As economies recover from the pandemic-inflicted shock of 2020 and 2021, global coal demand may well reach a new all-time high in the next two years. The amount of electricity generated worldwide from coal is surging towards a new annual record in 2021, undermining efforts to reduce greenhouse gas emissions, laments the International Energy Agency (IEA).

At the same time, as the world’s second largest consumer of the fossil energy source after China, India’s coal demand is set to expand to 1,185 million tonnes (mt) by 2024, growing at an average annual rate of 3.9 per cent, IEA has forecast in its latest report Coal 2021.

After nearly 18 months of rather muted economic activity, robust growth is on the horizon for India. Demand for electricity is set to expand as activities reopen, incomes rise and households get connected to the grid and buy household electrical appliances.

Coal plays a significant role in the country’s energy mix in the form of thermal power and accounts for 55 percent of the country’s energy needs.

Importantly, demand for electricity is expected to grow in power-intensive industrial activities such as manufacture of aluminium, steel, cement and so on. These commodities are required to meet India’s ambitious plans for rapid development of infrastructure across the country. India’s demand for metallurgical coal is bound to increase with increasing move towards blast furnace-basic oxygen furnace method for steel-making.

This will necessitate increased import of met coal for the steel sector. As per the current import policy, coal is kept under Open General License and consumers are free to import coal from the source of their choice as per their contractual prices on payment of applicable duty.

Rising imports

India’s coal import has risen from 191 mt in 2016-17 to a high of 249 mt in 2019-20; but declined to 215 mt in 2020-21 with drop in demand because of the pandemic-related restrictions.

Interestingly, huge investments – as much as $55 billion equal to the current value of over ₹4,00,000 crore – are expected to be made in coal gasification and liquefaction. The target is to have 100 mt capacity by 2030, according to the Coal Ministry. Coal India Limited has envisaged a coal production programme of one billion tonne from CIL mines by the year 2023-24. In other words, the country is unlikely to reduce its dependence on coal consumption anytime soon, despite the need for it.

(The author is a policy commentator and commodities market specialist. Views are personal)

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