India may face shortage of coal
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Mumbai, Aug. 15: India may soon face a shortage of coal as more power plants are built and domestic production lags. Coal imports could go up sharply over the next few years inspite of large domestic reserves.
Companies building power projects are also acquiring coal mines around the world. In its DRHP filed with Sebi last week, Coal India says that there will be a shorfall of coal if all the ongoing projects where it has signed letters of agreement are completed.
The company sees the shortfall at 101 million tonnes in FY11 going up to 235 million tonnes by FY12. One impact of the coal shortage would be a lower plant load factor for new power plants, says brokerage house JP Morgan. Newer projects may also find it more difficult to secure fuel linkages, the broker says.
While the worst predictions are unlikely to come true as many projects get delayed, many of the power companies are looking at alternative sources.
Earlier this month, Adani Enterprises paid $455 mn upfront in a deal to acquire a coal mine with 7.8 billion tonnes of reserves. Essar Group, which has a presence in steel, oil and power also spent $600 mn recently to acquire a coal mine in the US. Other large groups including Tatas, JSW, GMR and Reliance Power have also acquired coal assets overseas — mostly in the past 2-3 years. Even public sector firms such as NTPC, NMDC and SAIL are looking at acquiring coal mines to secure fuel supplies.
The favourite spots for Indian firms are Australia, South Africa and Indonesia — all of them are large coal exporters and in close shipping distance to India.
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