business

Indian Industries Mulling Coal Imports as Power Takes Priority

  • Costlier imports adding to costs, industry lobby says
  • Captive power producers getting half of contracted supply

Indian firms including aluminum smelters and chemical factories are considering importing more coal to ease fuel shortages as most of the country’s output is diverted to electricity generators.

The companies, which produce electricity for their own use, are being pushed toward costlier overseas purchases as they are getting barely half the supplies contracted from state-owned Coal India Ltd., Rahul Sharma, chairman of the industry lobby group Indian Captive Power Producers Association, said Thursday in New Delhi.

“We are having to import more and that’s adding to our input costs,” Sharma told reporters, without elaborating on the size of the shortfall or imports.

Coal India, which accounts for more than 80 percent of the nation’s production, has had to divert most of its supplies to power plants to prevent outages, causing shortages for other customers. As a result, power costs for other users have increased by an average of 50 percent, Sharma said.

Thermal coal at the Australian port of Newcastle, an Asia-Pacific benchmark, is trading near $100 a ton after gaining about 17 percent in the financial year that started in April. 

India’s demand for coal-fired electricity started surging in August because of lower generation from non-fossil sources, including nuclear, wind and hydro-power. The increase, which called for higher coal supplies to power plants, coincided with the monsoon season, when coal production and shipments are lower because of rain-induced obstructions.

Coal India’s shipments to power plants rose 9.2 percent to 290.6 million metric tons in the eight months ended Nov. 30, the company said. That accounted for 79 percent of the overall supplies of 368 million tons during the period.

“Coal India had slowed down production this year and was reducing its own inventory. It was caught on the wrong foot by the sudden pick-up in demand,” said Rupesh Sankhe, an analyst at Reliance Securities Ltd. “The situation is expected to improve once power plant coal stocks are out of the critical zone.”

While stockpiles at power stations have started rising, non-power customers have had to resort to costlier imports of the fuel. India’s coal imports rose 48 percent to 2.62 million tons during the week ended Dec. 11, according to Global Ports data compiled by Bloomberg.

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