Coal deficit may widen to 200 mt by 2013-14

India’s coal deficit is likely to widen in the next two years to 200 million tonnes due to rising demand from both industrial as well as power sectors and stagnating production from local resources.

Indeed, India is facing a shortfall of around 83 million tonnes in the current financial year, which is set to increase to 142 million tonnes in 2011-12, Union coal minister Sriprakash Jaiswal said recently in a coal conference. At the event organised by the Associated Chambers of Commerce and Industry of India (Assocham), Jaiswal said India’s coal production was projected at 554 million tonnes in 2011-12 against the demand of 696 million tonnes.

But, looking at the growth in production falling short of speed in consumption, the total deficit is estimated to increase further to 200 million tonnes in 2013-14, the minister said.

India is looking to these long-term arrangements because it wants to tie-up supply agreements to manage the risk associated with the supply shortfall it is currently experiencing.

The government has constituted a group early this month to resolve issues related to coal mining in “no-go” areas classified by the environment and forests ministry. Indian companies have been looking at alternate coal resources globally and are speeding up to acquire some mining leases. But, there is a need to permit mining in these areas to meet India’s coal requirement, Jaiswal added.

Nearly 600 million people in the country do not have access to electricity, and the government is facing tough challenges in meeting energy requirements. While the current energy supply is met from various sources such as coal, hydro-power, oil and gas, nuclear and other non conventional energy resources, coal plays a predominant role in supporting these needs.

The environment ministry has declared 203 coal blocks as “no-go” areas, with environment and forest clearance refused to these blocks, which collectively hold around 660 million tonnes a year of coal resources.

Meanwhile, the international coal market is still reeling from the enforced changes it is making on a near daily basis to keep pace with rising Indian demand, according to a recent Platts report. Replacing Europe as the main consumer of Richards Bay coal, a major customer for Indonesian material and with huge power projects about to come online - India is fast becoming a force to be reckoned with, the report added.

Meanwhile, the largest coal mining company in the world, Coal India Ltd, is putting finishing touches to a long-term coal supply contract framework that could see it purchase millions of tonnes of imported thermal coal from Australia, Indonesia, South Africa and the US from a list of pre-selected coal suppliers for delivery starting in April. The Kolkata-based Indian coal producer is assembling a panel of suppliers, each able to supply the state-owned miner with a minimum of a million tonnes a year of imported thermal coal under the terms of its 10-year long term off-take of coal contract framework.

India is planning to add 78,000 Mw generation capacity by March 31, 2012, of which 50,000 Mw is coal-based. However, the country has been facing shortages over the years and has resorted to imports to fill the supply gap.