The India coal market is expected to grow at a CAGR of more than 2.5% during the forecast period. Factors such as increasing power generation capacity plans and increasing electricity demand in India, owing to rapidly increasing industrial and infrastructural development activities, are expected to drive the market during the forecast period. However, the uses of coal are squeezed out of the energy mix and being substituted with renewables, the reason being the generation of air pollutants due to coal combustion. These factors, in turn, are expected to restrain the growth of the India coal market.
- Coal is extensively used in India to fire the thermal power stations and in turn meet the demand for various sectors, such as industry, transport, residential, commercial, and public services. The power stations segment is expected to dominate the market supported by India's plan for adding additional coal-fired plants during the forecast period.
- Lignite resources are concentrated in three states: Tamil Nadu, which accounts for 80% of lignite resources, Rajasthan and Gujarat. Most of the resources are untapped, and with supportive government policies, the mining of lignite sources is expected to create several opportunities for the market players.
- Moreover, population growth in India which is expected to overtake China as the world's most populous country by 2025 is a strong propeller for the market, with increased demand for electricity. Hence, to meet the demand coal production is expected to increase, subsequently driving the coal market in the country.
Key Market Trends
Power Generation Segment to Dominate the Market
- Power generation uses a variety of sources ranging from fossil fuels like coal and oil to renewable sources like wind and solar. Coal accounts for more than 72% of the total electricity produced through different types of coal and has been dominating for decades in the country.
- The power generation mix is heavily skewed toward coal with a major contribution, because of cheaper domestic fuel availability. Its share in the mix has increased over the years due to constraints in adding other conventional generation sources-hydro, nuclear, and gas.
- The starting of construction in 2019 of 8.8 GW of new coal power capacity in India, with completion expected in the forecast period, is expected to drive the market.
- In September 2019, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) confirmed providing USD 1.4 billion in loans to the USD 2 billion projects 1.6 GW Adani Godda coal-fired power plant.
- However, in India, most of the reduction in the South Asia pipeline occurred, and capacity under construction and in pre-construction development declined 80% from 311.1 GW in 2015 to 66 GW in 2019, with only 2.8 GW newly proposed in 2019. This, in turn, is expected to hinder the market growth during the forecast period.
- Although, there are several restrains in the India leading to decreased use of coal, many firms are still continuing construction of coal power plants, led by NTPC, in turn, bolstering the market growth in the country.
Increased Coal Production to Drive the Market
- India aims to become an economy of USD 5 trillion by 2024, with investing heavily in infrastructure. It is expected to boost the energy demand for industry and for electricity production. Although India has succeeded in bringing some form of electricity access to almost all of its citizens, the country's per capita power consumption is still low, giving it a significant scope to grow.
- The government of India is planning to use coal as a major source because it is cheaper and its availability in abundance in the country. India, as of 2019, had 105,93 trillion tonnes of coal reserves accounting for almost 10% of the global reserves.
- Further, most of the hard coal resources are located in seven states: Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Maharashtra, and Telangana. And lignite resources are concentrated in three states: Tamil Nadu, which accounts for 80% of lignite resources, Rajasthan, and Gujarat. To support the exploration of coal and lignite for power generation, India plans to spend USD 72 million in 2019 and hence promulgate the India coal market.
- Hence, the coal production in India has increased y-o-y until 2018, with a slight decrease in 2019. However, with government of India starting auction for mining of coal reserves is expected to drive the market in coming years.
The India coal market is moderately consolidated. Some of the major players are Adani Group, Coal India Limited, JSW Energy Ltd, NTPC Ltd, and Jindal Steel & Power Ltd.
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