Two officials who are aware of the development warned that if developed countries don’t make sincere and equitable efforts to lower artificially high fuel prices and promote energy transition, especially from coal to cleaner fuels like natural gas, countries like India will be forced to increase domestic coal production.
India has the world’s fastest-growing economy and one of the highest energy needs, despite significant global challenges. Due to a supply crunch caused by the producers’ cartel, the same cannot be satisfied by energy imports at exceptionally high rates. Thus, they warned, seeking anonymity, India will be compelled to dig deeper into its massive coal deposits, postponing its energy transition plans.
According to the government’s energy transition plan, natural gas will increase from 6.3% of India’s energy mix now to 15% by 2030, primarily through the importation of liquefied natural gas (LNG). “India is left with little choice but to increase its coal production as domestic output (of natural gas) is almost flat and costs of crude oil and LNG have skyrocketed due to the supply constraints,” one of them said.
India, the third-largest user of fossil fuels in the world, imports 54% of its natural gas needs and 85% of the crude oil it uses for processing. According to official figures, India’s gross domestic production of natural gas decreased 1.7% in September to 2,852 million metric standard cubic metres on an annualised basis, while crude output stayed essentially unchanged at 2.4 million metric tonnes.
Despite a 7% decrease in import volume, India’s LNG import expenditures rose 70% to $13.4 billion in 2021–22 from $7.9 billion in 2020–21. Prior to the Ukraine War, LNG was about $10–12 per million metric British thermal units (mmBtu), but now it costs $50–60 on the spot market.
To support India’s economic expansion, the government is concentrating on domestic coal production. A second official stated that the goal is to minimise dependency on imported coal by involving the private sector in coal production.
India plans to produce 900 million tonnes of domestic coal this year, according to coal minister Pralhad Joshi, who was speaking at the beginning of the sixth round of coal mine bidding, the largest-ever auction of 141 blocks. According to data from the coal ministry, domestic coal production for the current fiscal year up to October was us over 18% at 448.17 million tonnes. In 2020–21, domestic coal production was estimated at 778 million tonnes.
Nirmala Sitharaman, the finance minister, said that the rising cost of energy, particularly gas, necessitates increased investment in coal production and gasification projects for a fast-growing country like India. She emphasised the necessity of coal gasification at a time when gas prices are skyrocketing globally and energy supply worries continue.
Major shortages of intermediate products including petroleum, coal, natural gas, and semiconductors have been caused by supply chain disruptions brought on by the Ukraine war and energy supply curbs by OPEC and its allies, notably Russia (together known as OPEC+), experts say.
According to the newest issue of Economy Watch from consulting firm EY, “the consequent shortage and rise in energy costs is one of the primary causes responsible for the ongoing economic recessions/slowdowns in many economies.”
India needs cheaper energy to power its economic growth even as other economies are facing an oncoming recession since it is the world’s fastest-growing economy, according to EY. India “remains a bright spot” despite global recessionary clouds on the horizon, according to D K Srivastava, chief policy advisor for EY India.
“In 2022 and 2023, three major economies—China, the Euro area, and the US—are anticipated to slow down significantly. The US is expected to experience slower growth from 5.7% in 2021 to 1.6% in 2022 and 1% in 2023. Growth in the Euro region is anticipated to be 3.1% in 2022 before decreasing to 0.5% in 2023. With the exception of the early Covid-19 crisis in 2020, China’s predicted growth rate of 3.2% in 2022 would be the lowest in more than four decades, he said. “India’s growth is expected to be the highest among the world’s major economies, at 6.8% in FY23 and 6.1% in FY24. It is anticipated that India will maintain this position from 2022 to 2027 (FY23 to FY28 for India).
