The recent demand for higher allocation of domestic fuel by non-power coal consumers underline the risks before the country in achieving the desired level of growth. The risks are mostly external and are also appreciated by the Reserve Bank of India (RBI) while projecting a tad lesser growth in 2022-23 than the Economic Survey.
First thing first, the hue and cry about domestic fuel have more to do with subdued imports in the face of spiralling prices in the international market. The reasons for price volatility vary from Covid-19 pandemic, the temporary export ban by Indonesia, to the Ukraine-Russia standoff.
Between December 2020 and January 2021, the benchmark (HBA) price for thermal coal in Indonesia increased by over 27 per cent to $75.84 per tonne. Prices of the four most-imported Indonesian varieties in India moved up by $12-15 a tonne over the last month.
Naturally, everyone is now looking for domestic fuel, which is not only cheaper but is easier to take delivery, and is free from wild price volatility. During April-December 2021, India’s total electricity generation peaked at 9.4 per cent. But the generation of imported coal-based power was down to half.
The situation is opposite to the Covid year of 2020-21 when power generation was down by 2.5 per cent and Coal India was scrambling for buyers. The non-power sector — like fertiliser, metals etc — made the most of it. Supplies to the sector were up by 10 per cent often at a lower value than usual. Maintaining such high levels of supply to non-power sector was difficult in this fiscal, in the face of record demand from the power sector. Though pit-head stocks are available, rail logistics is overstretched due to unexpected changes in direction of movement.
Having said that, domestic supplies to non-power sector are only three million tonnes short this year, compared to financial year 221 (FY21). It means the country has done reasonably well so far in ensuring energy security in the face of global disruption. The concern, if any, is about the days to come.
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