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India is one of the great hopes for thermal coal exporters, but also presents a number of challenges

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Media release

23 August 2019

The Office of the Chief Economist has just released the Coal in India 2019 report.

The report examines the future of thermal coal in India, India’s future import requirements and the implications for Australian exporters. Coal in India 2019 provides an update to the 2015 report; since then, India has become the world’s second largest coal producer and consumer.

As the world’s third largest energy consumer and second largest thermal coal importer, India’s energy future will help shape seaborne thermal coal markets for decades to come.

The report finds that thermal coal consumption is likely to continue to increase next decade, and possibly beyond, in order to meet India’s increasing energy requirements. However, in the longer term, coal demand will depend heavily on the pace of expansion in renewable generation in India.

Another key factor will be the pace of growth in Indian coal production. India has ambitious targets, but faces challenges in its coal sector around approvals, land acquisition, productivity, transport and pricing.

Overall, the outlook for India’s thermal coal imports is finely balanced. A number of scenarios are possible, and the future for India’s thermal coal imports depends on movements in the balance of India’s future coal production and consumption.

Australia is currently not a significant supplier of thermal coal to India, but there are opportunities. The report discusses the opportunities, but also the barriers, for Australian thermal coal exporters and the Australian mining equipment, technology and services (METS) sector.

‘This report contributes to the debate by examining the key drivers, current trajectory and main uncertainties that could impact on future developments,’ the department’s Chief Economist David Turvey said.

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Key data

The infographic shows India has large and rapidly growing energy needs. The country is the world’s seventh largest economy and third largest energy consumer. Growing population and economic growth will drive demand for energy. Around half a billion people have gained access to electricity since 2000 but 168 million people are still without access. Coal dominates India’s energy mix, at 44 per cent. Complex institutional arrangements make market operation and reforms difficult in the power and coal sectors.

India’s thermal coal consumption is set to increase over the next decade and possibly beyond. Coal will remain a major source of electricity generation but its share will fall. Of the coal-fired power capacity under construction, 68 per cent employs supercritical technology and 20 per cent employs ultra-supercritical technology. The more advanced technology reduces coal use and CO2 emissions.

The infographic shows India’s production of thermal coal is increasing, but it remains to be seen whether it can catch up with demand. India is the world’s second largest producer of thermal coal, but there are several challenges facing India’s coal sector.

The outlook for India’s thermal coal imports is finely balanced and uncertain. India is the second largest importer of thermal coal, and relies on imports for around one fifth of its thermal coal consumption. Imports could fall or climb, depending on domestic production, but is unlikely to achieve its goal of self-sufficiency in the short term.

While Australia is not currently a significant supplier of thermal coal to India, there are opportunities. Australia could triple thermal coal exports to India, and further growth is possible if barriers are reduced. There are also opportunities for metallurgical coal producers and Australian METS companies.