Coal imports may surge in 2022-23 after a year of slump

coal imports to surge to meet power demand
Power minister has asked the states to step up coal imports as a supply shortage threatens to disrupt power output in the coming months.

In a dire reminder of what is in store for the country in summer months, Union power minister RK Singh on Tuesday urged the state governments to increase coal imports to ensure uninterrupted power supply during the monsoon months. Singh was addressing a meeting attended by senior power ministry officials, chiefs of power PSUs, senior officials from states, and representatives of power plants that use imported coal.

Most parts of India will face power cuts during summer months with coal inventories of power utilities hitting nine-year low levels. Maharashtra, Karnataka, Andhra Pradesh, Madhya Pradesh, Bihar, Uttar Pradesh, Jharkhand, Punjab, Haryana, Rajasthan, and Telangana have already resorted to power cuts due to coal shortage, hurting the fragile recovery from the Covid-induced economic slowdown.

Power shortage as a share of total electricity demand rose to 1.4%, according to a Reuters report that cited government data. It is worse than the 1% shortage witnessed in October last year. With April witnessing higher than normal temperatures, the government expects power demand to rise sharply in summer.

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Coal imports key to bridging shortfall

Coal is the source of around three fourths of India’s electricity output. This year, the coal supply situation is particularly bad because of the disruption in trade flows due to the Russia-Ukraine war and NATO sanctions on Russia. The rise in global coal prices has affected import in price-sensitive markets including India. India will need to increase its imports of thermal coal to meet the rising demand.

India imported 173.32 million tonnes of coal in 2021-22 compared with 215.25 million in the previous year. Imports stood at 248.54 million tonnes in 2019-20 and 235.35 million tonnes in the year before. India is the second-largest coal producer globally as well as the second-largest importer. Last year saw the country facing a major coal shortage when stocks fell to 7.2 million tonnes on October 8, 2021. The crisis was triggered by the interruption of coal supply due to unseasonal rains and low output from power plants based on imported coal.

India’s coal imports in 2021-22 was lower because of the high prices in the international market and a rise in domestic production. But the current financial year may see a surge in imports due to the shortage faced by coal-based power plants. The international prices touched a record high of $400 per tonne due to the disruptions caused by the Russia-Ukraine war.

The policy allows coal imports under open general licence by power plants. Thermal power plants, cement manufacturers, sponge iron plants, and industrial consumers are the main importers of coal. Steel manufacturers use imported coal to meet shortages and improve the quality of output.