Coal demand-supply gap is projected to widen

February 18, 2013 06:39 pm | Updated October 18, 2016 12:57 pm IST - NEW DELHI:

ICRA Management Consulting Services (IMaCS) has predicted that India’s energy supply and demand is likely to be dominated by coal for many decades to come, primarily because of its lower costs and abundant availability.

Compared with limited oil and gas reserves, India’s coal resources and reserves are enormous. As a result, even under a wide range of scenarios, coal is expected to contribute between 44 per cent and 51 per cent of India’s energy supply by 2035, compared with 42 per cent in 2010. Coal is expected to continue to be the main source of electricity generation, with its share increasing from 68 per cent in 2010 to 68.6 per cent in 2035, it said in an analysis statement issued here.

It says coal is expected to remain India’s most competitive fuel choice for power generation over the next 2-3 decades. In industry, coal is expected to be primarily used in steel and cement production, and is expected to be the main fuel used. Although world demand prospects for coal could increasingly be dependent on climate change policies, such factors could have less influence in developing countries such as India, which could place a higher value on economic growth and security of energy supply than on environmental objectives. Because of the long life of coal-fired power plants, and the higher cost of building advanced plants, alternate infrastructure will come into operation only very gradually.

Further, it states the increasing demand of coal in coal-based power plants in India is estimated to grow 7 per cent annually to lead a demand-supply gap of 266 metric tonnes (mt) in 2016-17.

“The import could comprise 35.5 mt of coking coal and 230 mt of thermal coal. Import demand would primarily be accounted for by power utilities (190 mt), and steel (36 mt). Although India’s coal needs will continue to be largely met domestically, the share of imports in domestic demand is forecast to increase to 27 per cent in 2016-17,’’ the statement said.

It said lower growth in India’s domestic production vis-à-vis demand, lower quality of domestic coal, and inadequate availability of domestic coking coal have resulted in India’s coal imports increasing at a five-year compounded annual growth rate (CAGR) of 16.2 per cent to 101 mt in 2011-12. Imports accounted for around 16 per cent of domestic consumption in 2011-12, compared with 7.1 per cent in 2003-04. Coal demand has increased at a five-year CAGR of 6.5 per cent to 635 mt in 2011-12.

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