Home > Cement, Coal, Infrastructure, Metals, Power, Six Core Infra > Coal Constrains Core Sector Growth in June 2010

Coal Constrains Core Sector Growth in June 2010

Growth in the six key infrastructure sectors decelerated for the third month in June. This is primarily due to last year’s high base effect. During April-June 2010, the output rose 4.6% compared to 4.3% in the year-ago quarter.

  • Coal production, which declined 0.4%, was the biggest drag on the core sector output in the June quarter. Weak growth in coal production in the recent months is a consequence of lower coal offtake. Coal India — India’s largest coal producer — claims it has not been able to get enough rail wagon combinations or rakes to transport the mined coal. Shortage of rail wagons is also resulted in imported coal lying idle in ports. This is likely to affect power, steel and cement sectors as coal is one of the key materials used by these industries.
  • Crude oil production rose 5.9% during the quarter, mainly due to higher output by private and JV companies, including RIL. Refinery output grew 5.3% on the back of resurgent energy demand in a recovering global economy. 
  • Growth in cement production also moderated to 7% from 12.1% during the year-ago quarter. A better mon-soon in the current year compared to the previous year also led to lower demand for cement by the construction sector. Also, with the Commonwealth Games around the corner, demand for cement from this segment is largely over. 
  • Steel production remained robust on the back of high demand from end use industries like automobiles and capital goods.

Coal Drags Core Sector Growth

Sector-wise Growth Rate (%) in Production
Sector                  Weight (%) Jun-09 Jun-10 Apr-June   2009-10 Apr-June  2010-11
Crude Oil 4.17 4.0 6.8 -1.3 5.9
Petroleum Refinery Products 2.00 -3.8 2.9 -4.2 5.3
Coal          3.22 15.2 0.9 13.0 -0.4
Electricity 10.17 7.7 3.4 5.8 5.6
Cement 1.99 12.7 3.6 12.1 7.0
Finished steel (carbon) 5.13 3.6 3.5 1.7 3.6
Overall 26.68 6.3 3.4 4.3 4.6
Source of data: PIB

As part of the annual plan 2010-11, the planning commission has projected all India demand of coal at 656.31 million tonnes against which the indigenous supply plan is envisaged at 573.42mt with a demand-supply gap of 82.89mt.

Insufficient/poor coal supplies have resulted in a raw material shortage for the power and cement industries. India’s thermal coal imports surged last year to a little less than 60mt from about 30mt in 2008, according to a report by the Macquarie Group. India plans to almost double its power generation capacity by 2012, when the shortage of coal will exceed 200mt.

In order to bridge the demand-supply gap of thermal coal in the country, Coal India plans to import 8mt of thermal grade coal for supplies to NTPC in 2010-11. However, in the absence of adequate infrastructure and expertise in international trade, CIL had nominated MMTC to import on its behalf.

Importing coal is more expensive for India but it is forced to do so, not for the want of reserves, but for the speed at which reserves are developed in India. Commercialising a mine can take 15 years — three times longer than in other countries, according to KPMG.

Buying Overseas

India has traditionally looked to Indonesia for imports. Rising domestic demand there and the large volumes involved are prompt-ing Indian companies to look further at mines in Mozambique, Botswana and Australia.

Private power companies — including Tata Power, Reliance Power, GMR Infrastructure and JSW Energy — have acquired coal assets overseas in Indonesia and South Africa. NTPC, the state-owned company, plans to buy mines overseas to source 67% of its imports.

While NTPC plans to directly import coal, cement makers, including ACC, Grasim and Jaypee Cement, have directed Adani Enterprises to import coal for them. Adani plans to import 4 lakh tonnes from Australia’s Linc Energy for Australian $1 billion, state reports.

South Africa and Colombia, which last year were the biggest exporters of steam coal to countries with ports on the Atlantic Ocean, are also boosting shipments to India where they get better prices.

  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: