India to step up coal imports quality checks

India is calling in specialist quality control monitors to stop poor quality coal imports getting through to its import-reliant power plants.

Indian utilities complain that poor quality coal reduces the efficiency of power stations, requiring more fuel and an increased need for the costly disposal of pollution.

Last month, India's largest utility NTPC refused to pay for coal viewed as substandard, prompting Coal India to respond by suspending supplies and raising concerns of blackouts.

To address the problem, the government is planning a tender for independent coal quality sampling by September, in which international verification companies such as SGS and Bureau Veritas are taking part.

"Coal India has had a long-standing Joint Sampling scheme in place with their consumers which ultimately ended...We have participated in the tender floated by Coal India for independent verification of their coal supplied to their consumers," said Erwin Oosterveen, business development manager with Bureau Veritas.

Indian utilities have become increasingly reliant on imported coal because domestic production is lagging demand, but the quality of many of these imports is dropping.

Low quality coal exports (known as sub-bituminous supplies) from Indonesia, the world's biggest exporter of thermal coal, have risen steadily in the past five years, especially to China and India.

India's government is desperate to avoid a repeat of a huge blackout last year, when half of the country's 1.2 billion people lost access to the power grid.

But with imported coal costing around 50% more, some power companies are facing huge losses unless they push up power customer prices, something state governments are resisting.

Last week, the National Aluminium Company, which uses large amounts of the fossil fuel for its power supply, said it had started cutting output because of a lack of domestic coal supply.

CHINA ALSO TAKES STEPS

Choking on pollution and keen for more efficient electricity production, China also wants to improve the quality of its coal supplies.

In a move to reduce pollution and help domestic producers, which have struggled to compete with Indonesian suppliers, China may soon ban lower quality imports.

"This move does fit in with the policy of promoting 'more efficient' growth. Also, the growing concern over pollution is likely to have played a part," Australian bank Macquarie said.

"Blending of coal to meet minimum requirements should open up large potential for traders," the bank added.

Coal is the dominant fuel to meet booming power demand in most emerging markets.

Asia's two biggest coal users, China and India, with other emerging economies have in recent decades ramped up coal use to account for more than half of current global demand.

But the most economical reserves of the fossil fuel are fast being depleted, leading to a drop in the quality of what remains.