KOLKATA (miningweekly.com) – With Indian electricity demand recording growth of only 5%, domestic coal production cannot be target driven, the government’s policymaking advisory body says.

The National Institute for Transformation of India (NITI) Aayog cautions that the country’s power sector may not require the volumes of coal that Coal India Limited (CIL) plans to produce. The country’s largest coal miner has set a goal of producing one-billion tons a year by 2020.

In a draft National Energy Policy, NITI Aayog has advocated that coal production should not be “autonomous” of growth in the power sector and should not be “target driven”.

While the policy advisory body is advocating for the abandonment of CIL’s target-driven growth plans, a section of government officials are sceptical about whether this will change the miner’s strategic plans as laid out by the Coal Ministry.

Even if the one-billion-ton-a-year target is not sacrosanct, it is imperative for CIL to continue pushing for higher production to achieve optimal efficiencies as coal production can not be increased or reduced in tandem with short-term demand changes, officials say.

The officials say that Aayog’s critical outlook on the coal production target might not find many takers within the government, considering that the Coal Ministry has already given a cold shoulder to the commission’s other major recommendation of splitting up CIL’s holding company structure.

The advisory body, through the same National Energy Policy document, has recommended that the seven wholly owned subsidiaries that make up CIL should be spun off as separate independent mining companies and compete against each other in the coal sector, which, in turn, would enable the evolution of a domestic coal market based on market dynamics.

However, the Coal Ministry’s official position is that there “are no plans for breaking up of CIL into separate entities”.

However, the dynamics of the demand for and supply of coal continue to dog official policy and emerging scenarios for coal production growth and offtake. Citing specific emerging trends, officials said even as CIL continued to ramp up production, the country’s largest thermal power producer, NTPC, planned to produce 107-million tons of coal from its own captive mines over the next five years.

With its own mines rapidly increasing production, NTPC’s coal offtake from CIL would see a matching downturn, the officials said.

At the same time, the slow growth of power demand is apparently “illusory”, considering the fact that NTPC is planning to go ahead in constructing five thermal power plants across the country, entailing an investment of $10-billion. However, these new thermal power plants are unlikely to generate new demand for CIL, as most of these power stations will be linked to ten captive coal mines allotted by the government that will progressively go into production, the officials added.

These projects are in apparent contradiction to forecasts from regulator, the Central Electricity Authority, that operational thermal power plants and projects already under construction will be sufficient to meet India’s projected power demand till 2027.

The contradictions apparent in the mooted lack of viability of one-billion tons a year of coal production by CIL, new thermal power projects and differing demand scenarios for coal is further aggravated by the national government’s renewed commitment to the Paris Climate Accord, officials point out.