Structural inefficiencies, unrest and environmental concerns restrict supplies as consumption skyrockets, writes Asia Sentinel.

Despite having 14 percent of the world’s recoverable reserves of hard coal, India has been unable to meet its domestic requirements and is having to resort to large imports, which were near zero five years back.

However, consumers in the country’s fast-growing power, steel, cement and fertilizer industries are becoming increasingly frustrated because of the insufficient supplies from the government-owned Coal India Ltd, which produces 80 percent of the country’s output. CIL estimates it will end 2010-11 with a shortfall of 110 million metric tons. Demand is expected to touch 730 million tons by 2011-12 with domestic supply at 520 million tons, leaving a shortfall of over 200 million tons.

As much as 70 percent of the country’s electricity is derived from coal, for major consumers including the state-owned NTPC, Reliance Infrastructure, Jindal Steel & Power, Adani Power, Torrent Power, Essar, SAIL and Lanco. Infratech and CIL.

A big part of the problem, analysts say, is that structural changes are needed in the sector to invite foreign and domestic private investment to push up output. Domestic producers now are allowed captive use of coal blocks that are allocated by the government, often to special interests which are not coal producers. These special interests sit on their allocations with no intention of developing them in the hope of selling at a premium should the government allow open sales.

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