India’s BJP Government Tries to Fire Up the Coal Locomotive

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There have been some positive developments on the coal front which could help India get its act together on fossil fuel supply.

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India is ranked fifth in the world with 7 percent of the world’s coal reserves. Yet, its current coal output of about 566 million tons (mt) falls woefully short of the domestic demand, which, in 2013-14 was over 720 mt, and was growing steadily. India’s annual coal output is far behind its neighbor China’s and Australia, because its coal import bill has doubled in the past five years.

Power generation companies, steel companies, and other industries that depend on the black mineral have started looking at captive mines abroad to get their coal fix. But India’s Power and Coal Minister, Piyush Goyal, has now stepped on the gas pedal to increase the coal supply for power projects. About 73,000 MW of power generation capacity is lingering due to fuel constraint, about 50,000 MW of which is thermal-based capacity.

Among the first steps in the possible coal reforms is allowing foreign firms to operate some of India’s coal mines, especially those currently under the state-run Coal India. This, feel many analysts, is an attempt to break the monopoly of Coal India in coal procurement.

A Reuters report quoted the Minister as saying that for the augmentation of coal production, a few projects of Coal India had been identified for operation under the mine-developer-cum-operator route, where international as well as domestic operators could participate.

On Thursday, the Minister told the Lower House of India’s Parliament that his Ministry was studying the recommendations of consultants Deloitte on restructuring options for Coal India, the world’s largest coal miner. A government committee has urged the ministry to restructure the company to help reduce the shortage of the fuel.

Goyal also said that the government had approved 15 projects for Coal India, with a total combined annual capacity of 136 million tons, for the five-year plan period of 2012-2017.

Like many other projects in India, its coal mining projects are caught in the deadly tangle of pending environmental clearances, land deals gone sour, lack of other government clearances and more. One example that highlights this: Of the 10 coal blocks allotted between 2008 and 2013 in the Indian province of Chhattisgarh, none have started production yet.

Even if a mining operation starts, there are also bottlenecks in transporting the coal because of poor railway connectivity from the mining pits.

In another effort to procure more coal, the Government of India was also actively contemplating allowing the use of surplus coal from captive producers (private parties) to meet overall demand in order to boost electricity generation.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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