India’s Rising Coal Demand: Good or Bad?

Home to 1,303 mines, India is the second-largest coal producer in the world. The all-India coal production in 2021-22 was 716.08 million tonne, with the production increasing by 6.74 percent (7.4 million tonne) during December 2021 compared to the production in 2019 around the same period.

The coal industry has been enjoying the benefits of national reforms and encouraging policies introduced in 2020 which have driven its growth, including the announcement of opening up the mining sector for privatisation. The accelerated growth in infrastructure and transportation sectors has also boosted the coal industry, which is still the backbone of India’s power sector. What’s more, industry progress indicates that demand for coal will not be abating any time soon.

The Russia-Ukraine war disrupted India’s supply of international coal, among many other things, creating a rift in the supply-demand equation. An added demand driver has been the ever increasingly hot summers spurred on by the impending Climate Crisis, which has driven up the usage of electricity nationwide, and the nation’s coal consumption, as a result, sending it almost to the brink of a coal shortage. The Central and State Governments have all been invested in mitigating the situation, resorting to power shedding and recently, prioritising the passage of coal-carrying trains over commuter trains.

The infrastructure sector, which had first taken a hit due to the pandemic and then due to the domino effect of price rise, stands to feel the brunt of this shortage of coal and hence, the shortage of electricity on its bottom lines as well.

Factors like the Russia-Ukraine war and the dearth of supply mechanisms for coal are short-term and expected to be resolved soon. However, one question seems to have been echoing across all business verticals: What does it mean for India’s independence and energy security to be so reliant on a single source of fuel?

India continues to remain strongly adamant about reaching its net-zero targets while also simultaneously bolstering its coal supply to keep itself running. However, the future is less sooty than the current scenario might lead us to believe.

In a step to introduce sustainability in coal mining, the Ministry of Coal has created a Sustainable Development Cell to prioritise and promote the adoption of environmentally conscious management practices in coal mines. Efforts continue being made to make solar cheaper and more reliable — not just during the day when the sun is out but also at night when there is no solar supply — to successfully surpass the popularity of and thus, the reliance on coal. Finally, private companies, to reach their carbon-zero goals, have been adding an extra push towards adopting renewable energy and their increasing reluctance towards using and investing in coal.