Slow economy provided relief to domestic coal production

UK-based research firm Wood Mackenzie (WoodMac) is of the view that Indian coal production will improve in 2020. Principal analyst Pralabh Bhargava at WoodMac said: “Higher rainfalls not only resulted in lower coal generation but also hindered domestic coal production, however, we expect domestic production to improve in 2020.”

“In addition to a decline in coal-based power generation in H2 2019, cement and steel production were also down 1.8% and 0.3%, respectively. This resulted in a decline in coal demand. We expect coal consumption to grow only 0.5% in 2019 as compared to 8.5% in 2018 but expect consumption to improve in 2020 with a growth rate of 4.4%.

With power generation and cement and steel production slowing, stocks of domestic coals have started to increase in India. If the economy doesn’t pick up in early 2020, and power, cement and steel demand remain slow, we see a downside risk to our coal imports forecast. Currently, we are forecasting 181 Mt of thermal coal and 65 Mt of coking coal imports in 2020.”

Principal analyst Alay Patel said: “2019 was a disappointing year as oil and gas production declined. Major reforms were introduced for licensing, but these failed to translate into successful bid rounds.

“Gas production is set to rise by 9%, underpinned by deep-water projects operated by Reliance (KG-D6) and ONGC (KG-DW-98/2). Both projects are on track for a 2020 start-up – although we expect only one well to be on-stream in ONGC’s field.”

Solar analyst Rishab Shrestha said: “India continues to invest in renewable sources of power with a focus on affordability, security and environment.  Despite the ‘must run’ status of renewable power, wind and solar projects still faced large-scale grid curtailment in 2019, owing to the ongoing financial distress of state distribution companies.

This has affected the returns on renewable projects, especially in Andhra Pradesh and Telangana, leading to credit downgrades.

“Even against this backdrop, the competitive price of renewables (averaging less than US$42/MWh) has led to an addition of 11 GW of renewable capacity expected in 2019 with solar contributing approximately 9 GW.

The Economic Times
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