India eyes foreign coal to meet demand at home

Australia, Indonesia, Mozambique and Zimbabwe are being considered

Mamata Singh And Monica Gupta / New Delhi October 03, 2005

The government is turning its attention to promoting acquisition of coal mines abroad to meet the country's growing demand for coal.

Australia, Indonesia, Mozambique and Zimbabwe are in the list of countries where mine acquisition is being considered as a viable option.

This is part of the strategies being worked out by the prime minister's Energy Coordination Committee towards long-term energy security.

"These countries are close enough to make transporting coal from India a viable proposition," said a government official, adding that the issue would be considered by an inter-ministerial group, headed by Coal Secretary PC Parakh.

Officials said acquiring coal properties overseas was also being considered as most coal reserves in the country had low-grade coal with high ash content. 

"Since our coal reserves are limited, we need to acquire mines overseas to sustain our energy needs," an official said, adding that that the government would encourage acquisitions by both public and private companies.

Assistance could also be taken from international funding institutions like the Asian Development Bank and a few multinational companies for acquiring mines abroad.

Proposals for equity participation by foreign companies in the development of new domestic coal blocks are already being examined with a view to have a reciprocal arrangement for Coal India Ltd (CIL) companies in mines abroad.

The CIL has a dedicated task force, consisting of a multi-disciplinary team of mining engineers, geologists, marketing and finance professionals.

This task force liaises with Indian missions abroad to identify opportunities and to examine and prioritise them. It also carries out the on-site technical, financial, commercial and legal due diligence.

The government is also planning to remove the cap on foreign investment in coal mining for steel and cement companies. Currently, while these companies are allowed up to 74 per cent foreign direct investment in coal mining, power companies can have 100 per cent equity.