India’s expected crude steel capacity growth to 173 million tonnes/year in the fiscal year through March 2020 (FY20) will result in an annual coking coal requirement of around 96mt, according to an Indian Chamber of Commerce (ICC)-PricewaterhouseCoopers joint report.

In FY15 India’s steel industry consumed 66mt of coking coal, with imported coal accounting for two thirds. This was based on a crude steel capacity of 110m t/y and production of 89mt.

“The steel sector demand assessment suggests a coal production capacity addition of around 63mt by FY 2020,” according to the report seen by Kallanish. “In order to attain this capacity, an investment of around INR 300,000–350,000 crore ($44.1 billion) will be required in the steel sector.”

Overall Indian coking coal demand for all applications including non-steelmaking is around 100mt, of which 50-55mt is produced domestically and up to 45% imported, the report says. Demand in FY20 may reach 140-145mt. Despite significant resources of coking coal, the quality of most Indian coking coal is insufficient for metallurgical use, meaning imports will likely continue.

Moreover, a domestic coking coal shortage remains after India cancelled in September 2014 214 of the 218 coal blocks awarded to companies since 1993. So far India has re-allocated 74 of these coal blocks through auctions.

“The success of coal block auctions carried out by the new government has proved that its decision to conduct a ‘fair and transparent’ bidding for coal mines has benefited the country in a big way,” says ICC director general Rajeev Singh. “However, there are many issues with regard to domestic coal production, including its quality, beneficiation of lower grades, transportation to distant consumers, environmental impacts.”