We are dangerously dependent on Indonesia for coal supply. Indonesia is India’s top supplier of coal – a forms of energy critical for our economic and individual growth. That is in itself not troublesome. But as Jakarta introduces new policies under pressure from environmental groups and local demand, can we ignore questions about future supply and its cost?
Indonesia wants to restrict export to only higher-value coal by 2014 while India imports cheaper low-calorie coal. Environmental groups are demanding a halt to mining in forest areas. Coal spot prices are being fixed by Jakarta using a new formula that has reportedly already raised India’s cost of electricity generation by 70 paise per unit. Clearly, Indonesia won’t remain our cheapest or most reliable coal supplier forever.
Thermal coal from South Africa is costly as it gets bid away by China and Europe. If India doesn’t seriously increase domestic coal’s production, quality and distribution, our electricity supply will be buffeted by the changing dynamics of another nation. Like other developing countries, Indonesia is particularly buoyant because domestic consumption is stronger than exports.
As a trade partner, that should worry us. US and China’s single-minded pursuit shows energy security is no longer a luxury. Not that we have any right to complain.