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Slowdown in steam coal imports is transitory: trader

The nearly 10% decline in India’s steam coal imports during the first 11 months of 2015-16 is a transitory phenomenon and the country’s imports would start improving again in the next 6-12 months, feels an official from an Indian supplier of imported coal feels.

“There has been good performance by Coal India Ltd (CIL) in terms of production and despatches and, from that perspective, the volumes of imports have gone down a bit. But, I think, this is a transitory phenomenon,” said Vipin Mahajan, Director of Knowledge Infrastructure Systems Pvt Ltd (KISPL).

“Definitely, the volumes have come down, and will remain low for at least the next one year, But I don’t see that to be a long-term phenomenon,” Mahajan stressed.

“My own view is that once the economy looks up, may be in six months or one year, coal consumption will go up. But, power demand also has to go up. When power demand is high, naturally coal consumption too will be high and imports should start improving,” Mahajan said.

According to him, there was a slight slowdown in demand for power in the country and that resulted in lower-than-expected growth in generation and poor financials of discoms led to demand-side management and ultimately a decline in coal imports.

The significant portion of power demand comes from industries, but as the industries are not running at full capacity, industrial demand for power has come down a bit and that has led to a reduction in PLF of generation companies. Because of that, there was a fall in demand for imported coal, he said.

According to him, if all the existing power plants in India start operating at 90-95% PLF, then there will huge requirement of coal, which Coal India will not be able to supply.

At present, many plants in the country are operating at much lower PLF because of poor financial condition of Discoms as they are unable to buy power and as such doing demand side management, and so the demand for coal is not that high, he said.

“But one-two year down the line, when general election happens, everyone will be clambering for coal, everyone will be supplying power at whatever rate it is available. Moreover, many private power producers, who have not yet been able to enter into power purchase agreements (PPA), will finally enter into PPAs and that will need additional coal,” he added.