LAUNCESTON, Australia – One of the most common assumptions among coal watchers is that India’s rising demand will translate into increasing imports, thus providing one of the few bright spots for a beleaguered industry.
While there is little doubt about the bullish demand outlook for India, the belief that imports will have to rise is predicated on the view that domestic coal output will continue to disappoint.
If history is a guide, then this is a safe bet, with state-controlled behemoth Coal India (COAL.NS) consistently failing to meet output targets and battling to supply enough fuel for the South Asian nation’s electricity generators.
India’s coal imports have steadily risen and gained 19 percent last year to 210.6 million tonnes, making the country the world’s second-biggest importer after China and ahead of Japan. But it may pay to heed a warning that accompanies financial products that past performance isn’t necessarily a guide to future outcomes.
There are signs that India is taking the right steps to boost its domestic coal industry, and while these won’t necessarily bear immediate fruit, it’s always worth watching the trend.
Once trends start, it becomes difficult to stop them. Just ask any coal miner who exports to China, which has gone from being the industry’s greatest hope for long-term growth to the bleak prospect of a declining market.
The new government of Prime Minister Narendra Modi has shown some determination to reform India’s vast coal sector, starting with making Coal India more efficient.
The government raised about $3.6 billion by selling a 10 percent stake in Coal India last month, part of its plan to raise $10 billion by selling assets.
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