If the Ukraine crisis hits the Russia pact, it will deal a jolt to the goal of supply diversification
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NEW DELHI :
The conflict in Ukraine has cast a shadow on India’s coking coal imports from Russia with the West looking to impose further economic sanctions on countries pursuing economic ties with Russia.
If the Ukraine crisis affects the pact with Russia for collaboration in mining and steel, with a special focus on coking coal, it will deal a jolt to India’s goal of diversifying its supplies. This collaboration would have given India an advantage in terms of pricing for domestic steel makers and assured supplies of one of the most critical inputs that accounts for 40% of the total cost of production of steel. Two Union government officials aware of the development said the steel ministry is also looking for alternative coal supplies in the event of delays in Russian supplies.
India and Russia signed a memorandum of understanding in October last year for a strategic partnership in mining and steel, with a special focus on coking coal. The MoU envisaged implementation of joint projects and commercial activities in coking coal, including long-term supplies of high-quality coking coal to India, development of coking coal deposits and logistics development, sharing of experience in coking coal production management, technologies of mining, beneficiation and processing as well as training.
A query send to the steel ministry remained unanswered at press time.
As per the Directorate General of Commercial Intelligence and Statistics (DGCI&S), India’s coking coal imports have risen from about 30 million tonnes to over 50 million tonnes in the last decade with the import bill rising from ₹30-35,000 crore to about ₹75,000 crore now. The country is expected to import about 55 million tonnes of coking coal in FY22.
Currently, India imports most of its coking coal from Australia. Though Australia has agreed to meet India’s demand for coking coal, talks are also on with suppliers in Brazil and a few central Asian countries.
India’s coking coal imports during the April-December period of FY22 were recorded at 37.132 million tonnes, up 0.41% over the corresponding period of the previous year, according to data sourced from the Indian Ports Association (IPA).
The steel import bill has shot up to ₹75,000 crore per annum as stated by Union steel minister Ram Chandra Prasad Singh in a media interview.
The Indian steel industry is confident that it will weather the crisis.
“Both Russia and Ukraine are manufacturers and exporters of steel in addition to being suppliers of raw materials including coking coal and natural gas. The unfolding Russia-Ukraine crisis will impact supply-demand dynamics, input costs and the overall global economy. We are continuously monitoring the evolving situation and have contingency plans in place to ensure our customers and stakeholders remain unaffected," said a Tata Steel spokesperson.
Currently, most steel producers in India are import-dependent for coking coal. However, large producers like Tata Steel and SAIL source more than one-third of their coking coal needs through domestic supplies.
Though India possesses large deposits of coking coal in the Jharia region of Jharkhand, most of it remains unexplored due to continuous fire in the mining areas. “Russian supplies of coking coal would have insulated India from frequent fluctuation of prices of this key raw material. In fact, high prices of coking coal led many steel makers to cut production last year rather than keep producing with high input cost," said a steel sector expert from one of the four big audit and consulting firms asking not to be named.