India needs to up coal imports .

MUMBAI (MINEWEB)  -

Some 700 people in India were in the dark recently, as the country experienced a massive power failure on July 29. The acute shortage of coal was cited as one of the major reasons.

Such was the scale of the power failure that mining operations in Eastern India were immobilised. Nearly 200 miners were trapped in a coal field in West Bengal and 65 others were trapped in the Bharat Coking Coal facility in Jharkhand.

The power failure forced homes and businesses to switch to back-up supplies, halted trains and public transport and caused massive traffic jams. In a bid to avert a repeat, Prime Minister Manmohan Singh has decided to hasten approvals for coal mining in the country.

An inter-connect substation near Agra, in Delhi tripped, followed by the automatic shutdown of all power generation plants in the Northern region. The following day witnessed a more widespread collapse, which included not just the Northern grid, but also the Eastern and North Eastern power grids, extending the power failure to 19 states and two Union Territories, covering half of India's population.

Though the world's second-most populous nation suffers from frequent power outages that can last as long as 10 hours, amid summer temperatures as high as 45 degrees Celsius in the capital, New Delhi, the country is now taking a fresh look at coal imports.

Though total imports of coal jumped from 20 million tonnes in 2002-03 to 90 million tonnes in 2011-12, India's coal imports are likely to touch a whopping 185 million tonnes by 2017, almost 20% of the international dry-fuel trade, amid a widening demand-supply deficit.

Projecting imports to increase to 185 million tonnes by 2017 against 137 million tonnes by the end of the 11th Five Year Plan (2007-12), a draft paper by India's Planning Commission for the 12th Plan (2012-17) cautioned that ``there is an urgent need to take effective measures to step up coal production.''

The total demand for coal grew by about 8% during the 11th Plan against the domestic production growth of only 4.61%. The gap was filled by higher imports. State-run Coal India, which meets over 80% of the domestic requirement, is battling with problems to augment production.

Coal India produces 440 million tonnes of coal, compared to a demand of about 650 million tonnes. Coal India has fixed a production target of 464 million tonnes for 2012-13. The company achieved 435.84 million tonnes of output in 2011-12 against a scaled-down target of 447 million tonnes.

According to Amol Kotwal, deputy director at market research firm Frost and Sullivan, "Of India's total power generation capacity, approximately 56% is coal-based. Given Coal India's constraints of ramping up coal production capacity, there was a shortage of 80 metric tonnes of coal for the power sector in FY2012-13''.

Moreover, in 2011-12, ``power utilities reported a generation loss in the order of 9 billion units (BU) and 11 BU due to shortage of coal and gas, respectively. Given the fuel shortage, almost 32,000 MW of coal-based plants likely to be commissioned in the 12th Five Year Plan are in jeopardy (they will either be shelved or put on hold by the developers). Without regular and proper fuel availability, developers are struggling to achieve financial closure, resulting in power projects being abandoned,'' he added.

Tata Power, the country's largest private power producer, has stepped in to say it is eyeing coal mines abroad for fuel security. The company is looking at Indonesia and South Africa for acquisitions.

The company aims to produce 50 million metric tonnes of coal annually by 2020 to ensure fuel security, officials said. For domestic supplies, the company relies on group companies Tata Steel and Coal India.

In the fiscal year ending March 2012, Tata Power imported 5.5 million tonnes of coal. For imports, Tata obtains coal from two Australian mines and four mines in Indonesia.

LOOKING OFFSHORE

Since foreign investment in the coal sector is negligible, India's coal minister, Sriprakash Jaiswal, and Coal India Chairman, S Narsing Rao are expected to meet investors and companies in Singapore and Hong Kong this month as part of an effort to attract much-needed foreign investment into the sector.

The coal sector has several opportunities, such as setting up of washeries and contract mining. The government is eager to bring more expertise and the latest technology to India. Though contract mining is one of the ways to involve foreign companies, global mining giants such as Rio Tinto and BHP Billiton do not engage in such jobs.

Meanwhile, power trading solutions provider PTC India plans to trade about 1.3 million tonnes of coal in the current financial year, nearly three times higher than the quantity traded in 2011-12. The plan for trading a higher amount of coal comes against the backdrop of falling international prices of the dry fuel amid sluggish global demand, the company said.

The company is into coal trading through its subsidiary PTC Energy. In 2011-12 period, PTC Energy executed 4,24,000 tonnes of spot sale/purchase of coal.

"PTC Energy has planned to trade more than three-fold as compared to 2011-12. A large portion of this would be supplied to PTC's tolling power projects,'' said PTC India chairman Tantra Narayan Thakur.

He added that international coal prices had fallen as much as 30% on an year-on-year basis in the last two years. Attributing the slide to the

European debt turmoil as well as slowing demand from China and shift towards shale gas in the US, Thakur said, ``China, the biggest importer of coal, is experiencing economic slowdown as compared to the past few years. This should be a boon to us.''

Source : mineweb.com