The Narendra Modi government has been working on cutting the country's coal import bill of over 1 lakh crore annually. Power minister Piyush Goyal has insisted the government would stop coal imports and make way for domestic coal going ahead.

However, the plan to replace imports with domestic output may falter on a crucial affliction - lack of coking coal reserves that is used as a raw material in steel making and allied industries. The country imported around 200 million tonne (MT) of coal last financial year to top up domestic production of 640 MT.

Coal in India is used either from domestic sources, mostly mined by coal India, or is imported. The imports are mainly to compensate the lack of good quality coal, especially coking coal from the mining sources in the country.

Coking coal is imported by state-run Steel Authority of India Limited (SAIL) and other steel manufacturing units mainly to bridge the gap between the requirement and indigenous availability and to improve the quality.

Coal based power plants, cement plants, captive power plants, sponge iron plants, industrial consumers and coal traders are importing non-coking coal. Coke is imported mainly by pig-iron manufacturers and iron and steel sector consumers using mini-blast furnace.

However, India does not have enough reserves for good quality coking coal and most of it is imported from Indonesia, South Africa, Russia and Australia.

Experts say, it is this requirement of coking coal added with power plants whose boilers are designed to run only on imported coal, which is likely to continue importing coal in the coming years.

"Talking in aggregate terms does not really help. Let us subdivide the import requirement of the country into three parts. One is of coking coal, where we have traditionally had a deficit. So, we have been importers of coking coal for a long-long time," Vivek Bharadwaj, joint secretary, Ministry of Coal, told ETEnergyworld.

He added this coal requirement will not end any time soon. "Also, we have power plants at the coasts which are based on imported coal. Their boilers are designed only for imported coal. They will continue to use imported coal. So, it is only the third category of thermal power plants which were using imported coal as a substitute for domestic coal because if its scarcity, which we can do something about," Bharadwaj explained.

As per provisional government figures, India's 200 MT of coal imports last fiscal included 43.50 million tonne of coking coal and 156.38 million tonne non-coking or thermal coal. This financial year (2016-17), the government had imported over 35 million tonne coal by the end of May.

However, the government is now taking steps to ramp up the production of coking coal in the country and curtail the use of imported coal. "Last year, there has been a drop of Rs 23,000 crore in the import bill," Bharadwaj said. "We are trying to map out these industries, with both power and non-power use, which will still continue to import coal in the near future."

Similarly, for plants situated at the coasts, switching to domestic coal would be a big challenge as the process would involve changes in its boilers, which involve huge costs.

Sources: economictimes.indiatimes.com