Indian Apr-July coal imports up by 32pct.

India’s coal imports jumped 32% roughly a third, in the first 4 months of this financial year. The energy hungry country imported 58.3 million tonnes of coal between April and July against 44.2 million tonnes in the corresponding period last year.

The jump in costly shipments of the commodity and the accompanying foreign exchange outgo comes at a time when the government is struggling to stem a widening current account deficit which stood at a record high of 4.8% of gross domestic product last financial year.

The impact of the rising imports has been worsened by the erosion in the value of the rupee. India saw a drain in foreign exchange worth INR 24,360 crore on account of coal imports this financial year, based on an average conversion rate of INR 58 for every dollar between April and July this year. This is 24.2% increase over a INR 19,610 crore outgo in the same period last year at the then conversion rate of INR 53 per dollar.

With the regulators permitting a pass through for fuel price, the rates for imported coal generated power would rise further. Experts attribute the exponential increase in coal imports for the world’s third-largest producer partly to an ongoing decline in local output, at the back of a lower than targeted production by state owned monopoly miner Coal India Limited and a recent decision by the government to allow power generators to pass on the burden of high cost imports to consumers.

An analyst with commodities focused research firm Oreteam said that we expect the prices to stay around the current levels for the second half of the year following the plentiful supplies in the seaborne market. Moreover, India would continue to increase its imports following the widening deficit. Imports in this financial year could go up to 140 million tonnes or even beyond that.

He said that the impact of the increased imports on the country’s CAD is likely to be limited, despite the rupee touching the 65 mark against the dollar due to weakened coal prices compounded by the lull in the freight market. India’s CAD is overburdened by crude oil imports, as coal accounts for less than two per cent of total value of imports.

A Business Standard analysis shows the rise in imports led to a foreign exchange outgo of close to USD 4.2 billion, a 13.5% rise against USD 3.7 billion in the first 4 months last financial year. This is despite a near 13% decline in global prices in the same period. The benefit of lower prices was offset by the rupee devaluation.

Source : coalguru.com