India has the distinction of being one of the fastest growing economies globally. This growth has been fuelled with the increasing consumption of resources like coal, gas, etc. Coal is the most important source of energy, fuelling almost 70 per cent of electricity requirements in India.
However with the fast depleting reserves in the country, coal shortages have been identified as a major issue for full utilization of the existing capacities of various sectors. Coal India Limited (CIL) being the apex body along with its 8 subsidiaries, renders around 80 per cent of domestic coal to various End-users.
The increasing demand- supply gap in coal supply has become a cause of worry for stakeholders spanning different industries. To combat the domestic shortage, coal imports have already seen an increasing trend in the last few years. But with increased imports, the problem of higher costs arise which affects the earnings and margins of most stakeholders.
The shortages faced are partly due to the inability of CIL and its subsidiaries to cater to coal requirements for the massive capacity addition targets and partly due to environment and forest clearances.
Therefore, to overcome this issue, the government had allocated captive coal and lignite mines to the bulk user such as power, cement and other end-use industries.
So far 208 Captive Coal blocks and 28 Lignite Blocks have been allocated to various End-users, out of which only 26 Captive coal blocks and 11 lignite blocks have started production which is not able to suffice the demand.
The industries are facing many hurdles in terms of delays in getting environmental and forest clearances, land acquisition issues, R&R issues to get started with the activities of a coal block which is in turn attributing to low production of coal in the country. Low availability of domestic coal is giving rise to imports in order to meet the increasing demand-supply gap.
Around 250 million tonnes of coal have been planned to be imported by 2016-17. This has lead to serious implications on the financial viabilities of the various projects coming up in the country.