Coal insulation against oil shock
A subtle shift in the UPA government's policy is on cards to secure the country?s energy interests.india Updated: May 12, 2006 02:45 IST
A subtle shift in the UPA government's policy is on cards to secure the country’s energy interests. Increasingly, the Manmohan Singh Government will depend on coal – either through domestic production or imports – as against liquid fuels and petroleum products, especially in view of the skyrocketing crude prices in international markets.
Sources divulged that PMO is considering this subtle shift to ‘insulate the economy’ from external oil shocks, minimise the impact of fluctuation in naphtha prices, make industrial production and power generation cost effective.
As part of this strategy, the government may double thermal grade coal imports to 30- 40 million tonnes, as against current level of 15 – 20 million tonnes. The coal imports may be doubled in the next two years that will essentially experience acute coal shortages due to spill over in completion of power generation projects.
Limited handling facilities at different ports may be the limiting factor in doubling the coal imports to meet the shortages at power stations across the country.
Sources said that relying on imports would only be a “stop gap arrangement” as coal prices in the international markets would be impacted in case any of the four large consumers, US, Japan, China or India, severely enhance their import quantities.
The PMO has been advised that given the high volatility in the price of oil and gas, the import parity pricing regime that is in place, “it would be highly risky to rely on hydrocarbon-based power generation for sustainable energy security”.
While enhancing the coal imports, the Centre will also work upon a strategy to enhance the capacity to identify ‘proven coal reserves’ to 10 billion tonnes as against 3 billion tonnes done annually. For that the official coal agencies would explore 15 lakh metres as against 3 lakh metres annually to enhance and pinpoint the proven coal reserves. In order to enable the government-owned exploration agencies to cover larger area, the Centre also proposes to set up a Rs500 crore revolving fund, as recommended by the TLShankar Committee. The PMO will take a view on this proposal as part of the change in its energy policy.
Coal industry experts have recommended that as a short term measure, imports was the best bet giving the breathing time for coal companies to expand their capacities and increase their output.