NEW DELHI–It looks like people in India will have to get used to blackouts, as the country’s coal minister said it would be difficult for the domestic coal industry to keep up with demand from power plants.

Asia’s third-largest economy relies on coal-fired power plants for the majority of its electricity needs. Increasingly stringent environmental regulations have made it difficult to raise output of the pollutive fuel, while power producers are reluctant to turn to imported coal because it is difficult for them to pass on the costs to consumers in a country where around 40% of the population get by on less than two U.S. dollars a day.

India needs to speed up environmental clearances for new mines and ease the process for companies seeking to acquire land for coal mining, federal coal minister Sriprakash Jaiswal said Wednesday, or the lack of coal supply will worsen.

“The government granted coal blocks to private power producers [in the past two decades] with the hope that it would raise output, but that doesn’t seem to have helped,” Mr. Jaiswal told The Wall Street Journal in an interview.

India is faced with a crippling shortage of power to run its factories and light its homes. Several cities in the country have daily blackouts of up to six hours, with shortages worsening in summer months when malls, offices and homes run air-conditioners.

Although the government said private companies could mine coal in earmarked areas to meet their needs, very few such mines are in operation and state-run Coal India Ltd. remains the monopoly commercial coal miner in the country.

“Coal India alone can’t meet all the rising demand for coal in the coming years,” Mr. Jaiswal said.

However, private companies have faced delays in getting environmental clearances, including additional regulatory clearances required for mining in a forested area, and difficulties in acquiring land have prevented them from mining in the blocks allocated to them over the last two decades.

Since 1993, 195 mining leases have been granted, but “only 25 to 30 such private mines have started operations to date,” he added.

“There have been some improvements in the process of getting environmental clearances in the last six months, but more needs to be done. Ultimately, a balance has to be brought between environmental concerns and mining,” said Mr. Jaiswal.

Coal-fired plants make up more than half of India’s total electricity generation capacity of 210 gigawatts, and power companies are often unable to ramp up production or operate plants at full capacity because of a lack of coal.

Despite the lack of domestically produced coal, there are several new coal-fired power stations under construction in India. Wind and solar energy form a very small portion of India’s power mix, gas-fired plants have failed to take off due to shortage of the fuel, and nuclear power generation has yet to take off in a major way.

Unless private companies are given the green light to start operations in their captive mines, coal imports will likely continue to rise, Mr. Jaiswal.

The country will likely have an estimated coal shortage of 192 million metric tons for this financial year ending March 31, and traders expect imports of around 140 million tons to help narrow the gap.

However, power producers are loath to rely on imported coal, which cost 40%-50% more than domestically produced coal. India’s power producers face difficulties in passing on the higher costs to consumers, because state governments have a large say in tariff hikes by state-run utilities as higher prices can stoke inflation.

“In the next several years, power tariffs are bound to rise, just as prices of other commodities are rising. Higher power tariffs will allow private producers to import more coal,” Mr. Jaiswal said.

Courtesy: THE WALL STREET JOURNAL

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