Tuesday, June 21, 2011

India projects coal shortage of 142 Mt in 2012

Fitch Ratings says coal will remain the dominant fuel for the Indian power sector, given the lower-than-expected gas production from existing fields and no new major gas discoveries. Additionally, the majority of the future generation capacity additions will be coal-fired.

State-owned Coal India Limited (CIL) dominates the domestic coal supply market with a 80% market share, although some industrial consumers, typically in the power and steel sectors, have access to captive mines. CIL's non-coking coal production target for 2012 is 452 Mt, only marginally up from 431 Mt recorded in 2011, as the development of some new fields has been hindered by environment ministry concerns.

Environmental issues have also led to most consumers' captive mine blocks lying idle. As a result, the coal ministry projects a coal supply shortfall of up to 142 Mt in 2012.

"Fitch believes that both the Indian government and the coal industry will need to take action to mitigate the near-term coal availability and price risks. As part of these efforts, CIL is planning quick liquidation of pit-head coal stocks and prioritised allocation of coal. Relaxation of the environmental constraints currently preventing mine development could open up more areas for mining," Reuters reported.

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