India’s coal production is expected to be in the range of 850-900 million tonnes (MT) in FY23, ending March, aided by the government’s push to meet the rising power demand in the world’s second biggest consumer of the key fuel.

CareEdge in a report reiterated its expectations on India’s coal output in the current fiscal year driven by Coal India’s (CIL) expected ramp-up in production to achieve the Coal Ministry’s target to produce 1 billion tonnes (BT) by FY26 and 1.5 BT by FY30.

“Despatches to the power sector are likely to inch up further as demand from coal-based power plants remains high. While the imports have increased compared to last year, the government’s initiatives to increase domestic production would lower dependence on imported coal in the medium-long term. International coal prices are expected to remain moderate in the near-medium term due to soft global demand,” CareEdge Advisory & Research Director Tanvi Shah said.

Growing appetite for power

The power sector contributed 84 per cent of the total coal despatches during YTD FY23 as against 82 per cent during the same period in FY22, CareEdge pointed out.

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Total coal despatch to different sectors during YTD FY23 (April-January) increased by around 7.5 per cent Y-o-Y, supported by higher production and improved rail connectivity for all major mines.

The aggregate coal despatch to the power sector during the same period was 609 MT, an increase of 10.5 per cent Y-o-Y. The despatches remained flattish for captive power plants and declined for other sectors.

Electricity consumption

The overall energy requirement in the country has increased to 12,64,083 million units (MU) during YTD FY23 (April-January) from 1,142,263 MU during the same period in FY22, the agency said.

Coal-based power generation has accounted for more than 65 per cent of total power generated in the past years. The plant load factor (PLF) of coal-based power plants improved to 63.23 per cent in FY23 (up to December) from 57.23 per cent in FY22 YTD, primarily due to a ramp-up in domestic coal supply to meet the high demand for coal-based power plants.

Power sector drives coal imports

Coal imports have increased by 25.6 per cent Y-o-Y to 192 MT as of YTD FY23 (April- December). Non-coking coal, mainly used in power generation, accounted for 66 per cent of the total coal imports,” CareEdge said.

Over 70 per cent of the non-coking coal is imported from Indonesia and South Africa while coking coal is majorly imported from Australia, it added.

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In January 2023, the power ministry directed the thermal power plants to import coal to achieve imported to domestic coal blending at the rate of 6 per cent for the remaining period of the current fiscal and H1 FY24.

The move is targeted to reduce the coal shortfall anticipated during the summer months, the agency said.

However, to reduce dependence on imported coal over the medium-long term, the government has taken various initiatives including auctioning of coal blocks for commercial mining, FDI under the automatic route, expansion of existing mines, the opening of new mines under CIL and development of evacuation infrastructure, it added.