India, US pursue sustainable alliance in coal sector

Mumbai: After the civil nuclear agreement, India and the US are pursuing an alliance in the coal sector. Both the countries, which met recently in New Delhi, are considering encouraging equity partnerships with offtake in expansion projects, long term offtake arrangement and equity in new projects.

India’s premier coal producer, Coal India (CIL), has identified 142 new projects, comprising 35 under ground (UG) and 107 opencast (OC) for ultimate capacity of 380.22 million tonnes with an estimated capex of $7.7 billion.

Besides, CIL is setting up 20 washeries with a capacity of 111.1 million tonnes, with estimated capex of $510 million. India is expected to have a coal production of 447 million tonnes by the end of the 11th plan and 633 million tons by end of the 12th plan. According to Centre’s estimates, the coal shortage is expected to be 85 million tonnes by end of 2011-12.

The alliance is crucial to tackle constraints in exploration of coal. Of 277 billion tonnes geological reserves, only 110 billion tonnes reserves are in “proved category”. Besides, there are problems and constraints in underground mining, mainly because of use of old technology, and labour-intensive processes and safety issues.

A coal ministry official told Business Standard, “In equity model, it is proposed to acquire stakes in operating mines or greenfield coal blocks and import produce from such acquisitions to India. In the off-take model, it is proposed to enter into long-term offtake contract (10 years) with coal companies for procurement of imported coal. USA has been identified as a preferred country for both the equity and off-take models.”

At present, Coal India (CIL) is in an advanced stage of creating strategic alliance with a large US company through the “equity model”. In “off-take model”, several US coal companies have qualified to participate in the final stage of the process and price bids shall be shortly invited from those coal companies.

The official argued: “Thermal coal exports from USA at a competitive price can potentially bridge India’s demand-supply gap. Competitive model for maritime freight needs to be explored for making the landed cost of US coal in India attractive. Indo-US bilateral platform can be leveraged to sensitise stake holders at the government level to create an enabling situation for CIL to strike deals with US coal companies. Several responses were received from US-based coal companies. Discussions are in progress with Peabody, and Massey Energy Corporation.”

US side may come up with new technologies and expertise to take part in mechanisation of UG mines, keeping in view the production, productivity, safety and economics.

India and US are also looking at financing of capacity building and skill development in the area of geospatial technology application in mine land reclamation for sustainable coal mining in India.

Besides, funds can be available to develop core competence of technical experts through training and site visits to make them capable of taking inferred decisions for addressing land reclamation challenges.