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Coal India eyes tie-ups with private players for foreign buys

Coal India eyes tie-ups with private players for foreign buys
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First Published: Mon, May 05 2008. 11 57 PM IST

Looking abroad: A labourer near a mound of coal in Guwahati. CIL is keen to acquire equity in overseas coal blocks to bridge the gap between demand and supply of the fuel in the domestic market.
Looking abroad: A labourer near a mound of coal in Guwahati. CIL is keen to acquire equity in overseas coal blocks to bridge the gap between demand and supply of the fuel in the domestic market.
Updated: Mon, May 05 2008. 11 57 PM IST
New Delhi: Coal India Ltd, or CIL, the country’s largest coal mining firm, is looking to partner with private sector companies such as Reliance Power Ltd (RPL), part of the Reliance-Anil Dhirubhai Ambani Group, to acquire coal blocks overseas. The partnership could be effected through CIL’s 100% subsidiary Coal Videsh Ltd.
“CIL will partner with coal companies in the private sector for acquiring coal blocks overseas,” H.C. Gupta, Union coal secretary, said in a recent interview, while declining to elaborate.
An official in the coal ministry familiar with the development, who did not wish to be identified, said that the company had decided to take this route in an effort to speed up its decision making. The fact that it is state-owned prevented it from taking quick decisions and this put it at a disadvantage in finalizing deals, this official added.
CIL is keen to acquire equity in overseas coal blocks to bridge the gap between demand and supply of the fuel in the domestic market, even as coal production in the country continues to decelerate. This will also protect the company against volatility in international prices of coal.
“We are trying to find out the right partners and are in talks with private sector companies such as RPL. Since China has depleted its supplies and is not exporting any coal, we are now looking at the coal blocks in Mozambique, Bangladesh, Indonesia, South Africa and Australia,” said a CIL executive who did not wish to be identified.
A Reliance-Anil Dhirubhai Ambani Group spokesperson declined comment.
Looking abroad: A labourer near a mound of coal in Guwahati. CIL is keen to acquire equity in overseas coal blocks to bridge the gap between demand and supply of the fuel in the domestic market.
After securing stakes in coal blocks in Indonesia with estimated reserves of 2 billion tonnes, RPL is looking for more coal blocks in Indonesia, Mozambique, South Africa and Australia, as reported by Mint on 23 April.
Coal industry analysts say such a joint venture will help both CIL and the private sector companies.
“It may be a symbiotic partnership, with CIL bringing its immense expertise in coal sector to the table and the private players bringing in their foreign investment acumen,” said Dipesh Dipu, a manager with accounting firm PricewaterhouseCoopers.
“While there are public sector investment vehicles created for the purpose, CIL may find the private players quicker and more agile for the jobs of target hunt and follow-up acquisitions. For the private player, CIL’s technical assessment of reserves, geo-mining specifications, technology implementation and project management expertise could be useful in stages of acquisition and development of mines,” he added.
CIL already has a memorandum of understanding with NTPC Ltd, Steel Authority of India Ltd, Rashtriya Ispat Nigam Ltd and National Mineral Development Corp. Ltd for the formation of a special purpose vehicle (or company) for acquiring coal mines abroad.
India has 256 billion tonnes of coal reserves, of which around 455 million tonnes per annum (mtpa) is mined. The country currently imports around 40mt of coal. Demand is expected to reach about 2 billion tonnes a year by 2031-32, about five times the current rate of extraction with the maximum demand coming from the power sector.
Currently, 78% of the country’s coal production is dedicated to power generation, and the sector is expected to need 545mt of coal by 2012, not counting the needs of new ultra-mega power projects, or UMPPs, each with a capacity of 4,000MW.
Domestic coal supplies are projected to provide only around 482mt, leaving a shortfall of about 63mt. Experts see India having to import nearly 115mt of coal when all the coastal UMPPs come online. The ultra mega power plants located on the coast will generate power from imported coal. Others are located next to coal mines and will generate power from local supplies.
India has an installed power generation capacity of 141,080MW and around 67% of this is based on coal. A significant portion of this thermal power capacity is idle because promised supplies of coal are not being delivered by CIL.
utpal.b@livemint.com
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First Published: Mon, May 05 2008. 11 57 PM IST
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