India's Power Sector Coal Requirement to Reach 850 Million Tons by 2016

Researched by Industrial Info Resources (Sugar Land, Texas)--In a recent development, India's electricity regulatory body, Central Electricity Authority (CEA) (New Delhi), directed the power ministry to commission a detailed study on how much coal would be required to bridge the demand-supply gap in the country. The study will include short- and long-term analyses of coal requirements for fresh thermal power plants. Officials have indicated that the study has become imperative to assess coal requirements for the next 10 to 20 years, and recommend improvements in the transmission, distribution and quality of power supplied.

During the 12th (2012-17) and 13th (2017-22) Five-Year plans, India is targeting new power generating capacity of 85,000 MW and 35,000 MW, respectively. By 2016-17, the country's requirement of coal to meet the projected power demand is estimated to reach 850 million tons, which is almost double India's current demand of 434 million tons.

Several thermal power plants in India are facing acute coal-supply shortages. Experts opine that coal stock of at least 15 to 30 days is necessary at each power plant to ensure uninterrupted power generation. However, in a recent CEA report, about 17 power plants in the country were operating with less than one week's stock. Another 15 power generating facilities had coal stock for only four operating days. The report also indicates that the state-owned Coal India Limited (Kolkata, West Bengal), which is India's primary coal supplier, had slipped its targets in April, May and June. Supply issues are likely to continue in July as well.

Sriprakash Jaiswal, Minister of State for Coal, said that the Ministry would invest about $86 million in 2010-11 to develop road and waterway infrastructure. The investment is expected to provide alternate routes to railways and facilitate easier movement of coal to various power projects.

Recently, commenting on India's growth drivers, Prime Minister Dr. Manmohan Singh indicated that the power sector is a major deterrent to India's target of attaining economic growth of 9%. In 2009-10, this sector posted losses of about $8.61 billion. As of March 31, 2010, about 30% of the power generated in India was lost due to commercial, transmission, distribution and technical issues. India's transmission and distribution losses are considered the highest worldwide.

Under the ongoing 11th Five-Year Plan (2007-12), India has targeted capacity addition of about 78,000 MW. However, the country is likely to add only about 62,000 to 64,000 MW. As on June 30, 2010, India's total power generating capacity was about 162,367 MW obtained from various hydroelectric, thermal, renewable energy and nuclear power sources.

India is also scouting for overseas coal assets in Columbia, Russia, South Africa, Australia, Mozambique and Indonesia. International mining and trading companies, including BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia), Vale S.A. (NYSE:VALE) (Rio de Janeiro, Brazil), Rio Tinto plc (LSE:RIO) (London, England), Xstrata plc (LSE:XTA) (Zug, Switzerland) and Mechel OAO (NYSE:MTL) (Moscow, Russia) are focusing on India to capitalize on the coal demand. Recently, for the first time, the Netherlands began exporting coal from the Rotterdam, Antwerp and Amsterdam terminals to India. CIL also has announced an investment of $2 billion over a four-year period to acquire coal blocks overseas. In 2009, the company purchased two coal blocks in Mozambique with total reserves of 1 billion tons. Several private power producers, including Tata Power Company Limited (BSE:500400) (Mumbai) and Essar Group (Mumbai), also are exploring coal assets abroad.

Nearly 50% of India's power generating capacity relies on coal. Although India has coal reserves of about 267 billion tons, only 40% are proven deposits. Srikumar Jaiswal also said that coal imports this fiscal year will increase 21%, as power demand and local coal production is expected to rise 15% and 8%, respectively. In the backdrop of growing power and coal demand, a government advisory committee also has submitted a recommendation to open coal mining, which is state-controlled, to private firms.

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