Decline in Coal Imports, Increase in Domestic Production

Written by Policy Analyst

A recent reply to a question in the Lok Sabha has revealed that there has been a significant decline in coal imports in recent years. We find that coal imports in the country have been consistently decreasing over the last few years. Coal imports declined from 217.78 Mt in 2014-15 to 203.95 in 2015-16. Further, in 2016-17, the imports declined to 190.95 Mt. The trend continues this fiscal year, as there has been a decline of 8.1% in the first quarter as compared to the same period in the previous year.

Imports have an adverse effect on the economy as they lead to ballooning of the current account deficit and pressures on the domestic currency. Also, imported coal is costlier, which increases the cost of electricity generation in thermal plants. This decline in imports has led to large savings for the country. The annual savings have been estimated at more than Rs 20,000 crore.

What has enabled this decline in coal imports? One of the reasons for the decline in imports is a sharp increase in domestic coal production. Production by Coal India increased substantially from 488.86 Mt in 2014-15 to 542.82 Mt. in 2016-17. For the record, the government has stated that the current coal generation capacity is adequate and substantial coal is being produced for domestic consumption.

The reduction in imports has been accompanied with an increase in the availability of coal. Data from the Central Electricity Authority reveals that in May 2014, one third of thermal plants (32 plants out of 100) in the country had critical levels of coal supply (less than seven days of coal stock). Today, just one plant faces a coal shortage and there is adequate availability.

Our dependence on coal imports is likely to continue as thermal plants with combined installed capacity of more than 80,000 MW, built during the tenure of the last administration, have been designed for only using imported coal. The process of replacing these thermal plants is slow and may take significant time. It is hoped that India’s plans for solar energy and other renewable sources of energy will hasten the process.