Exclusive-India power minister tells states to step up coal imports for 3 years - sources

© Reuters. FILE PHOTO: A worker shovels coal in a supply truck at a yard on the outskirts of Ahmedabad, India, October 25, 2018. REUTERS/Amit Dave

By Sudarshan Varadhan

NEW DELHI (Reuters) - India's power minister has told states to step up coal imports for the next three years, four sources told Reuters, reporting remarks that imply prolonged support for already elevated global prices for the fuel.

The statement by Power Minister R K Singh puts a long timeline on a major policy reversal suggested this month, when the federal government asked utilities run by state governments to step up coal imports.

That move was contrary to a long-standing national objective to buy less coal from abroad but widely seen as a temporary measure to address shortfalls amid rising power demand caused by soaring temperatures and a pickup in industrial activity.

But Singh's remarks in a meeting with state government officials on Tuesday mean India, already the world's second-largest coal importer, could significantly add to global demand until 2025.

"The states were asked to continue importing because the private sector will take till at least early 2025 to produce significant output and there is also a consistent trains shortage to move domestic coal around," said a power ministry official who attended.

Another power ministry official who did not attend the meeting but was briefed on it said states were asked to sign long-term deals to ensure supply and secure lower prices, and to purchase rail wagons to address logistics challenges.

The remarks made by the minister to state government officials are in effect a direction, because New Delhi largely controls domestic production and distribution of coal.

The decision to boost imports for so long underscores the severity of the India's fuel crisis. Indian utilities' coal inventories are at the lowest pre-summer levels in at least nine years and electricity demand is seen rising at the fastest pace in at least 38 years.

As part of the long-standing policy to substantially reduce coal imports, the government said in December "no import other than very essential should happen." It said in March it had "achieved significant reduction in import despite surge in power demand," attributing the decrease to "major reforms."

India imported 160.84 million tonnes of coal between April and December 2021, down 13.8% on a year earlier.

The move could add to the financial difficulties of state governments' debt-laden utilities, since they will have to pay the current high prices for coal.

Two sources from state governments and another from the federal power ministry attended the meeting.

"Only last year they told us to cut down imports," one of the state government officials said. "Now they want us to import as much as we can and saying there are supply constraints. This is a very confusing, mixed signal."