India’s Coking Coal Imports Disaster: The Clock Is Ticking

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There are natural disasters and then, of course, there are man-made ones.

India’s on-going coking coal crisis falls in the latter category.

For almost six years now, India has been unable to meet production targets of coking coal, a vital raw material in the production of steel.

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This is largely due to bureaucratic delays, lack of environmental permissions, and government dilly-dallying, among other factors, almost all of which can be attributed to humans.

So, even as news came that India’s coal imports last year were up by 21 percent as compared to 2012, which includes thermal coal, we had, on the other hand, India’s steel minister appealing to Australia to look at possibilities of setting up joint investments in coal.

Steel Minister Beni Prasad Verma was back in the country after a high-profile trip to Australia and New Zealand. So, while his own house is not in order, partially starving Indian steel companies of access to coal, his appeal for an Indo-Australian venture seems in stark contrast to the existing ground reality in India. Most of India’s imports come from Indonesia, South Africa, Australia and Canada, adding quite substantially to India’s forex bill.

Coking Coal Import Spike?

According to a report in the Business Standard, India’s coal imports rose 21 percent to 152 million ton in 2013, as power producers bought more due to low prices and a domestic shortage. In 2014, the situation was likely to get worse. Shipments could go up to 170 million tons. For now, the country’s steel sector imports about 30 million tons of coking coal.

The report pointed out that bureaucratic and legal delays in adding new mines and expanding existing ones had made India the No. 3 importer of coal, behind China and Japan, even though it sits on what BP Plc ranks as the world’s fifth-largest reserves.

Even the government-owned Rashtriya Ispat Nigam Ltd depends entirely on coking coal imports to meet its demand, while the Steel Authority of India (SAIL) imports 75 percent of its needs.

The India government does not regularly release data on coal imports. But going by the Coal Ministry’s input, domestic output could fall short of demand by 155 million ton this fiscal year.

Thus, it is abundantly clear, going by all available signals, that if the government does not get its act together on the domestic coal supply front, steel and other sectors will continue to suffer in future years, especially when the economy in India and elsewhere is slated to perk up.

Is Poland the Answer?

Meanwhile, in news that could add some relief, a consortium of PSU firms under the banner of the International Coal Ventures Ltd was said to be close to signing a maiden deal for the acquisition of a mine in Poland.

A report in the Business Line said the mine had an estimated reserve of over 500 million tons for which ICVL will join with an Indian steelmaker for acquiring the coking coal asset.

If the deal goes through, the acquisition will help reduce India’s forex outflow on imports of coking coal.

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