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India’s Coal Shortages to Worsen as Coal India Reduces Production Target

India’s Coal Shortages to Worsen as Coal India Reduces Production Target

State-controlled Coal India Limited (CIL) announced that it has lowered its production target for the fiscal year to 440 million metric tons, down from the 452 million tons initially outlined in the company’s annual plan, according to an Economic Times article.

Indian news agency PTI has quoted CIL Chairman N.C. Jha as confirming that they have kept the production target of at least 440 million tons.

While speaking to media on the sidelines of the International Conference of Safety in Mines Research Institutes in New Delhi, the chairman cited various reasons such as heavy rainfall, strikes and delays in obtaining forestry and environmental clearances for coal projects as the causes of the productions target’s downward revision.

Currently, CIL’s production is 10 percent below target, with a decrease of 3.9 percent as compared to the last year’s output.

The coal miner was not able to achieve its April-September target by about 20 million metric tons, recording an output of 176 million tons against the target of 196 million tons, as inclement weather, including heavy rains in August- September that affected production in almost all its collieries.

CIL accounts for 81 percent of India’s domestic coal production and is the sole supplier of coal and other basic raw materials to state-owned power utilities across the country. It has already missed the target in 2010-11 with the production barely inching up 0.2 percent over a year before, touching 431 million metric tons. As a pre-emptive measure, CIL cut the current year’s target for the second time to 440 MT from 447 MT, itself lowered from 452 MT set in the beginning.

The country currently faces a coal demand/supply shortfall of 142 million metric tons, with domestic output likely to amount to 554 million tons in the current fiscal year.

Industry analysts believe that in the current fiscal year, Coal India is in position to produce 550 million tons, but the demand stands at 700 million tons. Imports will fill the gap.

The Indian coal industry is the fourth largest in terms of coal reserves and third largest in terms of coal production in the world. But despite its huge resource base, to date, India has not been able to minimize its coal deficit.

Available trends show that India is becoming a major importer of coal from Indonesia and South Africa. The Indian federal government does not import coal. Under the present government import policy, coal is placed under Open General License and can be freely imported by anyone in the country on payment of applicable import duty.

Coal is the most important fuel for electricity generation for domestic industries such as steel, cement, fertilizers and chemicals. Power producers and steel manufacturers frequently import coal to fill their requirements. Many Indian companies have acquired overseas coal blocks for the fuel supply.

Analysts say that in order to satisfy the coal demand, the Indian coal industry needs more investment and private players to raise its production level. The coal washeries have to take a bigger role in the industry to produce less moisture and ash-based coal to remain compliant with strict environment regulations.

According to a research report, titled “Indian Coal Industry Forecast to 2013,” Indian coal demand is continuously rising on the back of high demand from major coal-consuming sectors including power, cement, and steel. Moreover, with huge coal reserves, growing industry demand and government support, India’s coal production is expected to grow around 7 percent between now and 2013-14.

Industry watchers anticipate that the demand for thermal coal and coking coal from the power and steel sectors will show tremendous momentum in the near future.

By. TC Malhotra

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