“States urged to increase coal imports for three years”

India has urged its states to increase coal imports over the next three years to build up inventories and meet demand, four sources told Reuters, a move intended to benefit the fuel’s global prices, which are falling due to the war in India Ukraine are already high.

The decision to boost imports underscores the severity of India’s fuel crisis, as coal stocks are at their pre-summer lows in at least nine years and demand for electricity is expected to rise at the fastest rate in nearly four decades.

India, the world’s second-largest coal importer, could boost global demand into 2025 as Energy Minister RK Singh set a longer timeline for a federal push to increase imports, which was previously seen as a temporary measure.

“States have been asked to continue importing as it will take the private sector until at least early 2025 to produce any meaningful output,” said an Energy Department official who attended Mr Singh’s meeting with state officials on Tuesday.

In addition, the state’s rail network is suffering from an ongoing shortage of trains to haul domestic coal, the official added.

The sources, two state officials who attended the meeting, and two Department of Energy officials declined to be identified because the matter is private.

At the meeting, states were asked to sign long-term import contracts to ensure supplies and lower prices, as well as buy railroad cars to solve the logistics problems, said another ministry official who was briefed but did not attend.

Higher coal imports could benefit miners like Indonesia’s Adaro Energy, Whitehaven Coal Ltd. from Australia and India’s largest coal trader Adani Enterprises, whose controversial Carmichael mine in Australia began producing coal this year.

But high global coal prices will weigh on Indian states’ indebted utilities and threaten to deepen their financial woes.

Global prices have soared on fears of a supply crisis after the European Commission decided to ban coal imports from Russia following the invasion of Ukraine, which Moscow is describing as a “special military operation”.

India, which has a long-standing policy of cutting coal imports, said in December it should have no other than very important imports.

In March, the government said it had “achieved a significant reduction in imports despite an increase in electricity demand,” a reduction it attributed to sweeping reforms.

“Just last year they told us to cut imports,” one of the state officials said at Tuesday’s meeting. “Now they want us to import as much as possible and say there are supply bottlenecks. That’s a very confusing, mixed signal.”

The minister’s comments to state officials constitute a guideline as New Delhi largely controls domestic coal production and distribution.

Although the energy-hungry nation has pledged internationally to gradually reduce its use of the fuel, it has said it will not phase out coal-fired power plants anytime soon because they provide cheap electricity.

India faces coal shortages despite record production by state-owned Coal India. As the world’s largest coal miner, it produces 80% of India’s coal.

Indian Railways is struggling to ramp up deliveries despite falling utility stocks.