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India urges design changes to import coal-based power plants to use local product

India’s power plants based on imported coal should carry out design modifications to their boilers and plants to accommodate the use of domestic material, said a report from the inter-ministerial committee formed by the federal coal ministry March 7, as the country seeks to reduce its reliance on imports. The report said that it would also consider raising taxes on imports of coal with high gross calorific value (GCV).

“In order to remove dependence on imported coal with volatile prices, the Ministry of Power may consider mandating the ICB plants to retrofit their boilers to make them compatible with the Indian thermal coal specifications and any cost in carrying out the same may be passed on to the consumers (in a manner similar to that of installation of FGDs),” said the report titled Strategy Paper on Coal Import Substitution.

A flue gas desulfurization (FGD) plant removes sulfur dioxides from flue gas produced by boilers, furnaces, and other sources.

The federal coal ministry had said in an earlier statement that India’s share of imported coal in its total consumption is expected to fall below 15% in the fiscal year 2024-25.

India imported 238 million mt coal in FY 2022-23 (April-March) out of which 20 million mt was procured by imported coal-based power plants, 35 million mt by domestic coal-based power plants and 125 million mt by the non-regulated sector (NRS), which includes cement and sponge iron sectors that use thermal coal for captive purposes.

The report also suggested that if there is an adequate supply of domestic coal and no logistics constraints, the Ministry of Power should mandate the domestic coal-based plants to use domestic coal instead of imported coal. The Ministry of Power recently asked domestic coal-based power plants to continue to include 6% imported coal in their fuel mix until June in order to prepare for peak summer demand, anticipating logistics issues, S&P Global Commodity Insights reported March 6. Peak power demand this fiscal is expected to hit a new record of 260 GW, the ministry said.

For NRS, the report suggested that the responsible ministries share the details of the grade-wise coal requirements of the sectors with the Ministry of Coal to enable demand aggregation and the planning of an effective strategy for coal import substitution.

The price of India-delivered 4,200 kcal/kg GAR averaged $70.75/mt over April-December 2023, down from $103.65/mt in the same period the previous year, showed S&P Global data. Platts last assessed the grade at $71.05/mt CFR India March 7.

Changes to cess structure

The report also proposed a change in the Goods and Services Tax (GST) compensation cess structure, suggesting an approach based on the value and quantity of coal rather than the current flat rate of Rupee 400/mt.

“Imported coal has a high GCV (5,000-6,000 kilocalorie) in comparison to domestically supplied coal (3,000-3,500 Kcal), and the tax incidence on imported coal on a per Kcal basis is less in comparison to domestic coal,” the report said.

Building a multi-modal logistics network for the transport of coal and early operationalization of captive/commercial coal blocks in the country were some of the other measures put forward by the report to reduce imports of coal. India’s domestic coal production in the current fiscal crossed 900 million mt as of March 6, and is set to hit 1 billion mt by the end of the financial year 2023-24.

Author: Shriparna Saha