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India to monitor overseas coal acquisitions
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29th October 2012
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KOLKATA ( – Stung by a rapidly rising demand-supply gap in coal and concerns by foreign governments over executing approved acquisition plans, India’s Coal Ministry would move to monitor overseas coal acquisitions on a quarterly basis.

A Ministry official said India’s record in carrying out acquisitions and developing coal blocks overseas had been tardy, despite adequate funds and good offers from Indonesia, Australia, the US and certain African countries.

Private companies had negotiated a few deals, but Indian government-owned miners like Coal India Limited (CIL) and International Coal Ventures Limited (ICVL), a dedicated special purpose vehicle (SPV) floated in 2009 exclusively for overseas acquisitions, had failed to clinch a single deal.

Despite a corpus of $1.9-billion CIL and ICVL had not been successful in acquiring any overseas assets.

Earlier this month, the Mozambique government also conveyed its serious concern to India over CIL subsidiary Coal India Africana Limitada’s (CIAL's) delay in exploring and developing two blocks in the African country.

An exploration licence was granted to the CIAL in 2009, but it was only over the past few months that the project gained momentum with exploration now slated to start within the next two months.

Similarly, ICVL, floated with an equity capital with $0.9-billion, had not acquired any coal assets, although it had been reported that the SPV was conducting due diligence on at least five coal blocks in Australia, Mozambique, Indonesia, the US and Russia.

However, the very structure of ICVL has now been questioned with principal stakeholders CIL and steel producer Rashtriya Ispat Nigam Limited (RINL) now wanting to exit the SPV.

CIL and Steel Authority of India Limited each own 28% of ICVL, while RINL, iron-ore miner NMDC and State-owned electricity utility NTPC each hold 14%.

“The acquisition review mechanism within the Ministry would monitor board decisions of government-owned mining companies, timely implementation of these decisions and identify roadblocks fast-tracking exploration and development of coal blocks overseas and smoothening them through government-to-government initiatives,” the Coal Ministry official said.

Explaining the need for monitoring, the official pointed out that India would have to import 185-million tons of coal by 2017 to meet increasing demand from the power generation sector. Domestic coal demand had increased 8% against domestic production growth of 4.61% between 2007 and 2012.

“Rapid coal asset acquisitions were the only way to ensure raw material and energy security. Imports based on merchant purchase of coal would be very challenging given the projected 187-million- to 200-million-ton requirement and that current international trade in coal is estimated at one-billion tons a year,” the official said.

Edited by: Mariaan Webb


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