Apr-July coal imports jump 32%

Weakening global prices partly rescue importers from Rupee devaluation

India’s coal imports jumped 32 per cent, roughly a third, in the first four months of this financial year. The energy-hungry country imported 58.3 million tonnes (mt) of coal between April and July, against 44.2 mt in the corresponding period last year.

The jump in costly shipments of the commodity, and the accompanying foreign exchange outgo, comes at a time when the government is struggling to stem a widening current account deficit (CAD) which stood at a record high of 4.8 per cent of gross domestic product last financial year.

The impact of the rising imports has been worsened by the erosion in the value of the rupee. India saw a drain in foreign exchange worth Rs 24,360 crore on account of coal imports this financial year, based on an average conversion rate of Rs 58 for every dollar between April and July this year. This is a 24.2 per cent increase over a Rs 19,610 crore outgo in the same period last year at the then conversion rate of Rs 53 per dollar.

With the regulators permitting a pass through for fuel price, the rates for imported coal generated power would rise further. Experts attribute the exponential increase in coal imports for the world’s third-largest producer partly to an ongoing decline in local output, at the back of a lower than targeted production by state-owned monopoly miner Coal India Ltd, and a recent decision by the government to allow power generators to pass on the burden of high cost imports to consumers.

“We expect the prices to stay around the current levels for the second half of the year following the plentiful supplies in the seaborne market. Moreover, India would continue to increase its imports following the widening deficit. Imports in this financial year could go up to 140 mt, or even beyond that,” an analyst with commodities-focused research firm Oreteam said.

He added the impact of the increased imports on the country’s CAD is likely to be limited, despite the rupee touching the 65 mark against the dollar, due to weakened coal prices compounded by the lull in the freight market. India’s CAD is overburdened by crude oil imports, as coal accounts for less than two per cent of total value of imports, he said.

A Business Standard analysis shows the rise in imports led to a foreign exchange outgo of close to $4.2 billion, a 13.5 per cent rise against $3.7 billion in the first four months last financial year.

This is despite a near 13 per cent decline in global prices in the same period. The benefit of lower prices was offset by the rupee devaluation.

The analysis is based on an average Free on Board price of $73 a tonne (5,800 Kilocalorie Indonesian coal of East Kalimantan origin landed at Vizag port) between April and July this financial year, as compared to the average price of $84 a  tonne last year.

Indonesian coal accounts for a bulk of India’s thermal coal imports of around 110 MT annually. Another 27 MT of steel-making coking coal is imported largely from Australia and South Africa. Overall imports are likely to go up to 180 MT this financial year.