Three of India’s most industrialised states plan to import 10.5 million tonnes of coal in coming months as officials scramble to arrest widespread power cuts, a move that could push global coal prices to new highs.

The scale of the purchases and the decision to go back on a plan to cut coal imports underscore the severity of the India’s fuel crisis. Utilities’ coal inventories are at the lowest pre-summer levels in at least nine years and electricity demand is seen rising at the fastest pace in at least 38 years.

Maharashtra plans to import 8 million tonnes for “blending purposes,” while Gujarat will place orders for 1 million tonnes next week, the states’ energy officials told the federal government on April 13, according to the minutes of the meeting reviewed by Reuters.

The chairman of the Tamil Nadu government-run utility said the state was targeting importing 20% of its coal requirements, adding that it had already placed orders to import 1.5 million tonnes, according to the meeting minutes.

The three states are the among the biggest power guzzlers in the country, cumulatively accounting for nearly a third of India’s electricity demand in 2021.

Specific details on the states’ import plans have not been previously reported. The cumulative imports planned by just the three states would be higher than annual imports by state government-run utilities for blending in at least 6 years.

The move by India, the world’s second largest coal importer, could lead to a further increase in global prices, which are already trading near record highs due to fears of a supply crunch following the European Commission’s decision to ban coal imports from Russia after its invasion of Ukraine.
Coal miners in South Africa, Australia and Indonesia are likely to be the main beneficiaries of India’s buying spree, though those producers are already stretched by the recent spike in demand.

Russia is also a possible supply source, but costs are already high and buyers are likely to push for discounts, two traders said.

India’s federal government has also asked the state governments of Karnataka, Uttar Pradesh, Madhya Pradesh, Punjab and Haryana to import a total of 10 million tonnes of coal.

While Punjab has committed to import 625,000 tonnes, the other states have not detailed any plans, the meeting minutes showed.

Maharashtra’s expected 8 million tonnes of coal imports will be in addition to the 2 million tonnes it had already ordered, for which delivery is expected on May 8.

India had previously asked state government-run utilities to import 4% of their coal requirements for blending, but subsequently suggested last week that imports be boosted to 10% of the quantity needed to address soaring power demand.

Federal government-run NTPC Ltd NTPC.NS, the country’s top electricity producer, plans to boost coal imports to the highest level in eight years, Reuters reported last month.

Many Indian states including Andhra Pradesh in the south, Maharashtra in the west and Haryana, Punjab and Rajasthan in the north are already facing power cuts.

Utilities in Tamil Nadu have less than two days of rolling coal stock left on an average, while power plants in Maharashtra and Gujarat have about five days of inventory on an average. Federal guidelines recommend that states have at least 24 days of stock.

Officials have also decided to invoke an emergency clause in the country’s electricity law to allow currently idled power plants designed to run on imported coal to pass on higher costs to distribution companies.

The move would facilitate operation of plants run by Adani Power ADAN.NS, Essar Power, CLP India and IL&FS Tamil Nadu, which have sharply curbed power production due to high global prices, the minutes of the meeting showed.

Source: Hellenic shipping News