(continued from issue XIX)

Future of Coal Demand

In FY'14-15, the government announced an ambitious plan to produce 1.5 billion tonnes of coal domestically by 2020, an annual growth of almost 20 per cent. The announcement came at the back of the chronic shortfall in availability of domestic of coal. However, by the end of FY’15-16, India’s coal shortfall had nearly ended, with the exception of coking coal supply for which imports continue. In fact, thermal power plants - which are the largest users of coal - reported an oversupply of coal, a situation mirrored in terms of power, with plant capacity growth outstripping power demand growth. A Brookings Institute study noted.

The demand of coal is growing faster than the current level of output/ supply in the country. During 2016- 17, as against the total demand of 838.6 MT (provisional), the domestic supply was 647.7 MT. Due to limited availability of low ash coal in the country, this type of coal is being imported mainly from Indonesia. Further, superior quality of non- coking coal is imported mainly by power plants that have been designed on imported coal. Production target of Coal India, which accounts for over 80 per cent of the domestic coal production, is 600 MT for the current fiscal year, i.e. 2017-18. Import of coal saw a decline of 6.37 per cent to 191.95 million tonnes (MT) in 2016- 17, partly due to higher production by Coal India ushering in an era of surplus from the era of shortages.

Comparatively, in 2015-16, India’s coal imports stood at 203.95 MT, against the aggregate consumption demand of 884.87 MT of coal, and total domestic production of 659.27 MT, Thermal and steam coal imports too have fallen more steeply 17.37 per cent at the top 12 major ports to 29.82 MT during April-July this fiscal, according to data compiled by Indian Ports Association (IPA).

With India’s thermal power projects presently facing low capacity utilization due to muted demand, the situation is getting critical. Low plant load factor (PLF) could cause damage to the equipment while running them below their rated capacity. As most thermal plants are not designed to operate below a plant load factor (PLF) of 55%, power producers such as NTPC are now evaluating measures such as retrofitting, requiring an investment of around Rs10 million per mega watt (MW). This in turn will increase electricity costs from those projects. A Rs 1 crore per MW investment may result in a tariff increase of around 25 paise per unit of India’s installed capacity of 329,231 MW, 59% or 194,553 MW is now coal- fueled. Such a large investment plan assumes importance, as the PLF of India’s thermal projects has been consistently falling decreased from 78.9% in 2007-08 to 62% in 2015-16. With thermal coal constituting the major bulk of the total coal demand in the economy, the largest of user of coal would largely determine the future trends in coal consumption and supply.

BREAKDOWN OF THE DEMAND IN 2020 (in million tonnes)
Demand Basis Coking Coal Non Coking Coal Total Coal
(MT) Domestic Import Total Domestic Import Total Domestic (a) Import (b)
Steel (+boilers) 34 67 101 1 0 1 35 67
Coking Coal 22 14 36 22 14
Sponge Iron 20 14 34 20 14
Cement 3 0 126 126 0
Fertliser 126 0 126 126 0
Others 648 167 815 648 167
Power (Utility) 76 37 113 76 37
Power (Captive) 895 232 1128 929 299
Elec, Demand Basis 34 67 101 895 232 1128 929 299
Total (a+b) 1,228