Coal will continue to be the predominant form of energy in future. To keep up, coal production will need to accelerate to catch upto rising energy requirement. However, there is not enough coal supply planned and relying on imports in future may not sustain.

Coal Reserves: India has huge coal reserves of 276bn mt as of April 2010. Of these proven reserves are estimated to be 110 bn mt (13% of total proven reserves in the world). In India, in opencast mines (OC), 90% of total proven reserves can be extracted, while in underground mines (UG), only around 35-40% of the reserves can be extractable. IEA maintains a R/P ratio of 105 years for India whereas there are estimates by Expert Committee (Ministry of Coal) having a view that coal reserves will run out in 30-40 years.

For 2010,

Demand of Raw Coal at 604mmt

Indigenous supply at 534mmt (OC Share - 89% and UG Share - 11%)

Import at 70mmt

Domestic Demand-Supply mismatch in coal: As per estimates from Crisil and IEA outlook, there exists a huge demand supply gap in coal sector due to rise in its coal based power capacity additions and limited incremental supply of coal. The domestic coal supplies are inadequate to cater to the local demand.

India coal imports to double by 2013-14

Thus, going ahead, this demand-supply gap will have to be filled in with imports which are expected to double by 2014. Asia remains the world’s largest importer of coal. The region already accounts for 59 percent of total world imports (Asian imports at 12.6 Quad btu). Strong growth is expected from China and India and much of the increase in demand for energy in these regions, particularly in the electric power and industrial sectors, is met with coal. With the doubling of imports, share of imported coal in India’s total coal consumption will rise significantly.

Coal India, contributing 82% to domestic coal production, has been facing problem in ramping up coal output, which could increase India's reliance on imported coal to meet its power plant's coal requirement.

Currently, India which is at fourth position in terms of imports is expected to move to second position by 2015 and first position by 2035 (Source: IEA)

International Coal Scenario World coal trading market can be divided into two parts – the Atlantic and the Pacific. The Atlantic region (mainly North and South America) is self-contained in terms of coal demand-supply equation. Most of the world coal trade takes place in the Pacific region.

Indonesia: Currently 70-80% of imports come from Indonesia which is the second largest coal exporter worldwide (In 2009, Indonesia exported 230mmt of coal). Indonesia is proposing to ban export of thermal coal by 2014, a move, which if undertaken, could have an impact on the domestic power sector that is dependent on Indonesia to bridge the coal supply shortfall in India.

Areas of uncertainty for Indonesian exports include:

Rate of growth in its domestic coal consumption

Adequacy of its internal transportation infrastructure

Continued development of new mines

Environmental concerns

This will likely result in reduced percentage of coal being exported, which presents a significant hurdle for Indian coal importers due to limited export quota, competition from other Asian coal consumer countries like Japan, Korea and Taiwan.

According to the current energy mix trend, share of coal in Indonesia’s energy mix is expected to grow from present level of 15% to 33% by 2025.

South Africa: Most of the mines in South Africa are underground, leading to higher cost of mining as compared to Indonesia. The cost of transportation from mine to port is also very high. Regulations are not facilitating removal of infrastructure bottleneck

Australia: Currently, India imports only 2-3 per cent of non-coking coal from Australia. This is mainly because landed cost of Australian coal is on the higher side compared to Indonesia and South Africa.

Conclusion: Thus, it is safe to assume that importing such large quantities of coal can be challenging and current plans for domestic coal production are inadequate to cater to India's growing energy needs.