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The great Indian coal rush

Indian companies belonging to a range of sectors from power to steel have been venturing to far-off shores such as Australia and Mozambique in their search for coal reserves. What explains this wanderlust?

It is certainly not the lack of coal reserves in India. India has 7 per cent of the world’s coal reserves and ranks fifth globally in its below-ground stash of the fossil fuel. Yet, it’s coal output of 566 million tonnes (MT) was not enough to meet the demand of over 720 MT in 2013-14. The shortage has led to rising coal imports. The import bill on the black fuel has more than doubled in the past five years.

Increasing domestic production is imperative but the problems in coal mining go deep. The rising deficit is due to many a slip between the mine and the boiler. To start with, for producers sitting on coal reserves, getting permits and licenses to start mining operations takes ages. Sample this — none of the 10 coal blocks allotted between 2008 and January 2013 in Chhattisgarh have achieved production so far. Even government owned Coal India faces delays due to “constraints of land acquisition and environmental clearances”, according to the coal and power minister.

The productivity of our miners is also low. India’s annual output per miner is around 4,000 tonne, compared to 10,000 tonne in China and over 22,000 tonne in Australia. One reason for the low productivity is the lack of proper mining infrastructure.

There are also bottlenecks in transporting the coal due to poor railway connectivity. There have been long delays in laying the railway lines for critical links. Bringing the end-user’s plants closer to the coal mines, has not helped either. Captive coal blocks allocated to private parties have become the ‘black sheep’ due to coal-gate and other issues.

The truth is that everyone know these issues exist, but not much has changed. Now the problems in the coal sector are clouding the prospects of user industries such as power, steel and aluminium producers.

With the economy picking up steam, demand for power, steel and aluminium is expected to pick up, with coal requirements set to increase from 171 million tonne in 2013-14 to 185 million tonne in 2016-17. This is why companies are loading up on overseas coal assets to fire up their growth.

Source: The Hindu BusinessLine