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India open to investment to spur coal output

India open to investment to spur coal output
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First Published: Fri, Mar 05 2010. 04 16 PM IST
Updated: Fri, Mar 05 2010. 04 16 PM IST
New Delhi: India is open to foreign investment joint ventures to help mine vast domestic coal reserves as imports are set to leap in the next fiscal year to meet fast-growing power demand, the coal minister said on Friday.
Coal contributes to generation of more than half of India’s annual energy consumption, but local output lags booming demand in the nation of more than one billion people.
“This year we have increased our production by about 8%, but our energy requirement has increased by 15%,” Sriprakash Jaiswal told Reuters in an interview.
“The reason is that our country’s growth is rising so fast, he said. “There are so many power plants being set up.”
Jaiswal said as part of India’s drive for more coal, the country has more than 25 blocks available this year for auction after a new mining bill slated to be introduced in the current session of the Parliament becomes law.
“If we start the bidding process, the private players who will come in could raise production,” he said, adding demand to fuel economic growth was key.
Factory output in India, Asia’s third-largest economy, grew nearly 17% in December from a year earlier, the fastest pace on record, signalling a strong economic recovery.
India’s coal production in the fiscal year starting 1 April, is likely to reach 571.87 million tonnes from an estimated 533 million tonnes in 2009-10, the minister said, adding that imports in the same year are seen up 21% to 84.44 million tonnes.
Jaiswal said India had coal reserves of 267 billion tonnes, of which 40% has been proven, but social and environmental issues have kept the pace of production growth low.
India is seeking imports and more local production at the same time as the global market has been rocked by the sudden emergence of China as a major buyer of thermal coal, the lower quality grades used for power generation, and a commodity in which it was previously self-sufficient.
UBS analyst led by Ghee Peh, in a recent research note, raised its forecast for contract thermal coal prices starting on 1 April, to $95 a tonne from $90, citing high demand from China and India and supply-side problems in Australia, Indonesia and South Africa.
Foreign Partners, Auctions
New auctions for coal blocks will be open only to users who need dedicated coal mines for their plants, mainly in the power, steel and cement sectors.
Foreign companies may be allowed as joint venture partners, Jaiswal said.
“There are big companies who can come via the bidding process and increase the coal production. If the need arises, then we can take the help of foreign companies,” he said without elaborating.
To bridge the shortfall between local output and demand, companies can also be encouraged to acquire mining properties overseas, he said.
Last August the coal ministry announced it would auction blocks in a first step towards reforms in the sector to spur local output and attract investment.
The government has allocated 208 coal blocks to public and private firms since 2003, but only 26 of these have started production.
“Many people have taken blocks out of which some have not been able to produce due to genuine reasons and some people are not genuine players,” Jaiswal said.
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First Published: Fri, Mar 05 2010. 04 16 PM IST