India aims to increase its domestic coal production to 1.2 billion mt by 2023-24 to reduce imports and bridge the demand-supply gap, according to a coal ministry statement Feb. 9, a near 75% rise from what the country produces currently.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
To achieve the target, the government has rolled out a number of steps including the commercial auction of coal on a revenue share mechanism and single-window clearance to boost output and rolling auction. S&P Global Platts reported Feb. 8 that the government also aims to add domestic production capacity through the approval of new projects and the expansion of those planned for the future.
Earlier, state-run Coal India Ltd., or CIL, had set a target to produce 1 billion mt of coal by 2024. Analysts, however, believe the target is ambitious given that the private sector has expressed limited interest in commercial mining auctions so far.
However, mining capacities were enhanced after India allowed the sale of additional coal from captive blocks in 2021. This led to a 9.01% increase in domestic coal production in April-November 2021 to 447.54 million mt against 410.55 million mt in the corresponding period of 2020, the coal ministry statement said.
India's coal demand stood at 905.88 million mt in 2020-21, with domestic supply contributing 690.89 million mt and imports at 214.99 million mt, the ministry data showed.
Stating that the gap between demand and domestic supply cannot be bridged completely as there is insufficient availability and reserves of prime coking coal in the country, the ministry said coal for blending purpose is also imported as this cannot be fully substituted by domestic coal given that the country has limited reserves of high grade coal.
Coal stocks fell to critically-low levels in October 2021, with coal burn sufficient for only four days on an average across utilities. India deferred imports due to bullish and volatile seaborne prices.
Prices dictate imports
The price of Indonesian 4,200 kcal/kg GAR averaged $67.699/mt FOB in 2021 against $29.464/mt FOB in 2020, Platts data showed. The price of Australian 5,500 kcal/kg NAR with 23% ash content averaged $83.255 /mt FOB in 2021 against $44.745/mt FOB in 2020, while the price of South African 5,500 kcal/kg NAR averaged $96.486/mt FOB in 2021 against $48.297/mt FOB in 2020.
"The overall imports of coal also reduced to 147.14 million mt in the period of April-November 2021 compared to 165.57 million mt during the corresponding period the previous year, a decrease of about 11.13% which has resulted in significant savings of forex reserves this year, especially when coal prices are at a high level in the international market," according to the statement.
Coal India has identified 15 projects with an expected annual output capacity of 160 million mt to boost production to 1 billion mt, the Minister for Coal Pralhad Joshi said in a written reply to the Parliament.
CIL also aims to augment capacity through the deployment of Mine Developer and Operator, or MDO, model, Platts reported Feb. 8.