Despite hurdles, India sees 2011/12 coal output growth

A concerted effort to remove regulatory hurdles could help boost India's coal output by 7% to 8% in 2011/12, although the country will remain a major importer, coal minister Sriprakash Jaiswal said on Wednesday.

Domestic production, which continues to provide the majority of coal consumed, has been crimped by difficulties over environmental clearances and land acquisition, as well as low investment, forcing a sharp downward revision of the output target in fiscal year 2010/11, which ends this month.

But Jaiswal told Reuters that legislation to ensure greater public acceptability for mining and an inter-ministerial panel to consider the environmental impact of projects would help enable mining expansion.

Coal India, the world's largest coal miner, has said it will likely miss a government-set production target of 460.5 million tonnes for 2010/11 due to inadequate transport infrastructure, which has led to a stocks pile-up.

"This year our growth almost stopped, we don't think we can achieve maybe more than 2% to 3% growth this year," Jaiswal said in an interview at his office.

"But the way the issues are being resolved now, we are hoping that we will come up to speed, maybe we will get to 7% to 8% next year," he said.

Still, imports will remain steady at about 20% of India's total coal consumption, he said.

The government is drafting a mining law that could include sharing 26% of profits by miners with local communities in a bid to smooth land acquisition, a touchy issue in the countryside, where a Maoist revolt has partly fed off resentment against industry.

Mining has also been curbed over the past year as an activist environment minister has tightened rules, proposing even to earmark no-mining zones that could put some 50% of potential reserves out of reach.

About 65 million hectares, or 20% of India's land, is forested, and that is where most of India's mineral resources lie, including huge deposits of iron ore, as well as the coal that fuels about 60% of India's power output.

Such green proposals have, however, been opposed by several ministries, prompting Prime Minister Manmohan Singh to form a panel of ministers to clear mining and infrastructure projects.

About 48 projects were awaiting the panel's clearance, and Jaiswal said 14 of them had been cleared in the past month.

Asked if the new mining bill will discourage private miners, he said: "You can say companies will be burdened but you will also have to say there will be no problems in land acquisition."

"People will come up and voluntarily offer their land. I don't think there will be any adverse impact on private investors. We don't think it's a big price to pay," he said.

Soaring imports

India is home to 10% of the world's coal reserves, trailing only the United States, Russia and China, but a shortfall from local supplies has grown rapidly with the increase in coal-fired power plants, and the country is likely to import about 90 million tonnes in the current financial year.

India's demand for coal is forecast to grow 11% a year, as the country aims to halve its peak-hour power deficit of nearly 14% over the next two years and triple generation capacity over the next decade. Imports for 2011/12 are likely to touch 135 million tonnes.

"Given the rate of our growth we can't say imports will taper. We are not in the mood to let this taper. Why should it taper, our efforts are towards more and more industrialisation," Jaiswal said.

"If the (demand-import) gap is constant that would be a big achievement. There is no doubt there will be shortfall (going foward)," he said.

"How much shortfall, what percent shortfall we can't say now, can't talk about what's going to happen in 20 years. If we compare it with today's conditions then the shortfall will be major," he said.

Demand for coal in India in 2021/22 is projected at 1,353 million tonnes against projected output of 1,084 million tonnes, leaving a shortfall of 269 million tonnes.

On Wednesday, Jaiswal told parliament the country was unlikely to become self-reliant in coal in the near future.