India Looks to Australian Coking Coal for Steel Production and Power Generation

by Sohrab Darabshaw on MARCH 14, 2017

On its journey of self-reliance, India still needs coal.

Highly dependent on imports for this crucial raw material needed for steel and power generation, India has decided to tackle its coking coal deficit by acquiring a foreign coking coal asset, and washing certain grades of coal to make it fuel-ready.

Power Minister Piyush Goyal told news agency Press Trust of India that one of the ways the government was contemplating reducing its reliance on imports was to wash certain grades of coal to make available 20 million metric tons of coking coal in the next three to four years for the domestic steel industry.

Not Enough Coal for Steel Production or Power Generation

Chairman and Managing Director of Coal India Ltd. S. Bhattacharya has reiterated that coking coal requirements for the domestic steel industry are still not being met. State-run CIL, the country’s near-monopoly coal producer, is said to be looking at coking coal assets overseas as the country was faced with constraints of commercially viable domestic metallurgical coal reserves, the Minister told Parliament in a statement. CIL is looking to appoint a merchant banker to assist it in acquiring assets overseas.

According to some media reports, CIL is considering buying coal assets in Australia for over $1 billion. The state-run company is likely to raise debt to fund the said assets in Australia. CIL is also reportedly mulling entering into strategic partnerships in the next financial year 2017-18 to import some coking coal.

Cleaning Unsuitable Coal

Ironically, India sits on a massive natural stockpile of coking-grade coal, but these resources have not been fully exploited, and much of it is not suitable for power plants, forcing India to rely on imports for electricity. India generates about 60% of its total energy from coal and about 10% using natural gas and even diesel fuel. In view of the climate commitments made by India at the Paris Climate Conference, it needs to bring non-fossil fuels up to 40% of its energy mix and the carbon intensity of its GDP down to 33% by 2020. Washing of the low-grade coal would mean it can then be used as coking coal for steel plants, and cheaper imports of coal for power plants can then be used.

CIL is on its way to raising its annual coal output up from 560 mmt to 905 mmt in 2020. Private coal mines allotted by the ministry of coal to private producers for captive power generation are expected to mine 500 mmt of coal by 2020. This is expected to take India’s total coal output up to 1.5 billion mt by 2020.