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The Indian industrial sector has slowed down and reviving it is an immense challenge, given problems in the availability of power. Many states across the country have been facing daily power cuts of upto six hours; the situation is only worsening despite measures being taken by the government such as sprucing up coal supplies. There was power generation loss of some 5.3 billion units in the period of April to October, 2011, due to coal supply shortage. The country’s largest miner, Coal India limited (CIL), revised its production target in 2011 to 440 metric tonnes (MT) from the previous 452 MT. This clearly shows that CIL will not be able to meet its production target in the coming year, either. Most of the companies are looking to source coal from other countries either through fuel supply agreements or buying coal assets in coal-rich countries. Even the Coal Ministry of India has indicated that the importation of coal is being considered as an option for power production.
Most of the countries in which Indian companies have shown interest have issues and problems similar to those in India, including that of inadequacy of infrastructure for transport and export. The cost of developing support infrastructure has to be borne by the miner. The investment requirement for this is huge and it would be an unfair burden on individual companies. Other challenges which need to be taken into account before acquiring overseas coal properties include: political stability; tax regime; and law and regulatory framework. A project could quickly turn non-viable for a company with the slightest changes in these factors. Such was seen in 2011 when Indonesia changed its mining laws, resulting in that country’s coal becoming upto four times costlier. Many other countries are considering amendments in their mining laws. Caution is therefore required if India is to secure overseas deals.
However, simply importing coal to fill the shortages will obviously not be sustainable, and would fail to serve a long-term purpose. Given that India’s poor-quality coal, coal shortages and increasing demand for power, are providing the impetus for more imports from coal-rich countries, there is a need to study the respective coal industries of other countries with reference to India’s own needs.
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