Narendra Modi’s power pledge set to lift coal imports to record high
2 min read 07 Jul 2014, 03:14 PM ISTOverseas purchases are estimated to increase to about 145 million MT this year from 135 million tonnes in 2013
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New Delhi: India’s thermal coal imports may touch a record this year as a faltering monsoon hampers hydro-power generation and pushes steam-driven power plants to replenish stockpiles.
“Overseas purchases are estimated to increase to about 145 million metric tonnes this year from 135 million tonnes the previous year as prices hover around a five-year low," said Andrew Cosgrove, a Princeton-based analyst at Bloomberg Industries. Mjunction Services Ltd, a commodity trader that tracks coal shipments, estimates imports at 152 million tonnes.
The weakest start to the monsoon in five years is threatening output from hydro-generation plants, adding pressure on coal-fired power to run factories and propel economic growth. After becoming Prime Minister in May, Narendra Modi told lawmakers his government will work toward providing a house with power, water and sanitation for every family by 2022.
“We’ll see a sharp jump in thermal coal imports from India in the coming months, Jeffrey Landsberg," managing director at New York-based Commodore Research & Consultancy, said by phone. “The new Indian government is very, very determined to stop large blackouts and that’s the reason we will see electricity demand continuing to rise."
Clogged network
Coal India Ltd, the world’s biggest miner of the commodity, has failed to keep pace with increasing demand, forcing power stations, aluminium producers and cement factories to buy coal from overseas. Beset with land acquisition and environment approval delays, the state-run monopoly has fallen behind output targets since at least 2010, when it was listed.
A clogged railway network hampers dispatches to power plants and several mines remain untapped because of a lack of logistics.
“A plan to increase production by building new rail links and gaining approvals to start new mines will only show results after two or three years," Landsberg said.
Coal India rose as much as 1.4% to ₹ 399.80 in Mumbai and traded at ₹ 395.35 as of 12:49pm. The stock has advanced 36% this year, compared with a 23% gain in the benchmark BSE S&P Sensex.
Declining coal prices in the international market and a strengthening rupee are also making imports easier. Power station coal prices at Australia’s Newcastle port, considered an Asian benchmark, fell to $70.35 a ton in the week ended 27 June, the lowest since September 2009.
India’s power plants had coal stocks of 12.4 million tonnes as of 30 June, compared with 20.9 million tonnes a year earlier, according to the power ministry’s central electricity authority. Forty-two plants had stocks of less than seven days, considered a critical level, compared with 11 last year.
The rupee has gained 3% this year, after falling 11% in 2013.
Summer demand
Coal consumption is being augmented by rising summer demand from households because of a delayed monsoon and a pick up in factory production on expectation the government will bring in business-friendly policies. Industrial output rose 3.4% in April, according to the Central Statistical Office, the fastest growth since March 2013.
India recorded the lowest June rainfall in five years amid predictions for an El Nino weather system that previously caused droughts and cut crop output. Chances of a drought this year are rising, Skymet Weather Services, a private forecaster, said last week. Bloomberg
