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India to remain hooked on coal

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World Coal,

Coal will remain the dominant fuel in India’s power mix, according to a recent research note from BMI Research. Despite growth in alternative energy sources, such as nuclear and renewables, coal will still contribute 66% of India’s power generation in 2025.

“India is facing growing pressure to reduce its emissions profile and diversify its coal-heavy power mix to incorporate cleaner sources,” said BMI Research. “However, Prime Minister Narendra Modi has openly voiced his reluctance to jeapardise economic growth by reducing the use of low-cost power sources – in this case, coal.”

That government support has seen the development of a strong project pipeline for coal-fired power facilities, which now account for over 60% of the total power project pipeline in India, according to BMI Research’s Key Projects Database. This strength in new coal plant development will help to lock-in India’s demand for coal, supporting BMI Research’s bullish outlook.

Coal use in India is also supported by increasing supply from booming domestic production – BMI Research expects domestic production to hit 935 million t by 2019 from 753 million t in 2016 – and the availability of cheap coal on the Asian seaborne market.

BMI Research forecasts the Newcastle benchmark to trade in the US$40 – 60 per tonne range to 2020, compared to US$140 per tonne in 2011 and US$78 per tonne from 2012 – 2015.

The boom in supply comes in stark contrast to mid-2014 when a record number of Indian power plants reported stock levels below four days of supply – causing widespread power shortages. Few plants now report such low stocks with the amount of coal stored at Indian power plants at a record high.

“We believe coal will maintain its position as the primary choice in the country’s power mix – owing to its availability and relative low cost against alternative fuels,” BMI Research concludes.

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