policy implementation and changing
pricing dynamics – particularly in the
US where cheaper natural gas has
undermined coal’s competitiveness.
1
Conversely, pricing and policy
dynamics often favour the use of coal
in Asian countries.
BMI forecast the share of coal in
India’s overall electricity mix to
remain steady over the coming years
as the majority of its natural gas
reserves are deemed uneconomical
given the current extraction costs.
Coal generation will account for
66.5% of total energy generation
during 2016 – 2024, slightly lower
than the average of 67.8% over
2006 – 2015. Coal consumption in
India will continue to grow in
absolute terms and the country will
see increased coal demand on the
seaborne market.
Power sector to face
challenges
Investment in India’s power grid
infrastructure will need to increase if
Prime Minister Modi’s ambitious
power plans are to be realised. Some
progress has been made, but the
transmission and distribution network
remains highly inefficient, posing a
significant risk to the expansion of the
power and renewables sector in India.
BMI has long-highlighted the shortfalls
in India’s grid infrastructure, notably
the high transmission and distribution
losses, restricted network coverage
and the widespread lack of investment
into the sector. These factors have
meant that the grid infrastructure has
not kept pace with the growth in
electricity generation capacity.
2
Miners to increasingly
look abroad
Despite reforms to domestic coal
production, projects in southern Africa
are expected to continue to receive
interest from Indian companies
seeking to plug its domestic shortfall
in coal production. The portfolio of
coal reserves in South Africa has
attracted an increasing number of
Indian companies, looking to establish
a foothold in the country’s mining
sector. South Africa has been cited by
Indian mining and industrial
companies as the obvious supplier,
since Indonesia’s coal is of poor
quality and extraction costs in
Australia are high. Jindal and
Atha Group have already invested in
South African coal, while companies,
including Dalmia Cement, are
considering entering the sector.
Besides South Africa, Mozambique is
gaining interest. For instance, in July
2014, Rio Tinto sold the firm’s coal
assets to Indian firm, International
Coal Ventures. International Coal
Ventures joins India’s state mining
company, Coal India, and Jindal,
another major Indian iron and steel
concern, in taking control of some of
Mozambique’s largest coal mines. The
Jindal mining concession covers an
area of 17 600 ha. and, by the time the
mine is in full production, the
company’s total investment will have
reached US$10 billion.
References
1. ‘Coal Power: No Escape From
Irreversible Decline,’ 26 May 2015 (BMI
Research).
2. ‘Modi's Power Plans One Year On,’
7 May 2015 (BMI Research).
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