India Has Instructed Its States to Increase Coal Imports Over The Next Three Years

India has ordered its states to increase coal imports for the next three years in order to replenish inventories and meet demand, four sources told Reuters, a decision that will help global coal prices, which are already high due to the Ukraine war.

The decision to increase imports highlights the seriousness of India's fuel crisis, as coal inventories are at their lowest level in at least nine years and energy consumption is expected to grow at the quickest rate in over four decades.

India, the world's second-largest importer of coal, might boost global demand until 2025, as Power Minister R K Singh has extended the timescale for a federal campaign to boost imports that had been viewed as a temporary measure.

"The states were asked to continue importing because the private sector will not create considerable output until at least early 2025," said a power ministry official who attended Singh's Tuesday meeting with state leaders.

Additionally, the state-run rail network is chronically short of trains capable of transporting domestic coal, the official added.

Two state officials who attended the meeting and two officials from the electricity ministry declined to be identified since the topic is secret.

States were urged to negotiate long-term import agreements to assure supply and decrease prices, as well as to purchase rail wagons to address logistics issues, according to another ministry official who was briefed on the meeting but did not attend.

Increased coal imports might benefit miners such as Indonesia's Adaro Energy, Australia's Whitehaven Coal Ltd, and India's largest coal trader, Adani Enterprises, which started producing coal from its controversial Carmichael mine in Australia this year.

However, rising global coal prices will put pressure on India's debt-ridden utilities, threatening to exacerbate their financial troubles.

Global prices have risen sharply on fears of a supply shortage following the European Commission's decision to prohibit Russia from importing coal following its invasion of Ukraine, which Moscow described as a "special military operation."

India, which has a long-standing objective of reducing coal imports, stated in December that no imports should be made except for those deemed absolutely necessary.

In March, the administration announced that it had "significantly reduced imports despite an increase in electricity consumption," a reduction it credited to key reforms.

"They only urged us to reduce imports last year," one of the state officials stated during Tuesday's meeting. "They now want us to import as much as possible, claiming supply shortages. This is an extremely perplexing, mixed signal."

The minister's words to state officials constitute a directive, as New Delhi has a disproportionate amount of authority over domestic coal production and distribution.

While the energy-hungry nation has made international promises to gradually reduce its reliance on coal, it has stated that it will not phase out coal-fired power stations in the foreseeable future due to their low cost.

Despite record production by state-run Coal India, India confronts coal shortages. It produces 80 percent of India's coal as the world's largest coal miner.

Indian Railways has failed to increase supply, despite a drop in utility inventory.