Impact Analysis of Captive Coal Blocks in India on Domestic Demand – Supply Metrics and Imports of Black Fossil , Comparing Impacts in Pre & Post De allocation Scenario

Production Trends from Captive Coal Blocks in India : A Know How

Coal mining for captive end use in India was initiated in 1976 for iron & steel sector and then with the gradual increase in the domestic demand of coal it was subsequently introduced to the other specific priorityexhibit-01-production-trend-of-coal-from-captive-blocks-fy2015 sectors majorly including power , cement etc. In power sector coal mining from captive blocks was permitted by GoI in 1993. From 1993 to 2012, total 218 captive blocks have been allocated in India to various private entities with estimated geographical reserves of close to 50.5 Billion Tons.

At present, the coal production in India from captive blocks stands to be 38.88 MT, the same could be observed in Exhibit 01. A significant increase in the production of coal from captive mines have been observed over the last 6-7 years.  It is pertinent to note that a momentous growth of 12.35% was witnessed in the output of coal from captive mines during FY2007-14. As a result, the share of coal produced from captive blocks stands to be 7% in FY 2014-15. In order to pull up the domestic supply of coal in the country , a sharp increase in the production of coal from captive mines was further projected by the end of this fiscal. The coal output from captive mines was expected to grow by 8.3% in FY 2015-16.

Impact of Captive Coal on Domestic Demand –Supply Metrics

exhibit-02-anticipated-output-of-captive-coal-blocks-in-india-till-2020-as-on-2015Captive blocks in India plays a vital role in bridging the demand-supply gap

of coal and significantly support the domestic supply of fuel in the country. Presently, captive blocks drives 6-8% of the domestic production of coal in the country. However, their share was projected to increase in upcoming years marking a slated rise of 11% by the end of 12th FYP. The production of coal from captive blocks was estimated to reach upto 87 MT in 2017 and was likely to cross a level of 140 MT by 2020. But, post de allocation achieving these targets seems to be little difficult and might lead to a downfall of 14.05 MT in the coal production from captive blocks in FY2015.

 

The demand of coal in India by several end consumers is already bearing a hit and the landmark judgment passed by SC in September 2014 would widen the demand-supply gap. As a result, mounting pressure on CIL & its subsidiaries in meeting the coal requirements along with increasing dependency on imports. The impact of captive coal on domestic demand-supply metrics could be seen in Exhibit 03.

exhibit-03-impact-analysis-of-captive-coal-blocks-on-domestic-demand-supply-metrics-of-coal-in-india-as-on-2015

Impact on the Tune of Imports

Captive coal blocks account nearly 10% of the total coal production in India, fulfilling the coal requirements and curbing the dependency of imports to a significant extent. The coal production from captive blocks in India was close to 39MT in FY2014 which bridged the demand-supply gap of fuel by 19% and hence reduced the tune of imports significantly. It is pertinent to note that total imports of coal in India grew at a slow pace of 15% from FY2012-14 against a growth of 41% from FY2011-13.But, the judgment passed by the SC about de allocation may shoot up the imports of coal. The impact of captive blocks on the coal imports can be seen from Exhibit 04 .

exhibit-04-anticipated-impact-on-the-tune-of-imports-of-coal-in-india-till-fy2017-comparing-change-pre-and-post-de-allocation-as-on-2015

To know more on the Indian coal industry , you may have a look on our upcoming research study on  “Coal Outlook in India 2016 – Analyzing Domestic and Imported Coal Scenario”

*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

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