Since inflation is around the corner, price hikes can be seen in every sector. The coal production and fossil fuel industry are also not left behind. Many countries have increased their in-country production due to such hikes, and India might too. India is the largest consumer of fossil fuels in the world. Therefore, the developing nation is set to raise coal production amidst rises in fuel prices.
Fuel Prices Hike May Impel India to Rise in Coal Production
The artificially high fuels can be brought down with the joint effort of all the developing countries. This will also aid in promoting an energy transition, mainly focusing on coal production to cleaner fuel options like natural gas. If not done, developing nations like India are only left with the option to increase their coal production, as mentioned by the authorities.
India has the fastest rate of economic growth in the world. The development leads to a huge demand for energy sources. Therefore, exporting during global inflation can be impossible due to price hikes in many parts of the world. As a result, India might have to dig into its resources leading to more production of coal in accordance with its transitional phase.
As a result of the transitional phase, the Indian Government will increase the share of the natural gas energy mix to 15% from 6.3% by the year 2030. This will mainly be done by importing liquefied natural gas (LNG). According to the Indian authorities, the wider usage of LNG and crude oils and its supply restraints have forced the fuel price hike in the country. Therefore, increased fossil fuel production is important as natural gas use is still stagnant.
Indian Landscape and Fossil Fuel Demands
India is a country that imports 85% of its processed crude oil. Moreover, it also imports 54% of its natural gas requirements. The gross domestic production of natural gas in India went down to 1.7% (2,852 million metric standard cubic metres) annually. At the same time, crude oil production remained stagnant at 2.4 million tonnes metric, as per the Indian Government data.
Meanwhile, the LNG import in India costs increased by 70% in 2021-2022. The jump increased from $7.9 Billion (as recorded in 2020-2021) to $13.4 Billion in 2021-2022. Also, the quality of imported LNG went down by 7% in the same period. The cost of the LNG was recorded at $50 to $60 million/metric thermal unit (in British – mmBtu) in the spot market. Whereas, the fuel price before the Ukraine-Russia war was recorded to be $10 to $12 million mmBtu.
According to the officials of the Indian Government, they are concentrating on the domestic production of coal to combat the inflation in global fuel prices and aid economic advancement. The government is also planning to involve private entities in coal production to decrease the country’s dependence on imported fuels.
During the 6th coal bidding session, the Coal Minister of India Pralhad Joshi mentioned that the country is expecting 900 million (in tonnes) of produced coal in the current year. This auction is the biggest auction of about 141 blocks. In 2022, the production of domestic coal was seen as 18% (448.7 million tonnes) as mentioned by the Ministry.
Finance Minister, Nirmala Sitharaman, also mentioned that developing nations like India needs more investment in their gasification coal production sector. It is because of the inflation in global fuel prices and gas rates. She also mentioned the importance of coal gasification in the period when prices are surging in the energy sector and is going to sustain for a long time.
The supply chains were disrupted due to the Ukraine-Russia war by the Petroleum Exporting Countries Organisation (OPEC) and allied nations (including Russia). According to industry experts, this disruption leads to a major dearth of products like natural gas, coal, semiconductors and crude oils.
Many economies worldwide are also facing the beginning of an impending recession. Consequently, the Indian economy needs a source at lower costs for energy production. These cheaper energy sources will keep the country’s growth on the right track even during global inflation.
