Guest commentator TC Malhotra contributes from New Delhi.
The Anglo-Australian mining giant Rio Tinto is aiming to provide a coal supply line to the rapidly growing Indian thermal coal market.
Indian business daily Business Line, in its report dispatched from Perth, quoted Nik Senapati, Rio Tinto India’s managing director, as saying that his company wants to supply coal to India because India’s coal imports are projected to touch about 200 million tons over next few years. Last year, Rio Tinto supplied three million tons of coking coal to Indian steel companies such as JSW Steel and Tata Steel.
A senior government official announced that India’s coal demand will go up to 1 billion tons by the end of the 12th Five-Year Plan (2012-17). This means India needs to import about 200 million tons of coal to bridge the shortfall in domestic output. The production shortfall in the current fiscal year, the final year of the 11th Five-Year Plan (2007-12), is projected at 142 million tons, with domestic output likely to amount to 554 million tons.
According to a PTI report, while speaking on the sidelines of a conference in New Delhi, Planning Commission Senior Advisor of Power Arbind Prasad said that projected coal demand is in the range of 900 million to 1 billion tons by the end of the 12th Plan. Domestic production will be about 770 million tons or so. So we still face a shortfall of about 200 million tons.
Prasad further said that the commission has estimated domestic production at 770 million tons by 2017 on the basis of projected annual growth of about 7 percent in output. However, it is clear now that the domestic production by the end of this plan would be 554 million tones.
India is forced to import coal as the demand is continuously rising from domestic steel mills, power producers and cement manufacturers.
Indonesia and Australia contribute to about 55 percent of India’s coal imports. However, till recently, Indian companies had preferred Indonesia for coal imports.
The Indonesian Coal Mining Association has recently announced that India will surpass Japan to become the leading buyer of Indonesian coal this year, taking in as much as 60 million tons. India should import 5 million tons more coal from Indonesia in 2011 compared to last year, with the total number set to jump to 90 million tons by 2013.
However, a new law in Indonesia makes the coal imports from that country economically unviable. Indonesia said it would not allow exporting companies to sell coal at prices below notified rates after Sept. 23, 2011.
Rio Tinto’s announcement has been seen here as a move after the new Indonesian law which is likely to hike the coal prices. Market analysts say that Indian companies are looking closely at these moves.
There are many reasons that justify India’s increased coal imports in the coming year.
- Steel demand is already on rise, which will directly affect the coal imports. There is also enough coal demand from cement producers because the infrastructure sector is on the rise in the country, so more cement is required for development in this sector too.
- Reports suggest that power projects worth 43,000 MW, that have been awarded under competitive bidding, are under construction and about 30 percent of this capacity — or 13,000 MW — is based on imported coal. So power producers will need more coal in the coming years.
- Besides, India’s dependence on imported coal is expected to increase not least because Coal India Limited (CIL) has not been able to increase its production. The state-owned CIL contributes around 85 percent of India’s coal production. It is the largest company in the world in terms of coal production. Last year, CIL produced about 431 million tons of coal, almost the same output it recorded in 2009-10.