“About 100-120 mn t of imported coal is definitely substitutable through leveraging domestic potential and, considering the government’s efforts in liberalising the mining space in the country and cutting down on imports, we can reach this specific goal of import substitution by maybe 2026-2027,” A.K. Jha, ex-Chairman, Coal India Limited (CIL), told CoalMint over phone.
The government is taking active measures in this respect, he informed.
“A lot of good blocks have been given to CIL as well as captive producers, and now commercial exploitation too should raise production to a level where imports could surely be lessened,” he opined.
Depressed despatches
The world’s top coal miner, Coal India Limited (CIL) is looking to substitute imports with domestic coal amid slow recovery of industrial activity in the country and despatches to the power sector plummeting by 21.7% to 93.5 mn t in Apr-Jun ’20.
CIL had despatched 119.5 mn t of dry fuel to power producers in the first quarter of FY20.
CIL’s despatches in Jun ’20 stood at 2.27 mn t against 4.6 mn t in Jun ’19 and pithead stocks were pegged at 72.88 mn t on 16 Jul ’20.
Power plants are still running on low load and poor offtake is a major concern for the coal behemoth looking to shore up domestic sales.
Coal imports are estimated to be over 242 mn t in 2019-20 –compared to over 235 mn t in 2018-19 – of which a little over 50 mn t was coking coal and the rest thermal coal for the power sector.
“In 2020-21, coal imports are expected to fall due to pandemic-induced economic downturn and subdued demand for power. Even today the power utilities have sufficient stocks. But this situation can’t be expected to persist for long,” said Mr. Jha.
“After the fourth quarter of this fiscal demand will definitely pick up. India will certainly need more coal after that to fuel the economy,” he said.
Inevitable imports
In 2018-19, India produced 730 mn t of coal, out of which 607 mn t was produced by CIL, and around 66 mn t came from Singareni Coalfields Ltd. In 2019-20, CIL produced a tad over 600 mn t but consumption was around 965 mn t. So, there is a gap of around 235 mn t, out of which again coking coal imports, over 50 mn t, remained more or less constant due to absence in India of good reserves of coking coal.
“But non-coking coal imports largely happen by way of power plants in the coastal regions. For power producers along the coast, imports are definitely cheaper,” Mr. Jha informed.
If cost of production of coal in India is roughly INR 800/t today, transportation cost per tonne is INR 2,000, he further informed.
“If coal from Mahanadi Coalfields Ltd. (MCL) goes to Punjab, the transportation cost is more than two times that of the coal price,” he said, adding that replacing all imports from Australia and Indonesia is impossible at the moment.
Many coastal power plants are designed for high calorific value coal, which is not available in India and, therefore, imports are inevitable. Imports for such power plants should be around 65 mn t, stated Mr. Jha. “But 120 mn t of imports can be substituted,” he maintained.
Coking concerns
“Coking coal, however, can’t be indigenously produced to suit domestic demand of steel-makers. There are only little reserves with BCCL. As Chairman, CIL, I had visited Russia for investments in coking reserves in the Siberian region. If the production cost there is $50/t and another $50 is spent in transportation, producing coking coal there was still a lucrative prospect, given the fact that seaborne coking coal prices at that time (around Sep ’19) were around $150/t,” he informed.
“However, my visits to Russia happened at the fag end of my career as CIL Chairman and unfortunately, I didn’t have the requisite time and scope to pursue the project further,” Jha lamented.
“The government could also consider investing in Canada and elsewhere. Such projects have to take off if domestic coking coal production is to be bolstered as China too is thinking of investing in Africa and Canada,” he averred.
“By 2030, the demand for coal should reach a plateau of 1.3-1.4 bn t. By that time CIL should be producing more than 1 bn t of coal annually. Rest will come from captive and commercial mines. The entire volume, I believe, will be produced by domestic producers, except irreplaceable imports of coking coal and steam coal for power generation by plants along the coastal belt,” affirmed Mr. Jha.
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