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Just as global banks desert coal, can India ramp up the sector without foreign investment?

It is not unusual for observers and leaders of an industry to feel nervous in India when their sector begins to collapse in developed countries. But Indian coal industry veterans are unusually sanguine at the moment, even as coal companies show signs of terminal decline elsewhere in the world. The reason: they think that the Indian government and financial institutions have enough money to fund a rapid expansion in the coal sector without foreign investment.

Over the past decade, many global NGOs have stepped up pressure on institutions to divest from coal. This has led, according to a study in 2013 by Oxford University, to the fastest-growing divestment movement in the history of the planet. This movement has gained strength after the study was published, as several big funds and institutions have announced their intentions to divest from coal. However, say industry analysts, market forces are playing a bigger role in the collapse of the coal industry in some developed countries.

Last week, Alpha Natural Resources, the fourth largest coal company in the US, filed for bankruptcy. Analysts expect Peabody Energy and Arch Coal, the two largest public coal companies in the US, to follow suit soon. Early this year, Europe's largest coal company — Kompani Weglova, owned by the Polish government — closed four mines and downsized to stave off bankruptcy. Coal production in Europe is falling, as European power companies begin the shift to phase out fossil fuels. On the other hand, India is on a rapid expansion of its coal sector. Coal India, the country's largest producer of coal, is on its way to double its production to 1 billion tonne by 2019. Despite huge investments being planned in solar energy, coal remains the basis of India's energy plans for the next few decades. Producing so much coal will require investments of at least $20 billion, according to industry insiders. The World Bank, which has funded Coal India in the 1990s, is unlikely to fund coal mining anywhere in the world. "The impact of World Bank withdrawal on India is next to nothing," says former Coal India chairman Partha Bhattacharya. "Indian commercial banks can now take over."

source: http://economictimes.indiatimes.com