India will only secure its future energy supplies if it ramps up its efforts to generate more renewable power and instigates a credible coal policy, a new report states.
Despite having a huge dependency on coal, the country has suffered severe supply problems in the past year.
To try to remedy this, the government has ordered the country’s largest state-run supplier, Coal India Limited (CIL), to sign contracts to supply at least 80 per cent of the required coal to power utilities or suffer penalties.
But this has been branded a “desperate move which will not save the industry” by analysts at business intelligence company GlobalData.
Their report also points out that the proposed penalties on CIL will only kick-in after three years, and therefore “will have no short-term effect on the coal supply shortage”.
GlobalData calls CIL’s domination of the India domestic coal market “near monopolistic” and states that it results in supply bottlenecks and delays in coal field development.
It adds: “There is a growing need for a transparent and credible coal pricing policy based on global norms.”
The report also states that foreign policies let down India’s coal industry. Indonesia accounts for 50 per cent of India’s imports, and a new Indonesian policy stipulating the benchmarking of coal prices to international market rates “will likely increase the cost of imports dramatically”, says the report.
Australia, which accounts for 5 per cent of India’s coal imports, has also now issued a draft mining law to impose taxes on coal and iron ore projects from next year.
The report concludes that “until the Indian government supports the coal industry or offers renewables as a suitably enticing alternative, the country seems set to keep on struggling”.