State-run Coal India (COAL.NS), which accounts for 80% of domestic coal output, saw production fall for two straight years ended March 2021 mainly due to a lack of demand during the COVID-19 pandemic. India also pushed utilities to cut imports of coal used for power generation to zero during that period.
But a recovery from the pandemic followed by an unrelenting heatwave boosting air conditioning use, has revived demand and the government is forcing utilities to step up imports and Coal India to ramp up production to address supply shortages.
On Friday, the coal ministry’s top bureaucrat said the world’s second-largest producer, importer and consumer of coal after China expected to increase output by up to 100 million tonnes in the next three years by reopening closed mines.
“Earlier we were hailed as bad boys because we were promoting fossil fuel and now we are in the news that we are not supplying enough of it,” Coal Secretary Anil Kumar Jain told a conference aimed at attracting more private players into coal mining.
“This is a very courageous move by the ministry and Coal India to offer very quickly large supplies of coal.”
Months of declining fuel inventories at power plants culminated in the worst power crisis in more than six years in April, disrupting industrial activity and forcing India to accelerate coal mining.
A resurgence in India’s hunger for coal could mean peak consumption is years away. The use of the fuel for power generation is seen growing at the fastest pace in over a decade this year.
“While we are stressing on developing renewable sources of energy, coal is also going to be one of the major contributors in energy production,” Coal Minister Pralhad Joshi told the conference.
Power use touched a record high during a heat wave in April and while temperatures have eased this month, they are forecast to surge again soon.
India’s power minister last month asked states to keep importing for the next three years. His ministry has also evoked an emergency law in a bid to restart generation at some idle power plants using imported coal.
India’s moves are likely to provide prolonged support to global prices . While prices came off near-record highs this week, fears of the impact of sanctions on Russia – a key coal and gas supplier to Europe – and higher Chinese imports once lockdowns are lifted, have kept prices on the boil.