It is a matter of concern that India, sitting over the world’s fifth largest proven coal reserves of well over 111 billion tonnes, produces only around 800 million tonnes of coal per annum and continues to be a major global coal importer year after year. China, ranked 4th in coal reserves with around 134 billion tonnes, produced over four billion tonnes of coal, a world record. The nationalisation of coal mining by the Indian government over 50 years ago seems to have failed to achieve its purpose. The sector remains one of the most corrupt government-controlled areas. Such practices as illegal mining and transportation, unreliable pit-head stock claims, import manipulation and cost distortion have remained common. The country’s near-monopoly public sector producer Coal India’s (CIL) poor performance over the years is mainly responsible for coal shortage and imports, perpetuating massive corruption. In the past, coal scandal cases had reached the Supreme Court and even a prime minister’s name was dragged in.
The nationalisation seems to have achieved little except expanding the dark side of the business. In the last six years, India has imported a total of over 1.3 billion tonnes of coal. India is once again going in for large coal imports this year at a time when the import prices are rising as Western Europe, facing Russian energy import ban due to the Ukraine war, is slated to emerge as a big coal importer. Ironically, CIL itself has been asked to import coal. The Gautam Adani group will continue to be the biggest benefactor in the coal import exercise. The Adanis are the largest trader of imported thermal coal with state-run NTPC Limited, India’s biggest bulk power producer, as a major customer.
What prevents India from producing enough coal to meet its target of thermal generation, which accounts for almost 70 percent of the country’s annual electricity requirement, remains a mystery. For the present, the country needs to produce only about 1.3 billion tonnes of coal annually to be fully sufficient to meet its thermal power sector’s demand and even generate a small surplus for export. With some proper planning and effort, this should be possible. However, it is not happening for unknown reasons.
Nearby, China achieved the highest ever coal production of 4.07 billion tonnes last year. Contrast this with India’s total coal production of 777.31 million tonnes during 2021-22. CIL’s estimated coal production during 2021-22 was only 622.64 MT. State-controlled Singareni Collieries produced 65.02 MT. Small quantities of coal are also produced by Tata Steel, Indian Iron and Damodar Valley Corporation among a few others. Now, for the first time in several years, CIL has been asked by the government to import coal for use by utilities as shortages raise concerns about renewed power outages. In April, India faced its worst power cuts in more than six years.
Generally, Indonesia, Australia and South Africa together account for 80 percent of India’s coal imports. In 2020-21, Indonesia accounted for 42.98 percent (92.535 MT) of India’s coal imports followed by Australia 25.53 percent, and South Africa 14.45 percent. Coal imports reached a peak of 248 MT in 2019-20 and then declined during the next two years to 215 MT in 2020-21 and further to 209 MT in 2021-22. “The import of coal could be checked only by sustaining increased domestic supply over the years,” noted the Coal Ministry. Unfortunately, domestic coal supplies are not improving enough. In 2021-22, the coal production increased by only 61 MT over the previous year’s output of 716 MT.
For the first time, Russia has emerged as a preferred source for coal imports by India. Russian traders are said to be offering 25-30 percent price discount for thermal coal and accepting payment in rupees. India’s steel and cement companies have already stepped up coal imports from Russia. The country’s top steelmaker, Tata Steel, imported about 75,000 tonnes of coal during the second half of last month. India’s import of Russian coal this month reached a new peak. Coal imports from Russia are expected to continue through the coming months. Due to the power crisis, CIL is importing coal for the first time in seven years. Coal prices in Indonesia and other places are rising. On June 4, the Indonesian Ministry of Energy and Mineral Resources issued a statement saying that a strong demand from India helped the Indonesian HBA index rise 17.5 percent.
Last year, India imported a small amount of coal from Russia, accounting for only about two percent of India’s total imports. In March, this year, India imported 1.04 million tons of coal from Russia, the highest since January 2020. According to the union steel ministry, India will double the coking coal import from Russia which is exporting coal. The country needs a total of 50-55 million tonnes of coking coal annually, of which imports take care of about 85 percent of the coking coal demand. This year, India’s coal imports from Russia show a nearly six-fold increase.
India is the world’s third largest energy consumer after China and the US. India’s energy resource endowment is similar to that of China — rich in coal, poor in oil, and low in gas. Going by the “bp World Energy Statistics Yearbook 2021”, India’s coal reserves were about 111.1 billion tons at the end of 2020, accounting for about 10.3 percent of the world’s total proven coal reserves. In 2020, India was the world’s second-largest coal and third-largest oil consumer. In India’s energy consumption structure, coal accounts for the highest proportion, reaching 54.8 percent; followed by petroleum (28.2 percent). While the country can’t do much to step up petroleum production because of its poor oil and gas reserves — offshore and onshore — the responsibility for failure in adequate coal production lies entirely with the government and mining companies giving rise to corruption.
In 2014, the Supreme Court declared the allocation of 214 out of 218 captive coal mines between 1993 and 2010 illegal – an indictment of several governments as the windfall funds were assumed to have benefitted both businesses and their political allies. Corruption in India’s coal sector is also riddled with red tape, notably the requirement for various clearances at both the state and central government levels which enables profiteering. Often, production is underreported to sell the surplus in the open market at a higher profit.
In 2015, the Directorate of Revenue Intelligence began investigating claims of numerous large corporations routinely over-invoiced for coal imports from Indonesia to the tune of Rs 50,000 crore (around £5 billion), as well as charging higher rates from consumers. Over-invoicing is popular because it circumvents capital controls and converts Rupees into alternative currencies, as well as providing additional hidden funding – known as ‘black money’ – for political parties to spend in election campaigns. This may partly explain the government’s lack of concern for adequate coal production and continuing imports. (IPA Service)