This article exists as part of the online archive for HuffPost India, which closed in 2020. Some features are no longer enabled. If you have questions or concerns about this article, please contact indiasupport@huffpost.com.

Train Shortage, Power Demand To Drive Resurgence In India's Coal Imports

"The question is, how far do you stretch a rubber band?"
A truck is loaded with top soil at the Jharia burning coal field at Dhanbad district in the eastern Indian state of Jharkhand September 17, 2012.
Ahmad Masood / Reuters
A truck is loaded with top soil at the Jharia burning coal field at Dhanbad district in the eastern Indian state of Jharkhand September 17, 2012.

BAMBOLIM, India - Caught between logistical bottlenecks and surging demand from power plants, India will likely increase coal imports in 2018, industry executives said, in what would be a setback to the government's plans to cut the country's dependence on foreign supplies.

In a statement, Coal India said that the company was given a target of 288 trains of coal per day for the fiscal year ending March 2019. In February, the company is averaging 264.2 trains per day and reached a peak of 286 on a single day.

The company also said that the start up of two new railway lines should add between eight to 10 trains.

India needs a total of 332 coal trains per day to meet end-user demand, according to the Jan 22 meeting minutes.

The stretched supply chains and higher costs for imports are worrying Indian power companies.

"The question is, how far do you stretch a rubber band? Today, it is pretty stretched," said Vipul Tuli, chief executive officer of power company Sembcorp's India unit, referring to the rising costs of imported coal.

After years without significant imports, state-run utilities in the states of Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat, have ordered several cargoes of Indonesian coal over the last month, Adani's Singh said on the sidelines of an industry event in Bambolim in India's Goa state last week.

The utilities did not respond to calls for comment.

The surge in imports has created a traffic jam of about 200 ships outside Indian ports, shipping data in Thomson Reuters Eikon showed.

Data from consultants Wood Mackenzie shows that India's seaborne imports of thermal coal fell 3.3 percent to 147 million tonnes in 2017.

Rodrigo Echeverri, head of hard commodities research at Noble Group, said last week that Indian coal imports will rise in 2018 after falling for two straight years.

Power generators are not the only source of additional coal demand. Cement makers are buying coal to replace the petroleum coke they use to fuel furnaces that make cement from minerals.

In October, India banned the use around the capital of New Delhi of petroleum coke, or petcoke, a highly polluting fuel that is the solid remnants left over from processing fuel oil into fuels at oil refineries.

While cement companies have gained exemptions from the ban, they are replacing some of their petcoke with coal to avoid production delays.

Petcoke consumption by cement makers will likely fall by 10 percent to 15 percent in 2018, said Kirik C. Gandhi, an executive at Shree Cement, adding that they will diversify into other fuels, mainly imported coal.

To further reduce petcoke consumption, the country in December raised the import duty on the fuel to 10 percent from 2.5 percent.

Australian mining giant BHP said this week that the duty increase, which mostly impacts cement manufacturing, "is expected to add roughly 20 to 25 million tonnes to coal demand."

"We are all geared up (for more coal imports) because this question will come again for sure," said Sanjay Kumar, an executive from cement maker Lafarge Holcim, referring to the potential for restrictions on petcoke usage.

Close
This article exists as part of the online archive for HuffPost India, which closed in 2020. Some features are no longer enabled. If you have questions or concerns about this article, please contact indiasupport@huffpost.com.