Acquiring blocks: Coal Videsh to seal Mozambique deal

Acquiring blocks: Coal Videsh to seal Mozambique deal

New Delhi: Coal Videsh Ltd, a 100% subsidiary of the country’s largest coal mining firm, Coal India Ltd (CIL), is close to finalizing a deal to acquire coal blocks in Mozambique.

“A CIL team led by chairman Partha S. Bhattacharyya is going to Mozambique this month to sign a cooperation framework," said a senior coal ministry official, who did not wish to be identified.

They will work out the details of an agreement for acquiring equity in the blocks, which have both coking coal and low-ash non-coking coal.

The Mozambique acquisition is part of a larger strategy to gain access to coal mines in Zimbabwe, Australia, Bangladesh and South Africa.

Apart from meeting increasing demand, CIL’s foothold in international coal blocks is expected to help it source its supplies from these mines, instead of importing them and being subject to volatility in international coal prices.

Mozambique and India have been keen to have an institutional framework for technical cooperation and mutual assistance in the coal sector. The two countries had signed an agreement in May 2006 to promote bilateral cooperation in the field of coal resources.

India currently imports around 40 million tonnes of coal. Demand is expected to reach about 2 billion tonnes a year by 2031-32—about five times the current rate of extraction—and observers believe that the acquisition in Mozambique is a big stride towards bridging the gap.

“It remains to be seen whether the operational and administrative mechanisms within which CIL has to operate will make it easier for CIL to run projects abroad. Also, it is expected that CIL’s proposed projects in India would not have an impact due to capital outlay in foreign operations. Overall, though, the sign is positive as it indicates eagerness and good intent on behalf of the prime mover on Indian coal industry," says Dipesh Dipu, a manager with the accounting firm Pricewaterhouse Coopers.