Commercial mining likely to replace coal import market: Icra report

The recent bidding guidelines for commercial coal mining is likely to throw open a market for import substitution.

A report from Icra says the absence of end-use condition in the guidelines is a significant positive for commercial miners, who were not eligible to participate in the previous coal mine auctions conducted during 2015.  "The potential market opportunity for private commercial miners would include the partial substitution of India's 160 million tonne per annum (mtpa) thermal coal imports, getting a share of the 100mtpa e-auction market, and meeting a part of the 165 mtpa incremental domestic coal demand to be created in the next five years," said Icra in its latest report.

The report noted that India's coal demand-supply balance remains tilted in favour of coal imports as the production by Coal India Limited remains short of meeting India's coal demand, especially with respect to coking coal and higher grade thermal coal/washed coal. As against a compounded annual growth rate of 5.6% in domestic coal demand during the XIIth Five Year Plan ended March 31, 2017, India's coal production has grown at a slower pace at 4.5% during this period.

As a result, India' coal imports, despite witnessing some moderation in FY16 and FY17, remains high, accounting for around 24% of present domestic demand. Icra, however, cautioned that the track record of private sector captive miners in ramping up domestic coal output has not been very encouraging.

The production levels have largelyremained in the range of 40-60 mtpa in the last several years, accounting for 6-10%of the overall domestic production. "Long delays in getting regulatoryapprovals, challenges in land acquisition, and infrastructure deficits haveoften emerged as key reasons for the limited growth in India's captive coalmining," it said. In this context, Icra said the success of opening up commercial coal mining to the private sectorwould critically hinge on several factors which include the size of the minesbeing offered, infrastructure preparedness, geological challenges in mining, landacquisition and timely regulatory clearances.