Coal - The Hidden Treasure

Posted in Finance Articles, Total Reads: 2907 , Published on 04 November 2011

COAL is the most important and abundant fossil fuel in India. It accounts for 55% of the country's energy requirements. The Indian coal industry is the world’s third largest in terms of production and fourth largest in terms of reserves. Despite India being a coal-rich country, delay in mining activities at captive coal blocks, inferior quality of coal, hindrances in domestic coal transportation, environmental clearances and naxalite threats has increased power utilities dependence on imported coal. Coal linkages through imports have become extremely important for power utilities to ensure timely commissioning of their planned power.


From energy security point of view, the government has been encouraging acquisition of coal properties abroad. Lately the private sector has been gobbling up coal mines across the globe as they rush to secure raw material for the growing thermal power plant capacity. While the government owned companies like Coal India, National Thermal Power Corporation in spite of a huge corpus of funds for overseas acquisition haven’t been successful due to the delays in government formalities and mandatory procedures.


Overseas Company


Deal Size

Adani Power

Linc Energy



GVK Power & Infra Limited




Essar Group

Aries Coal



GMR Energy

PT Barasentosa Lestari



As per the Planning Commission, India needs to import 250million tonnes(MT) of coal to bridge the demand – supply gap. As of now, China remains the top importer of coal with its demand expected to double from 90 million tonnes in 2011 to 200 million tonnes in in 2015.However, China is different as they still have alternatives for fulfilling coal combinations vis-à-vis India who has no alternative for its energy resources. This indication of the huge demand in the country would send coal prices through the roof and a breakout of war among supplier countries like Indonesia, Australia, South Africa and the U.S.Another signal send by one of the major coal exporting country Indonesia is the recent change in regulations. As per the new regulations, the Indonesian government prohibits the sale of coal, including sales to affiliated companies, below a benchmark price based on international rates. The regulation requires that all existing contracts are modified from this month to comply. On the other hand, Australia issued a draft mining law 10 days ago to impose levy on coal and iron ore projects from next year. The Association of Power Producers, a group of 13 private companies, has asked the power ministry to set up an expert committee to find appropriate solution to tackle rise in imported rates, as it makes imports economically unviable.

Does that mean Government's ambitious target of 'Power to all by 2012' under the National Electricity Policy shall remain only a dream? Is this rise in price going to reach the pockets of the aam aadmi? Will the government subsidize coal prices to strengthen its vote bank at the cost of widening the trade deficit?

Now that the global environment has changed, it has become the need of the hour to explore domestic reserves. The regulatory procedures need to be streamlined taking into account environmental considerations in energy policies. Currently it takes about seven years to get environment and forest approvals to start mining. For state-run Coal India, which operates 470 mines accounting for more than 80 percent of the country's domestic coal production, 233 projects are being held up because of regulatory clearances, including environmental approvals. India must exploit new avenues in emerging technologies that will reduce coal consumption, produce larger power output and enhance environmental sustainability. China, for instance, has built more efficient coal power plants that are not only less polluting but also have lesser output costs.

Recently after intervention from the Prime Minister Manmohan Singh, the Coal minister Shriprakash Jaiswal and Environment minister Jairam Ramesh reached a compromise on Ramesh's controversial Go-No Go policy for coal mining. Coal India Limited, whose projects were delayed owing to environmental clearance received green nod for 14 of it projects. Can’t we be pro active in removing impediments and resolving conflicts that are in the interest of the nation? Probably the coal regulation committee that is intended to be set up by the end of FY12 will monitor this sector competently.

This article has been authored by Ernestina Fernandes from Sydenahm Institute Of Management Studies,Research and Entrepreneurship Education


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