September 24, 2007	Monday	Ramazan 11, 1428

ENERGY hungry India has a voracious appetite for coal. But the country’s coal companies – mostly state-owned – are unable to efficiently mine the stuff and transport them to the power plants, cement factories, steel manufacturers and other bulk consumers in a cost-effective way.

The quality of coal that is sold by the public sector units is also not up to the mark, so India has to increasingly depend on imported coal. Many of the power plants that are located along the western coast – and also in north and south India – find it cheaper to import coal from South Africa, Indonesia and Australia, instead of acquiring them from mines in eastern India.

India is facing a demand-supply gap in coal of a hefty 55 million tonnes, which is growing sharply. With the economy growing at over nine per cent annually, demand for power is expected to surge. The country is already facing an acute power shortage, and the government is making efforts to raise capacities.

The government’s Integrated Energy Policy estimates that to sustain a growth rate of over eight per cent over the next 25 years, India needs to raise its primary energy supply by almost four times, and its electricity generation capacity by nearly six times.

India currently has a power generating capacity of 160,000 MW (which includes captive power plants), and the government has set up a target of a whopping 800,000 MW for the year 2031-32.

”In order to deliver a sustained economic growth rate of eight per cent, the power generation capacity has to increase from the capacity of around 160,000 MW (inclusive of all captive plants) to nearly 800,000 MW by 2031-32,” says power minister Sushil Kumar Shinde.

At present, coal accounts for nearly two-thirds of India’s power generation, with hydro-power contributing a quarter, and the remaining 10 per cent by renewable energy and nuclear power (about three per cent). Though the share of hydro, gas and other sources will continue growing over the coming years, coal will dominate the power sector in the foreseeable future.

The government is promoting seven new ultra mega power plants, each with a 4,000 MW capacity. All these plants, being developed by private players, will be using coal to generate electricity. Some of the plants are being developed near coal mines, ensuring regular supplies.

According to the Planning Commission, India’s coal requirements may surge to as high as 2.5 billion tonnes by 2031-32, when the power generating capacity is expected to be around 800,000 MW. Demand for coal is around 600 million tonnes at present, and is expected to leap by about 25 per cent over the next three to four years, by when an additional 100,000 MW of power generating capacity is likely to be added. The power sector alone would require about 550 million tonnes of coal by 2011-12.

INDIA has huge coal reserves of over 250 billion tonnes, of which proven reserves are a little under 100 billion tonnes. But much of it is thermal coal, has high ash content, and low sulphur and low calorific value.

About 375 million tonnes of coal are produced through opencast mining and nearly 60 million tonnes from underground mines. The power sector accounts for about 75 per cent of India’s coal production.

Private Indian energy giants, worried about the growing coal crisis, have begun acquiring mines abroad, or sourcing coal from other sources. International traders too are eyeing the lucrative market for coal in India. Coal prices have also shot up with increased imports from India.

Last week, Reliance Energy – part of the Anil Dhirubhai Ambani Group – announced that it was planning to acquire coal mines in Indonesia, Australia and Africa. Its rival, Tata Power Company, paid about $1.3 billion a few months ago for acquisition of two Indonesian coal mines.

Reliance Energy recently won a bid to promote the 4,000 MW ultra mega power plant at Sasan in Madhya Pradesh. The company has ambitious plans to raise its power generation capacities, and is keen on ensuring steady supplies of coal.

Dubai-based Coal & Oil Company, a commodities trading firm, which has been supplying coal to India and Pakistan, last week announced that it had entered into a long-term contract with an Indonesian mine to supply 50 million tonnes of coal to India over the next 10 years.

The company expects to meet the coal requirements of India’s independent power producers over the coming years. The first tranche of two million tonnes of Indonesian coal is expected to be supplied over the next two to three years. Last year, Coal & Oil sold about 5.5 million tonnes of coal to Indian companies; this year, the figure is likely to touch the seven million-mark.

India has also been increasingly importing coal from South Africa. This year, of the 28 million tonnes of coal imports, South Africa will account for almost 10 million tonnes. Last year, imports from the African republic amounted to just three million tonnes. India’s coal imports are expected to nearly double by next year, and South Africa will continue to be a major supplier.

Two public sector steel majors – Steel Authority of India Ltd (SAIL) and the Rashtriya Ispat Nigam Ltd (RINL) – are also keen on acquiring coking coal assets in Australia and Indonesia. SAIL is already negotiating with three coking coal companies in Australia, while RINL is looking at assets in Indonesia. India’s steel minister Ram Vilas Paswan had also visited Australia a few months ago in search of coking coal assets for the public sector steel giants.