be supplied coal under current proposal would be offered coal from the mines nearest to them and they should haul the coal by road, it added.
Latest news from the much more efficient Singareni Collieries Company Ltd (SCCL – one of its operations shown here, the latest news is that as of January 1 Sri N.Sridhar, IAS has taken charge as Chairman & Managing Director.