UPDATE 1-India 2012/13 coal import needs seen 140 mln T-source

Tue Feb 28, 2012 6:58pm IST

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By Ratnajyoti Dutta

NEW DELHI Feb 28 (Reuters) - India may need to import 140 million tonnes of coal in 2012/13, about a quarter more than this year ending March 31, a coal ministry source said on Tuesday, underscoring the country's struggle to produce enough of the cheap fuel for power stations.

Coking coal would be about 15 percent of the total coal import that could cost about $11 billion. International coal prices are up to 40 percent higher than domestic rates.

India is home to about 10 percent of the world's coal reserves, but domestic output has been crimped by hurdles over environmental clearances and land acquisition, as well as low investment.

A shortage of fuel has constrained expansion in India's power sector, which consumes about two-thirds of the country's coal output, putting a drag on growth in Asia's third-largest economy.

"The rising demand is mainly coming from power utilities," the coal ministry source said.

India's coal demand is set to jump to 980 million tonnes by 2017, but output in this period may only be 795 million tonnes, India's Coal Minister Sriprakash Jaiswal said on Monday.

State-run Coal India, which accounts for about 80 percent of the country's output, aims to produce 464 million tonnes in 2012/13, and has already scaled down output target to 440 million tonnes in 2011/12 because of regulatory hurdles.

Following the intense lobbying by the power sector, Prime Minister Manmohan Singh has directed Coal India to guarantee long-term supplies to the under-performing power sector, even if it has to resort to imports.

But it was not immediately clear if the 2012/13 imports include any overseas purchases by the coal monopoly, which is seeking clarity on who will foot the extra costs of imports.

Erratic coal supply has derailed many power companies' plans, including Essar Energy's three projects worth $3.1 billion which it said was now on hold for want of coal.

Coal accounts for more than half of India's power generation and will be required for about 85 percent of the 75,000 MW of new capacity that is due to come online in 2017.

India's peak-hour power deficit is about 12 percent, a shortage which many analysts say drags down economic growth. (Writing by Krittivas Mukherjee; Editing by Rajesh Pandathil)

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