Protracted electricity shortages in India are a grave threat to the country’s growth. Despite having among the largest coal reserves in the world, India’s reliance on imported coal is increasing and there is a clear need for innovation, technology and infrastructure in the domestic coal sector. Public private partnerships (PPPs) could be a major part of the solution.
Coal commands a 54% share of India’s energy basket. However, coal production has consistently been below planned targets and the current model of private participation is clearly not delivering the results needed. There is a need to reinvent the way PPPs are utilised in the coal sector—as has been done in the airports, highways and ports sectors.
The ministry of coal has overall responsibility for policies and strategies regarding exploration and development of coal through Coal India Ltd, the single largest coal producing company in the world.
About 60% of India’s total installed power capacity is generated using coal and 85% of new capacity coming on-stream by 2016-17 will also be coal-based. Although India accounts for nearly 10% of global coal deposits, the demand for coal has been outstripping indigenous production. Demand is expected to rise to 980 MT by 2016-17 and to 1,373 MT by 2021-22. Supply, however, is expected to be just 795 MT by 2016-17 and 1,102 MT by 2021-22.
The shortages caused by inadequate or delayed receipt of coal from Coal India and insufficient imports are hitting the electricity generation sector hard. The power minister recently said that several large coal-based projects have, at best, four days of coal reserves on-hand.
The situation was exacerbated when Indonesia, a key source of imported coal, substituted the long-term bilateral coal supply contracts regime that hedged the price and quantity since 1967, with a new coal pricing regulation that resulted in an increase in the landed price of imported coal from $36 per tonne to $102. The hike threatened to make several competitive tariff based power purchase agreements unviable.
Harnessing India’s coal potential is constricted by political and socio-environmental factors. Monopolistic Coal India can’t mine coal fast enough, and the country has failed to develop adequate transportation infrastructure to swiftly move coal freight. In addition, substantial coal deposits lie under India’s already shrinking forest cover, which houses endangered species and a large tribal population.
While the government needs to fast-track other sources of energy like renewables, LNG and shale, India’s dependence on coal means it must find ways