Coal India's annual output falls for first time in two decades

Labourers work inside a coal ball factory in Kolkata November 4, 2010. REUTERS/Rupak De Chowdhuri/Files

Sudarshan Varadhan-APRIL 1, 2020

CHENNAI (Reuters) - Coal India’s (COAL.NS) annual production fell for the first time since 1998/99 as the heaviest rainfall in 25 years battered coal mining regions and a broad economic slowdown stifled demand for the fuel.

The world’s largest coal miner produced 602.1 million tonnes of coal during the fiscal year ended March 2020, compared with 606.9 million tonnes in 2018/19.

India used nearly a billion tonnes of coal in 2018/19, over three-quarters of it at power plants. State-run Coal India accounts for over 80% of the country’s production.

The worst economic slowdown in Asia’s third largest economy in six years saw electricity usage fall at the steepest pace in over a decade in October, reducing demand for the fuel.

The slowdown coincided with a fall in coal production. Still, imports of thermal coal - mainly used for electricity generation - rose 12.6% to nearly 200 million tonnes in 2019, the second straight year of growth.

 

Frequent outages caused by strikes by locals and workers have also hit production. The reasons for the strikes have ranged from concerns over workers’ safety to a trespassing goat getting killed in an accident.

But the heaviest annual monsoon in 25 years, including large scale flooding in one key eastern Indian mine that accounts for about 5% of total output, resulted in production falling for five straight months.

Nandikesh Sivalingam, director at Center for Research on Energy and Clean Air (CREA), said disruptions to coal mining made a case for faster transition away from using the fuel.
India’s annual electricity generation from coal-fired utilities fell for the first time in 2019, a phenomenon industry executives say could become a trend in 5-10 years.

“With changing climatic conditions, extreme weather events may increase in central India, leading to more such disruptions in the future,” Nandikesh said.

 

Government data shows a higher incidence of short spells of intense rain and lengthy periods of little or no rain, a phenomenon India attributed to climate change in its annual economic survey in 2018.
Prime Minister Narendra Modi’s government has repeatedly emphasised its desire to cut thermal coal imports by the world’s second largest consumer, importer and producer of the fuel to zero.

But a slow pace of reforms, logistical issues and the inability of Coal India to ramp up production quickly has failed to check imports. While higher imports is bad news for India, it has helped international coal miners such as Indonesia’s Adaro Energy (ADRO.JK) and Peabody Energy (BTU.N) in the United States, as well as commodity traders such as Glencore (GLEN.L) and India’s Adani Enterprises (ADEL.NS).