India's Imported Coal Prospects Stretch through 2017 as Supply Chain Creaks

---

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Although India is one of biggest global producers of coal, the country probably will continue with costly imports into 2017, said Pratik Patil, the Minister of State for Coal, in Parliament.

India imported 110.42 million tons (M/t) of coal between April 2012 and January 2013, which came mainly from Indonesia, Australia, South Africa and the U.S. "It is estimated that there will remain a gap between demand and domestic production, even by the end of the 12th Five Year Plan (2012-17), which will need to be met through imports," Patil said. He added that, in the last financial year, 557.5 M/t of coal was produced domestically.

Coal is under open general license and can be imported at prevailing international prices by anyone paying the applicable import duty. "Apart from allowing imports of coal, the government has taken measures to step-up domestic production to the extent feasible," Patil said.

These steps include modernization of technology; infrastructure development; the monitoring of coal blocks; the periodical review of projects under way; the development of some adjacent blocks owned by state-controlled Coal India Limited (BSE:533278) (CIL) (Kolkata, India); and engaging mine developers and operators, according to Patil.

Industry observers and players have difficulty accepting any upside concerning the country's coal sector, with coal production monopolized by a less-than-efficient CIL and a litany of missteps along the supply chain. Most people with knowledge of the industry agree that deregulation of the sector is imperative.

But the government has been hit by an alleged scam in allocations of coal blocks to private developers for "captive" uses, which is likely to further delay any decisive action in this vital sector. It is also reported that much of the coal produced by "captive" mines is quietly diverted to the open market, with the connivance of politicians across party lines.

In another twist, the nation's largest power company, state-controlled NTPC Limited (BSE:532555) (New Delhi), informed CIL that it would not continue paying for rock in adulterated coal supplies, and it refused to sign a 20-year coal supply contract for recently built power plants, as the low quality of coal is causing generation capacity to fall and causing power outages. Tampering along the supply chain may be one of the reasons for the lack of acceptable quality tonnage. Another reason may be that tenders floated for 20 additional coal washeries in 2009 have not produced any operating units.

For related information, see December 12, 2012, article - India to Become World's Largest Coal Importer by 2016, Says IEA.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.