Indonesian Coal Export Ban Unlikely to Impact India
Strategic Research Institute
Published on :
01 Feb, 2022, 5:30 am
Not long ago, India faced coal shortages due to a decline in domestic coal production after mines flooded during the monsoons. That had more to do with developers not maintaining enough coal stockpiles than a decline in domestic coal production. Some of this shortfall in domestic supply from August to October 2021 was met through imports. Indonesia, the world’s biggest exporter of thermal coal, has begun to loosen its coal export ban which it implemented for the month of January to increase domestic supply, as Indonesian power plants grapple with critically low stock levels. Institute for Energy Economics and Financial Analysis Energy Economist & Lead India Vibhuti Garg wrote that given that about half of India’s total coal imports are from Indonesia, how might such a ban impact power generation? And also, how should India protect itself in the future from the associated price volatility and energy security risks of continued reliance on fossil fuel imports?
India has about 16 gigawatts of imported coal-based plants, which comprise about 8% of the total coal-based capacity. Most of these plants are located in four major coastal states – Karnataka, Andhra Pradesh, Gujarat and Tamil Nadu. Indonesia’s ban is likely to impact these states the most. However, these plants have power purchase agreements with a host of other states, so any shortfall in generation will lead to energy shortages across many states in India.
India has been progressively reducing reliance on imported coal by replacing it with domestic coal production, as well as increasing reliance on domestic renewable energy alternatives. Coal imports for the power sector increased from 57 million tonnes in 2018 to 70 million tonnes in 2019, but have since declined by ~55% because of government action to boost domestic coal production and reduced power demand due to low economic growth and COVID-19.
With Indonesia set to lift restrictions on coal exports early, the disruption caused by the ban will be temporary and India will manage its power demand without an energy crisis. In an extreme, but unlikely, scenario of a continuing export ban, India would have been forced to look at alternate sources of supply, both domestic (coal and accelerated renewables deployment) and imports. Indonesia earns huge revenue from coal exports, so a continuing ban is unlikely in the future because it would impact economic growth. To fill the gap, India has the option to increase imports from South Africa or Australia. India could also meet the shortfall by increasing domestic coal production. However, with states like Gujarat and Chhattisgarh announcing coal exit policies, any expanded reliance on new coal mining would be met with huge resistance.