Wednesday, August 10, 2022

Report says India doesn’t need more coal or new coal mines. Here’s why

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  • While power plants have reduced their stocks from record peaks at the start of the year, an even greater quantity has built up at pitheads managed by CIL and SCCL, said IEEFA

  • While this could be seen as an opportunity to rethink the nation’s coal requirements, Coal India remains intent on expanding production at the same time as new commercial mining blocks are on offer, it added

New Delhi: India has stockpiled a record 132 million tonnes (MT) of coal — enough to run India’s power plants for two months — greatly exceeding the average of the previous five years, said a new report by the Institute for Energy Economics and Financial Analysis (IEEFA). The note by analyst and guest contributor Charles Worringham said that while power plants have reduced their stocks from record peaks at the start of the year, an even greater quantity has built up at coal mine pitheads managed by state-run Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL), reaching 103 MT.

'Large coal stockpiles put downward pressure on coal production growth’

“As coal quality degrades with prolonged storage and has a heightened risk of spontaneous combustion, operators and the community would be very keen to see the reduction of these stocks being given priority over new coal production,” said Worringham. 

“The record-level coal stockpiles should be able to meet any continuation of the current electricity demand surge even if domestic coal production, which dipped this financial year, remains static into the near future,” said the report. “In fact, these large stockpiles are likely to put downward pressure on domestic coal production growth.”

‘India raising coal output, offering commercial mining when it doesn’t need more coal’

“While this could be seen as an opportunity to rethink the nation’s coal requirements in the near and longer term, Coal India remains intent on expanding production at the same time as new commercial mining blocks are on offer,” said the report. A second tranche of coal block auctions representing some 67 potential new mines was recently announced. This is despite India experiencing lower-than-expected coal use, in part due to the effect of the pandemic.

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“Our analysis shows coal stockpiles are growing disproportionately relative to thermal power generation,” said Worringham.

“And the financial year just ending, FY21, also saw Coal India claim success in their drive to substitute imported coal with domestic production,” he added.

‘CIL’s 1-BT target, commercial coal mining at odds with reality’

“If stockpiles can continue to build up in a year when, despite the pandemic, total electricity generation was stable, coal production slipped, and some imports were substituted, it does not augur well for massive production increases,” said the report.

“This situation puts both Coal India’s billion tonne production plans for FY24 and the expansion of commercial domestic coal mining increasingly at odds with the reality of flat demand and a record quantity of stockpiled coal.”

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