© Reuters
© Reuters

The thermal coal industry’s hopes of Indian demand growth helping absorb global oversupply are being dashed by a jump in domestic production from the world’s second largest importer.

India is looking to more than double its total coal output to 1.5 billion tonnes by the end of this decade, with 500 million coming from the private sector.

State run Coal India’s output grew 32 million tonnes to 494.2 million tonnes in the fiscal year 2014/15, the biggest volume rise in its four-decade history.

“Imports are going to stay but they’re not going to rise, they’re not going to increase at the rate that was projected before, like 25 percent growth every year,” said Sabyasachi Mishra, head of minerals sourcing at Tata International.

Speaking at the Coaltrans world coal conference in Barcelona, Mishra said demand for imported coal would be flat at around 163 million tonnes per year going forward.

Coal fuels 60 percent of India’s power production and the turnaround in India’s coal industry has been a highlight of Prime Minister Narendra Modi’s tenure in office since May last year, as he aims to connect to the grid millions of Indians who still make do with kerosene lamps.

Restrictions on buying land are among barriers holding up projects however.

Kaamil Fareed, general manager of trading at privately held Coal & Oil Group, one of the largest thermal coal importers, said the biggest challenge to the government’s goal was land acquisition.

“The current government over the past year has been struggling to pass the land bill,” Fareed said, adding farmers were at the heart of concerns.

Fareed was optimistic the government could meet its production target.

“India will reach 900 million tonnes in four years,”

he said, referring to government production by 2019.