India, despite having the fourth-largest coal reserves globally, has been grappling with significant coal imports, amounting to over Rs. 3.85 lakh crore in the past year. This extensive reliance on imported coal places a considerable burden on foreign exchange reserves, prompting the Indian government to address the issue and strive for self-sufficiency in coal production. While progress has been made in reducing the share of imports in total coal consumption, there is still a need to enhance domestic production to curb import dependence.
Challenges in India’s Coal Landscape
Coal remains the primary energy source in India, contributing to over 70% of the country’s electricity generation. Despite its dominance in the energy mix, India faces challenges in meeting its surging energy demands. Domestic coal production falls short of the rapidly growing needs, necessitating coal imports to bridge the supply-demand gap.
Factors Driving Coal Imports
Several factors have driven the upward trajectory of India’s coal imports, including:
- Rising Electricity Demand: The increasing demand for electricity from both households and industries has amplified the need for coal, as it is a key source of power generation.
- Declining Quality of Domestic Reserves: The quality of India’s domestic coal reserves has been on the decline, impacting their suitability for various industrial applications.
- Delays in Opening New Mines: Delays in opening new coal mines have further strained domestic production, contributing to the reliance on imports.
Vulnerability to International Coal Prices
India’s dependence on imported coal exposes the nation to fluctuations in international coal prices. Recent months have seen coal prices surge, influenced by global factors such as the conflict in Ukraine. These price hikes have resulted in a significant increase in India’s coal import bill.