Coal exports to help India lower trade deficit in energy

Aug 02, 2016 12:00 AM

India is set to export coal for the first time, shipping 2-3 million tonnes (mt) of the fuel to neighbouring Bangladesh, as domestic stocks swell following a record output.

State-owned Coal India Ltd (CIL) raised output by 8.5% in 2015-16 to 536 mt, which helped bring down imports by 34 mt.

By the end of March, coal stock available with power generation companies also rose to the equivalent of 27 days’ requirement, up from 18 days a year ago.

“Talks are on with Bangladesh for export of coal. Now, they are importing from Indonesia. Export of coal will help as far as our trade deficit in energy is concerned,” coal secretary Anil Swarup said.

While the quantum of exports is yet to be finalized, 2-3 mm mt a year will make a good beginning, he added.

CIL, which is planning to double output to 1 billion tonne by 2019-20, wants to explore neighbouring markets to boost sales.

Though coal is in surplus, India is heavily import-dependent on the other two primary sources of energy—crude oil and natural gas.

The government wants to reduce this dependence by 10 percentage points to 67% by 2022, by encouraging domestic production of oil and gas through a liberal policy regime and shifting consumption to more renewable and nuclear energy.

Although India exports secondary sources of energy—petrol, diesel, kerosene, jet fuel and other refined petroleum products—they account for only one-third of the overall crude oil and products imports.

In 2015-16, India’s net import of oil stood at 170 mm mt, which cost $82.6 billion, as per official data. The country also exports electricity to Bangladesh from ONGC Tripura Power Co. Ltd’s plant at Palatana.

While growth in the consumption of domestic coal by the power sector remained close to double digits in the past fiscal, consumption is below its real potential as debt-ridden state-owned power distribution companies are in the process of attempting a turnaround under the Ujwal Discom Assurance Yojana (UDAY).

The scheme allows state governments to take over one-fourth of the utility’s outstanding debt in phases. A revival in the power distribution business and replacing polluting diesel-based power generation sets with grid-connected power are expected to boost CIL’s coal sales in the coming years.

The coal ministry is now waiting for demand to pick up before it opens up the sector for private commercial mining, which will allow producers to trade in the fuel, in competition with state-controlled CIL.

According to Energizing India, a report on energy choices for the country brought out jointly by experts and economists from Royal Dutch Shell Plc and New Delhi-based think tanks the Council on Energy, Environment and Water (CEEW) and The Energy and Resources Institute (TERI), greater private participation in captive and commercial mining will, over the long run, yield benefits to the sector and the wider economy.

“Private and foreign mining firms could employ industrial best practices and technologies in India, improving productivity and operational efficiency,” it said.

There are challenges to India becoming a competitive exporter of thermal coal, said Kameswara Rao, leader, energy utilities and mining, PricewaterhouseCoopers in India. “We are disadvantaged by poor quality coal, logistical constraints and higher delivered costs. A better option for India is export of electricity, which can be cheaper for Bangladesh as it uses pit head coal power plants, and transmission capacity is easier to build and costs lower. India, too, gains from improved plant utilization and from regional trade.”

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