India’s big industrial states plan massive coal imports to stave off shortages

NEW DELHI: Three of India’s most industrialised states plan to import 10.5 million tonnes of coal in coming months as officials scramble to arrest widespread power cuts, a move that could push global coal prices to new highs.

The scale of the purchases and the decision to go back on a plan to cut coal imports underscore the severity of the India’s fuel crisis. Utilities’ coal inventories are at the lowest pre-summer levels in at least nine years and electricity demand is seen rising at the fastest pace in at least 38 years.

Maharashtra plans to import 8 million tonnes for “blending purposes,” while Gujarat will place orders for 1 million tonnes next week, the states’ energy officials told the federal government on April 13, according to the minutes of the meeting reviewed by Reuters.

The chairman of the Tamil Nadu government-run utility said the state was targeting importing 20% of its coal requirements, adding that it had already placed orders to import 1.5 million tonnes, according to the meeting minutes.

The three states are the among the biggest power guzzlers in the country, cumulatively accounting for nearly a third of India’s electricity demand in 2021.

Specific details on the states’ import plans have not been previously reported. The cumulative imports planned by just the three states would be higher than annual imports by state government-run utilities for blending in at least 6 years.

The move by India, the world’s second largest coal importer, could lead to a further increase in global prices, which are already trading near record highs due to fears of a supply crunch following the European Commission’s decision to ban coal imports from Russia after its invasion of Ukraine.

Coal miners in South Africa, Australia and Indonesia are likely to be the main beneficiaries of India’s buying spree, though those producers are already stretched by the recent spike in demand.

Russia is also a possible supply source, but costs are already high and buyers are likely to push for discounts, two traders said.