India has urged its states to increase coal imports over the next three years to build up supplies and meet demand, four sources told Reuters, a move that should benefit world fuel prices already high due to the war. in Ukraine.
The decision to increase imports underscores the severity of India’s fuel crisis, as coal stocks are at their pre-summer lows in at least nine years and power demand is expected to rise at its fastest pace. fast in nearly four decades.
India, the world’s second-largest coal importer, could boost global demand until 2025 as Energy Secretary RK Singh set a longer timeframe for a federal push to increase imports, previously seen as a temporary measure.
“States have been urged to continue importing as it will take the private sector until at least early 2025 to produce significant generation,” said an Energy Department official who attended Singh’s meeting with state officials on Tuesday.
In addition, the state rail network suffers from a continuing shortage of trains to transport domestic coal, the official added.
The sources, two state officials who attended the meeting and two Energy Department officials, declined to be identified because the matter is private.
At the meeting, states were urged to sign long-term import contracts to secure supplies and lower prices, as well as buy wagons to solve logistical problems, said another ministry official who had been briefed but was not present.
A surge in coal imports could benefit miners including Indonesia’s Adaro Energy, Australia’s Whitehaven Coal Ltd, and Adani Enterprises, India’s biggest coal trader, whose controversial Carmichael mine in Australia started producing coal this year.
But high global coal prices will weigh on India’s indebted utilities and threaten to exacerbate their financial problems.
World prices have soared on fears of a supply shortage after the European Commission decided to ban coal imports from Russia following its invasion of Ukraine, which Moscow describes as a “special military operation”.
India, which has a long-standing policy of reducing coal imports, said in December that there should be no imports that are not very important.
In March, the government said it had “achieved a significant reduction in imports despite strong increases in electricity demand,” a decline it attributed to sweeping reforms.
“Just last year we were told to reduce imports,” one of the state officials said at Tuesday’s meeting. “Now they want us to import as much as possible and they say there is a shortage of supply. This is very confusing and mixed-signal.”
The minister’s comments to state officials are a guide, as New Delhi largely controls domestic coal production and distribution.
Although the power-hungry nation has pledged internationally to gradually reduce fuel use, he has said he will not phase out coal-fired power plants any time soon because they provide cheap electricity.
Despite record production by the state-owned Coal India company, India faces a shortage of coal. As the world’s largest coal miner, it produces 80% of India’s coal.
Indian Railways is struggling to increase deliveries even as utility stocks dwindle.