14
|
World Coal
|
January 2016
Despite industry reform and growing output from
Coal India, the Indian coal sector is beset by persistent
problems that will hamper growth.
Mitchell Hugers,
BMI Research, UK,
reports.
GOOD
A
lthough India possesses one of the world’s
largest coal reserves and has significant
production growth potential, the country will
continue to suffer from a persistent coal deficit
over the coming years. The Indian government has made
great progress in improving coal mine production and coal
offtake in recent quarters. As a result, BMI has raised its
production forecast, with India’s coal output to grow from
753 million t in 2016 to 935 million t in 2019, posting average
annual growth of 7.4% during 2016 – 2019, a sizeable
acceleration from an average growth of 4.4% annually
during 2011 – 2015.
While impressive, these growth rates will fall short of the
government’s ambitious target. Despite passing the Coal
Mines (Special Provisions) Bill, two key challenges will limit
the sector’s growth. Firstly, attracting foreign players will be
hampered by coal unions. The strike in January 2015 by coal
unions highlighted the need to address the union’s concerns
before making any changes to the current policies. Secondly,
low coal prices will limit investment from entering the
sector. BMI forecast thermal coal prices to average US$62.0/t
during 2016 – 2019, significantly lower than US$85/t during
2006 – 2015. Moreover, the lack of infrastructure
modernisation and the government’s inability to push
through the land acquisition bill will limit the development
of coal infrastructure, which will impede coal output growth
over the coming years.
Government reforms taking shape
In March 2015, the Indian government passed the Coal Mines
(Special Provisions) Bill. BMI believes that this bill will help
boost domestic production as it has removed the state
monopoly held by Coal India. Under the new law, private
mining companies are allowed to enter the domestic coal
