9/11/2014 India's coal demand­supply gap is projected to widen: IMaCS ­ Economic Times

data:text/html;charset=utf­8,%3Cdiv%20id%3D%22mod­article­header%22%20class%3D%22mod­economictimesarticleheader%20mod­articleheader… 1/2

Tags: IMACS | Environmental Issue | Coal India Limited | Coal India | coal demand | CIL |captive power plants | CAGR

India's coal demand­supply gap is projected to widen: IMaCSDebjoy Sengupta, ET Bureau Feb 14, 2013, 06.05PM IST

KOLKATA: Increasing demand of coal in coal based power plants in India is estimated to grow 7% annually to leada demand­supply gap of 266 mt in FY2017, said IMaCS, a multi­line management and development consulting firmin India.

The import could comprise of 35.5 mt of coking coal and 230 mt of thermal coal. Import demand would be primarilybe accounted for by power utilities (190 mt), and steel (36 mt). Although India's coal needs will continue to belargely met domestically, the share of imports in domestic demand is forecast to increase to 27% in FY2017.

Lower growth in India's domestic production vis­a­vis demand, lower quality of domestic coal, and inadequateavailability of domestic coking coal have resulted in India's coal imports increasing at a 5­year CAGR of 16.2% to101 mt in FY2012. Imports accounted for around 16% of domestic consumption in FY2012, as compared with 7.1%in FY2003. India's coal demand has increased at a 5­year CAGR of 6.5% to 635 mt in FY2012. Demand isdominated by the power sector, which accounts for 70­72% of total demand. Including steel (11%) and cement(5%), three industries account for 87% of India's coal demand.

Coal based plants account for around 55­57% of India's electricity generation capacity, however, their share inpower generation has been higher at 67%. India's coal demand is forecast to increase at an annual rate of 7% to981 mt by FY2017, according to IMaCS. Out of the forecast demand, demand by power utilities is forecast at 682 mt(5­year CAGR of 8%), accounting for 70% of forecast demand.

Including forecast demand of 56 mt by captive power plants (CPP), the projected demand for power sector isaround 75% of total demand. Demand by the steel sector is forecast at 67 mt (5­year CAGR of 8%), accounting for7% of total demand.

India's coal production has increased at a 5­year compound average growth rate (CAGR) of 4.6% to 540 milliontonnes (mt) in FY2012. Over the last few years, the increase in production has come almost entirely from non­coking coal. Production of coking coal has increased at a low rate mainly because of lower production by Coal IndiaLimited (CIL).

Rising prices has ensured improved financials for CIL during FY2010­12. Although competition from alternatesuppliers and imports is likely to increase considerably over the medium­term, the dominant position of CIL isunlikely to be impacted.

Consistently increasing demand­supply gap, increased production, steady reduction in workforce, and productivityimprovement measures are the factors which may have a positive impact on CIL's profitability on a consolidatedbasis. However, performance variations across subsidiaries may continue.

India's energy supply and demand is likely to be dominated by coal for many decades to come, primarily because ofits lower costs and abundant availability. Compared with limited oil and gas reserves, India's coal resources andreserves are enormous. As a result, even under a wide range of scenarios, coal is expected to contribute between44% and 51% of the India's energy supply by 2035, compared with 42% in 2010.

Coal is expected to continue to be the main source of electricity generation, with its share increasing from 68% in2010 to 68.6% in 2035. Coal is expected to remain India's most competitive fuel choice for power generation over

9/11/2014 India's coal demand­supply gap is projected to widen: IMaCS ­ Economic Times

data:text/html;charset=utf­8,%3Cdiv%20id%3D%22mod­article­header%22%20class%3D%22mod­economictimesarticleheader%20mod­articleheader… 2/2

the next 2­3 decades.

In industry, coal is expected to be primarily used in steel and cement production, and is expected to be the main fuelused. Although world demand prospects for coal could increasingly be dependent on climate change policies, suchfactors could have less influence in developing countries such as India, which could place a higher value oneconomic growth and security of energy supply than on environmental objectives. Because of the long life of coal­fired power plants, and the higher cost of building advanced plants, alternate infrastructure will come into operationonly very gradually.