A few short years ago the assumption that coal demand was essentially endless in China and India was seen as irrefutable. Now this 'coal consensus' is breaking as analysts from Citi Bank to Bernstein predict a rapidly approaching peak in Chinese coal demand. But while the end of the Chinese coal bubble has generated headlines the situation in India has flown entirely under the radar. Now the Indian coal bubble may have popped and no one seems to realize they’re standing in the rubble.
To understand the depth and extent of the Indian coal bubble you have to first understand the country's unique problem: Despite sitting on the world's 5th largest supply of coal, it can't secure affordable coal supplies. That's because the country can't mine coal fast enough, and has failed to expand transportation infrastructure (largely railways) to move coal where it needs to be (the power plants). The resulting supply crunch is so acute that power plants operators and Coal India have fought for years over 'Fuel Supply Agreements' while scores of coal plant developers have moved to India's coastline to bypass domestic supply problems in favor of expensive imports. In sum, this supply crunch is structural, and it's not going away anytime soon.