Indian policies fuel needless coal imports.

Tata Power's 1,050-megawatt power station in the state of Jharkhand is a textbook case of the absurd results that India's 1970s-era coal supply laws can produce and why power utilities are lobbying the government to change them.

The Maithon power station is located in the heart of India's vast coal belt, but a shortfall in local fuel supplies has forced Tata to import some of the coal for the plant all the way from Indonesia.

The company has a coal mine nearly ready in the neighbouring state of Odisha, which is meant to feed another power plant, the construction of which has been held up by government red tape. Tata wants, but has so far not got permission, to use coal from that mine to fire the Maithon plant.

The case underscores how restrictive supply policies helped push up India's coal imports to a record high of nearly 138 million tonnes in the last fiscal year.

India sits on top of the world's fourth-largest reserves of the fuel, but it has become the third-biggest coal importer after China and Japan, an estimate by the World Coal Association showed.

That is an anomaly India can ill afford, as the government fights to tame a current account deficit that hit a record high last year and helped knock the rupee to record lows in August.

"At current import prices, we are talking about US$14 billion of coal imports, which is likely to go up to US$25 billion by 2016-17," said Rahool Panandiker, a principal at the Boston Consulting Group. "In this context, when there is a focus on reducing the current account deficit to US$70 billion, every bit of increased coal production contributes to decreasing the [deficit]."

Amid lobbying from private companies, the government set up a committee to look into how to free up supplies of domestic coal and is due to publish its findings this month. However, interviews with government and company officials suggest that no consensus has emerged about how best to proceed.

"There is a very strong need to augment domestic coal supplies and reduce our dependency on imports," said the Association of Power Producers, a powerful lobby group that gave a closed-door presentation last month to the power ministry's top civil servant.

Source : scmp.com