In spite of increasing domestic coal production in India, Indian manufacturers have increased their reliance on imported coal due to logistics bottleneck, which keeps constraining domestic supply.
The government used to be committed to reducing coal imports and achieving self-sufficiency in coal supply. However, the mismatch between increasing demand and subdued domestic supply has pushed industrial producers to ramp up imports from Indonesia, Australia, and South Africa.
India is the world's second largest coal consumer. Starting from April this year, the demand from Indian industry is expected to gradually increase to its peak. In 2022, industrial coal consumption accounted for about 70% of India's total coal imports.
Coal India Ltd accounts for about 80% of the total coal production in India. The company had earlier stated that it plans to increase its supply to the industrial sector by 57% this fiscal year, reaching 170 million tonnes. However, the Indian Railways stated that it cannot meet the increased demand because the railways need to prioritize supplying coal to power plants.
In the previous fiscal year, the proportion of coal supplied by rail decreased to a three-year low.
In the summer of this year, Indian power and industrial companies may face a daily supply gap of 0.2 million tonnes of coal, an official of the coal ministry said.
At the same time, due to railway capacity constraints, Indian buyers have been forced to transport coal by truck. In the first 10 months of the 2022-23 fiscal year, coal supply by truck in India has increased nearly 30%, reaching a four-year high, although the highway transport costs are nearly 35% higher than those of train transportation.
Not only that, but carbon emissions of truck transportation come nearly three times higher than that of train transportation. This means that Indian manufacturers will face a double whammy of high transport costs and increased carbon emissions.
(Writing by Alex Guo Editing by Harry Huo)
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