KOLKATA (miningweekly.com) - With the value of the Indian rupee crashing to an historic low, coal imports into the country would have to be checked through the rapid development of domestic sources to keep the import bill under control and to reduce the current account deficit (CAD), the Planning Commission warned.
According to Planning Commission member B K Chaturvedi, despite the country having substantial coal reserves, the demand for dry fuel was much higher than supply, resulting in import dependency, which, in turn, had a negative impact on the CAD.
The CAD indicated that the import of goods services and transfer was higher than Indian exports, and it made up some 4.8% ($88.2-billion) of the country’s gross domestic product (GDP) in 2012/13. The government has targeted pruning the CAD to 4% of GDP, or $70-billion, by the end of current fiscal year.
However, government officials said that with the rupee in a tailspin, crashing 25.1% since April 2013 to Rs68.83 against a dollar, the coal import bill would be hard to contain.
The Indian rupee has been the worst performer since April among emerging markets, followed by South Africa, Brazil and Indonesia where currencies depreciated 22.6%, 15.8% and 15% respectively.
India’s oil import bill was pegged at $169.25-billion during the last fiscal year, compared with the $50-billion gold imports and the $18-billion coal imports. Officials pointed out that the demand inelasticity of oil and its criticality to the economy, gave little room for the desired reduction of imports, while the government had taken several measures to check gold imports.
However, in contrast, despite adequate domestic coal resources, the import of dry fuel as feedstock for power generation was climbing, with little policy initiatives in place to boost domestic production, officials said.
“The policy is to maximise domestic production so that imports of coal are reduced and the CAD will improve to that extent,” Chaturvedi said.
But senior officials in the Coal Ministry pointed out that, given the constraints faced by coal miners, such as Coal India Limited, including protracted land acquisition, delays in securing mandatory forest and environment clearances and long timelines for the development of new coal projects, even efficient policy interventions would not be effective in counter-balancing the rapidly worsening currency and CAD.
Coal Ministry officials were, however, apprehensive that any move to cut coal imports, in the wake of the slide in the rupee, could jeopardise power generation capacity creation, as 78 000 MW of thermal generation capacity was still awaiting fuel linkages.
Domestic coal production demand was 772.84-million tonnes in 2012/13 while production was 557.60-million tonnes. According to estimates of the Planning Commission, the demand for coal has been forecast at 980-million tonnes by 2017, while domestic production - assuming CIL was to implement all new projects according to schedule - would be 795-million tonnes, with the balance sourced through imports.
According to some nongovernmental data, imports of mining and mineral products, excluding gold, contributed about $30-billion to the country’s total CAD of $88.2-billion.