India's Coal Imports has been increased by around 33% during the first quarter of the current year due to constraints of the domestic coal availability; this has led to the foreign exchange outgo of around USD 1.0 Billion, a 44% rise from the earlier level of USD 1.3 Billion last year.
During the Q1 of 2013-14, India has imported around 27.7 Million tonne of coal compared to 20.7 MT in the same period last year according to the data of Indian Ports Association (IPA)
Due to this, there was a huge jump in the costly shipments and associated foreign exchange outgo which came at a time the government is struggling to stem a widening current account deficit which stood at a record high of 4.8% of Gross Domestic Product (GDP) last fiscal.
The 44% rise is based on an average coal price of $69.5 per tonne (5,500 Kilocalorie Indonesian coal landed at Vizag port) this fiscal, a 7.7% increase over the average price of $64.5 per tonne last year. Indonesian coal accounts for a bulk of India’s thermal coal imports of around 110 MT annually. Another 25 MT of steel-making coking coal is imported largely from Australia and South Africa. Overall imports are likely to go up to 180 MT this fiscal.
The impact of the rising imports has been heightened by a weakening Rupee. In value terms, India saw a drain in foreign exchange worth Rs 10,830 crore on account of coal imports in the first quarter this fiscal based on an average conversion rate of Rs 57 for every dollar last quarter. This is a 57% increase over Rs 6,890 crore outgo in the same period last year at the then conversion rate of 53 per dollar.
Experts attribute the exponential increase in coal imports for the world’s third-largest producer to an ongoing decline in local output, at the back of a lower than targeted production by state-owned monopoly miner Coal India Ltd (CIL), and to a recent decision by the government to allow power generators to pass on the burden of high cost imports to consumers.
Coal is among the top five items in India’s import bill of around $415 billion annually. The bill rises owing to the weakening Rupee, leading to higher inflation and a wider current account deficit. This strains the country’s foreign reserves and further strains GDP growth that stood at a decade low of 5% last fiscal.
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