(Bloomberg) — India plans to substantially reduce its imports of thermal coal, a dominant source of energy in the country, in three years as local production gathers momentum, Coal Minister Pralhad Joshi said.
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The nation aims to stop inbound shipments of the coal varieties that are locally available, Joshi said at an event in New Delhi to start the latest round of mine auctions. However, imports of the high-grade fuel mainly used by coastal power plants will continue, he said.
Imports, which account for about a fifth of India’s coal usage, prove a drain on foreign exchange reserves and expose users to price volatilities. Prime Minister Narendra Modi’s government aims to make the nation self-reliant in energy and is giving impetus to local production of coal, petroleum and renewable energy. Lower thermal coal imports by India could be a setback for its leading suppliers such as Indonesia, Australia and South Africa.
The ministry is geared to meet coal’s rising demand in the country this summer, when power consumption is expected to surge, Joshi said. Typically, domestic coal production peaks during January-March, but slows in the following months, he said. “I have asked coal miners to maintain the same rate of output during April and May,” the federal minister said.
The country faced coal supply disruptions last year as record-high temperatures and a deadly heat wave boosted power consumption. India’s meteorological department forecast a warmer-than-normal weather this year as well, with peak electricity demand seen climbing to a new high in April. The power ministry has issued fresh directives to electricity producers to import the fuel to meet the short-term demand.
The coal ministry is closely working with the railways — a key part of the coal supply chain — to ensure there are no shortages this summer and during the monsoon season when rains flood mines and hurt output.
India expects to produce 880 million tons of coal during the current fiscal year ending this month, a 13% increase from a year earlier, Joshi said. India’s coal output is expected to rise at a compounded annual rate of almost 9% during the five years to March 2026, against a growth rate of 2.3% in the prior five years, government data show.
The surging demand for coal in the country has forced India to continue using the dirtiest fossil fuel, resisting international demand to curb consumption. The nation has been auctioning mines at a rapid pace to shed its over-dependence on state miners Coal India Ltd. and Singareni Collieries Co. Ltd. It has removed entry barriers for companies to bid for the mines, eased environment regulations, simplified regulatory approvals and is handing out incentives for early start of mining to lure investors.
“Coal demand is unlikely to abate. We expect demand to keep rising at least until 2040,” M. Nagaraju, additional secretary at the coal ministry, said at the same event.
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