Coal supply gap remains
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Calcutta, July 20: Coal imports by India will continue despite efforts by the Centre to step up production to bridge the demand-supply gap. Market analysts expect both thermal and coking coal prices to fall in 2017-18, thus bringing down the import bill marginally.
Union coal and power minister Piyush Goyal said in the Lok Sabha today that the coal demand-supply gap will continue.
"The gap between demand and supply of coal cannot be bridged completely as there is insufficient domestic availability of coking coal and power plants designed on imported coal will continue to import for their production," he said.
Provisional data suggests that against a total demand for 838.68 million tonnes in 2016-17, the total domestic supply was 647.73 million tonnes. The country imported 190.95 million tonnes by spending Rs 10,0231.3 crore.
Although in volume terms, coal imports in 2016-17 were lower compared with 2015-16 (203.95mt), the import bill was higher on account of a rise in both thermal and coking coal prices in the second half of the year.
The Niti Aayog has estimated coal demand to be 908.40mt in 2017-18 and production between April and June was 159.38mt.
Coal market analysts have estimated coal prices to marginally soften this fiscal.
According to India Ratings and Research, price assumption for the benchmark thermal coal (Newcastle 5500 calories) in 2017-18 is around $60 per tonne compared with $66 per tonne in the fourth quarter of 2016-17. Similar assumption for coking coal imports is $150 per tonne compared with $222 per tonne in the fourth quarter of 2016-17.
"Although coking coal prices are likely to weaken in 2017-18 because of a production recovery in Australia and China, the average price for the full year may continue to remain high compared with the first half of 2016-17 because of continued supply side constraints and low inventory levels," said India Ratings and Research in its note.
Higher-than-expected volume ramp-ups by large miners, proliferation of renewables, downward revision of royalties and taxes are among the downward risks for coal prices.
The government today also said that coal cess (Rs 400 per tonne) will contribute to the GST compensation fund.
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