Amid worst power crisis in 6 years, India buys more Russian coal
While European importers keep avoiding doing business with Moscow, Indian traders are snapping up large amounts of Russian coal.
Russia, which is under harsh Western sanctions as a result of its invasion of Ukraine, warned the European Union in April that sweeping coal penalties would backfire because the fuel would be diverted to other markets. Now, India's sales of Russian coal have increased in recent weeks as brokers offer discounts of up to 30%, according to two trade sources and data reviewed by Reuters.
According to unpublished Indian government statistics examined by Reuters, its purchases of coal and related items increased by more than sixfold in the 20 days through June 15 compared to the same time a year ago, reaching $331.17 million.
Similarly, Indian refiners have snatched up inexpensive Russian oil that has been spurned by Western countries. The value of India's oil trade with Russia increased by more than 31 times to $2.22 billion in the 20 days leading up to Wednesday, according to the data.
As a heatwave bakes broad swaths of South Asia, creating massive power outages, India is experiencing its worst power crisis in almost six years. A jump in air-conditioning demand brought on by this year's unrelenting weather, as well as an economic recovery brought on by the lifting of all COVID-related restrictions on industrial activities, drove power demand to new highs in April.
India has been forced to alter a policy of reducing thermal coal imports to zero, and has requested utilities to continue importing for three years as a result of the problem. It also invoked an emergency law to restart generation at all imported coal-fired power plants, many of which have been shut down due to high international coal costs.
Similarly, Indian refiners have snatched up inexpensive Russian oil that has been spurned by Western countries. The value of India's oil trade with Russia increased by more than 31 times to $2.22 billion in the 20 days leading up to Wednesday, according to the data.
Despite the fact that European importers avoid doing business with Moscow, Indian traders are snapping up large amounts of Russian coal despite the high freight expenses.
While calling for a stop to the violence in Ukraine, India has refrained from criticising Russia, with which it has long-standing political and security relations. New Delhi defends its imports of Russian goods as part of a broader attempt to diversify supplies, claiming that a sudden halt would raise global prices and harm its citizens.
The United States have told India that there is no embargo on Russian energy imports, but they do not want to see a "rapid acceleration"
India's trade ministry did not immediately respond to a request for comment on Saturday.
"The Russian traders have been liberal with payment routes and are accepting payments in Indian rupee and United Arab Emirates dirham," one source said. "The discounts are attractive, and this trend of higher Russian coal purchases will continue."
COAL BUYING TO CONTINUE
Offshore units of such Russian coal traders as Suek AG, KTK and Cyprus-based Carbo One in places including Dubai and Singapore offered discounts of 25% to 30%, triggering bulk purchases of Russian thermal coal by traders supplying to utilities and cement makers, the sources said.
The second source said the Singapore-based unit of Suek was also accepting payments in dollars.
Suek and KTK did not immediately respond to requests for comment. Reuters could not immediately reach Carbo One.
The EU ban has barred new coal contracts and by mid-August will force members nations to terminate existing ones.
India bought an average $16.55 million of Russian coal a day in the three weeks through Wednesday, more than double the $7.71 million it bought in the three months after Russia's Feb. 24 invasion, according to Reuters calculations.
Oil purchases averaged $110.86 million a day in the 20-day period, more than triple the $31.16 million it spent in the three months ended May 26.
Indian bulk buying of Russian coal is set to continue, with June imports expected to be the most in at least seven and a half years, Refinitiv Eikon ship tracking data showed.
Bulk shipments of Russian thermal coal started reaching India in the third week of May, with orders mainly from cement and steel firms and traders, according to shipping data compiled by an Indian coal trader.
(With Reuters inputs)
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First Published:19 Jun 2022, 05:59 AM IST
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