Russia is increasingly India’s go-to destination for key commodities, thanks to steep discounts. It was crude oil earlier; it is coal now.
India is being offered Russian coal at a discount of around $10 per metric tonne over Australia’s Newcastle thermal coal. The payment mechanism, timing, and deliveries are, however, under negotiation.
With global coal prices doubling in the wake of the Ukraine war, Indian buyers have been scrambling for lucrative Russian offers. India uses coal to generate about 70% of its electricity.
Russia is the world’s third-largest coal exporter. However, a ban on Russian coal by the European Union and Japan has disrupted supplies.
“Markets suspect that India and China may boost coal imports from Russia, offsetting some impact of a formalised EU ban,” Vivek Dhar, director of mining and energy commodities research at the Commonwealth Bank of Australia, has said. India plans to double its imports of Russian coking coal, used to make steel.
India’s low coal inventory
Indian power plants’ coal stocks stood at 22.26 million metric tonnes as of April 19, enough for only nine days, as against the standard 17-26 days. This indicates a looming energy crisis amid scorching summer demand, costly imports, and supply disruptions.
“Power demand in states has increased, and many of them are not able to bridge the gap between demand and supply,” Shailendra Dubey, chairman of All India Power Engineers Federation, said in a statement.
Besides, manufacturers also face a supply crunch of fossil fuels, according to Nomura Research. “This could become another stagflationary shock,” it said in a research note.