India looking at doubling coal output in 7 years

We had written an article recently which was speaking about the current energy landscape of India and how it is planning to solve its Energy problems in the near future. The article can be accessed HERE. We had indicated that Coal will be the solution, India is looking at and even said that Coal will rule the power generation sector in the coming years. Though Environmental issues will continue to surround this, the idea of using coal will only get stronger.

Environmental Minister, Jairam Ramesh has informed that India will look at expediting environmental approvals and allow mining in degraded forests to double its coal output. He has also pointed out that India will have to increase its coal production to about 1 billion metric tons in the next seven years to feed its existing and newer power plants.

Degraded forests are the ones which have lost most of their trees and around 55% of India's forest land contains degraded forest. The Environmental Minister has clearly indicated that there would not be any objections from their side for mining in these degraded forests.

India plans to add around 78,700 megawatts of generation capacity before March 2012 and add 100,000 megawatts in the next 5 year plan from 2012 - 2017. Clearly, India will not be able to reach anywhere near these levels without mining a billion tonne of coal. Coal India Limited, the largest coal mining entity in India and the world produced 403.7 million tons in the financial year FY 09. It is currently planning to raise its output capacity to 520 million tons by March 2012. However, there will be a shortage of around 228 million tonnes by the year ending Mar 2012, since the demand is estimated to be around 730 mt.

Though India currently imports Coal, it is yet to be seen how far the imports can be encouraged, since the shortage is growing at a higher rate every year. This is one of the key concerns of the Indian government and could even drive them to open up coal mining for private companies.

To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com