A Misleading Australian Report on India’s Coal Appetite Is Informed More by Hope Than Fact

The Australian government’s Office of the Chief Economist is a little out of step, it seems, with global coal-industry trends.

In the release this week of its “Coal in India” report, the office relies extensively on year-old, outdated research from the International Energy Agency (IEA).

Twelve months is a lifetime in this commodities market, yet the Office of the Chief Economist (OCE) seems stuck in early 2014. The IEA outlook the report clings to is based almost entirely on data that came out before the election of Indian Prime Minister Modi in May of last year, an event that reset Indian energy policy. Since Modi’s ascension, and under the direction of Energy Minister Piyush Goyal, India has gone on an energy-policy tear, announcing initiatives almost daily aimed at transforming the Indian coal industry and its power generation, grid distribution and utilities sectors.

THE OFFICE OF THE CHIEF ECONOMIST, INCIDENTALLY, USED TO BE CALLED THE BUREAU OF RESOURCES AND ENERGY ECONOMICS, and its report is colored more by industry hope than market reality. It concludes, quite erroneously, that India will not just continue to rely on coal imports, but will increase them. In addition to relying on old IEA numbers, it cites Coal India’s musty year-to-March annual report from last year, and it ignores Goyal’s November 2014 announced goal of ending thermal-coal imports “in the next two or three years.”

Nor does the report mention that in April of this year, Arup Roy Choudhury, managing director of National Thermal Power Corp.—the largest coal-fired power generator in India—announced plans to cease thermal coal imports by 2020. It also lacks any analysis of Indian coal demand needs relative to its electricity sector, where the government is pursuing the expansion of options from a three- to a seven-horse race. Coal will have to compete increasingly with nuclear, gas, solar, wind, biomass and hydro-electricity alternatives, as well as grid and energy efficiency improvements.

The OCE report says India has 205 gigawatts of coal-fired power plants in operation, although the Central Electricity Authority of India says the actual number is 165 gigawatts. The OCE report has the government of India aiming to double domestic coal production by 2020 when in fact its goal is to triple domestic production (and even half-achieving this would zero current reliance on imported coal).

THE REPORT CONTAINS ADDITIONAL ERRORS OF FACT AND OMISSION, BUT SUFFICE IT TO SAY THAT IT SIMPLY MISSES THE BIG PICTURE. It does little to examine the risks to Australian thermal coal exports posed by India’s new energy policy, for instance, and it says nothing of the associated new mine and rail-port infrastructure in Australia that will be at risk of being a stranded asset should Goyal achieve his frequently stated goal for India to cease importing thermal coal.

While the report does provide some in-depth information on the Indian coal and coal-fired power markets, its value is limited by its skew toward an ill-informed and overly rosy conclusion that India will be a net importer of thermal coal for the foreseeable future. This may come as little surprise given that the purported growth in India’s appetite for foreign coal is why the Abbott government is using taxpayer dollars to fund foreign billionaire investments in high-risk new coal ventures in Australia.

The truth is the government report is misleading and is a disservice to its public.

Tim Buckley is IEEFA’s director of energy finance studies, Australasia