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India to Export Coal to Neighbours in Counter to China

The state-run company plans to export to Bangladesh, Nepal and Bhutan, according to a draft policy sent to the secretary of India’s coal ministry


Workers unload coal from a supply truck at a yard on the outskirts of Ahmedabad. Photo: Reuters.

 

Coal India, the world’s largest coal miner, plans to directly export output to neighbouring countries, after decades of exclusively supplying domestic consumers.

The state-run company plans to export to Bangladesh, Nepal and Bhutan, according to a draft policy sent to the secretary of India’s Coal Ministry reviewed by Reuters.

The move is part of India’s “neighbourhood first” policy, which seeks to counter China’s growing economic influence in South Asia.

The proposal was presented at an internal board meeting on corporate strategy in October 2020 and confirmed by Coal India’s chairman this week.

However, a critical coal shortage in India now means the first such shipments would be unlikely until the end of this year.

“We would have ideally wanted to start exporting this financial year if not for the energy crisis,” Coal India chairman Pramod Agrawal said, noting the current priority was to address domestic demand.

 

Encouraging Bulk Trade

Under the proposal “3% of Coal India’s annual production will be earmarked separately for exports” with the main focus on encouraging bulk trade for the long-term.

The export push is seen as a longer-term pivot that would help Coal India diversify its revenue streams and boost New Delhi’s push to firm up ties with strategically important neighbours.

However, the proposal has more recently been overshadowed by India’s own coal shortage at home, which means the first shipments would be unlikely until the end of 2022, according to Agrawal.

India – which relies on coal for nearly three-quarters of its electricity supply – is yet to fully recover from the crunch that forced power cuts, which lasted up to 14 hours a day in some northern states.

Compounding those woes, international coal prices have soared due to a surprise temporary export ban by top exporter Indonesia and large purchases from European buyers concerned that any invasion of Ukraine by Russia could sever gas flows to Europe.

Coal India, which produces 80% of India’s coal, aims to ramp up output to 1 billion tonnes by 2024.

The company saw earnings rise 18% in the second quarter. “Coal India’s near-term outlook has improved led by pick-up in volumes and case for higher e-auction prices in the second half,” Nitij Mangal, an equity analyst at Jefferies in Mumbai said.

“However, higher staff cost due to workers’ wage revision should pose a headwind.”

 

  • Reuters, with additional editing by George Russell

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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