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Fund push for foreign coal assets
Cash Fillip

New Delhi, March 28: Indian firms could buy more foreign coal assets to meet the growing gap between demand and availability, which is set to shoot up to 200 million tonnes by the end of the Twelfth Five Year Plan (2012-17).

A sovereign fund to buy the foreign assets is under the consideration of the Indian government.

“Coal production is not growing fast enough. This is leading to an increasing dependence on imports. Coal imports are likely to reach 183 million tonnes (per annum) by the end of the Twelfth Plan,” according to the mid-term appraisal of the Planning Commission.

Officials said the coal ministry was in favour of the sovereign fund.

“A common fund for the acquisition of blocks or stakes for oil, gas or coal will help to deal with the energy needs of the country,” a senior official said.

The oil ministry has proposed a $20-billion sovereign fund to help oil and gas explorers ONGC and Oil India to acquire assets abroad.

India has foreign exchange reserves of $278 billion, according to the RBI. China, with $2.4 trillion of reserves, has set up a $300-billion sovereign fund to enable its energy firms buy foreign assets.

The Indian government is planning a similar fund so that it is able to support the energy needs of the economy that is expected to grow at an average rate of 9-10 per cent during the Twelfth Plan. Growth for this fiscal is likely to be 7.2 per cent.

Finance ministry officials said, “The government favours the creation of a sovereign fund as the country’s energy demands are expected to increase, and acquisitions abroad are the only way to ensure energy security. But, the size of the fund has to be worked out as an integrated approach has to be there.”

State-run power utility NTPC is in talks with Indonesia’s Sugico Group to acquire a coal mine with 1.8 billion tonnes of reserves.

Coal India is negotiating with US-based Peabody Energy and six others to own stakes in overseas coal assets through joint ventures.

The mining firm plans to invest $2 billion over the next four years to pick up stakes in overseas assets.

Coal India acquired two coal blocks in Mozambique with estimated reserves of 1 billion tonnes in 2009. It aims to import coal from the Mozambique blocks.

Coal production in 2010-11 is likely to reach 571.87 million tonnes from an estimated 533 million tonnes in 2009-10, while imports are likely to increase 21 per cent to 84.44 million tonnes in the next fiscal.

The plan panel has said steps should be taken in the current plan period (2007-12) to tie up imports from coal exporting countries, along with enhancing the level of domestic production.

A nodal agency should be given the responsibility for coordinating the required imports, it added.

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