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Coal India seeks to tap South Africa fossil fuels

Published on 08/08/2012

Coal India, the world's biggest coal miner, moved ahead on Wednesday with plans to acquire mines abroad by beginning the process of forming a subsidiary in South Africa.

The development follows state-run Coal India Ltd (CIL) signing a pact with the Limpopo province of South Africa to identify and develop coal mines as the Indian company grapples with an acute coal shortage.

The public sector firm invited bids for appointing consultants to help it form a wholly-owned subsidiary in Africa, the semi-official news agency Press Trust of India said.

“Coal India intends to select South Africa based consultant(s) to assist its venture of formation of a wholly-owned subsidiary company,” CIL said in the bids document, according to the news agency.

The step comes as India recovers from last week’s massive power outage — the worst in the history of the country, which runs a peak-hour electricity shortfall of around 12 percent.

Last year, the government of Limpopo, the northern province of South Africa, approached Coal India to set up a joint venture.

Coal India has earmarked 60 billion rupees ($1.1 billion) for acquisition of mines overseas in this financial year from its cash reserves of nearly $11 billion.

CIL, which accounts for more than 80 per cent of domestic coal production, missed its revised 2011-12 production target. It achieved only 435.84 metric tonnes as against the targeted 447 metric tonnes.

The demand-supply gap for coal was 161.5 million tonnes in the last fiscal year to March 2012 and it is expected to be around 114 million tonnes this year.

CIL has agreed to a government demand that it sign fuel supply agreements to meet a minimum of 80 percent of the needs of some 48 new power projects.

The company will have to pay penalties to electric utilities in the event of a shortfall in supply.

It wants to improve coal availability both by increasing domestic production and also through overseas sources.

Coal India produces more than 80 percent of India’s coal at close to 500 mines across eight states.

It holds the largest extractable coal reserves in the world, with over 22 billion tonnes, but has struggled to boost output due to failure to get environment and regulatory clearances.

Coal accounts for more than half of India’s energy use and consumption is set to increase as development accelerates in energy-intensive sectors such as steel and cement manufacturing.

India has been adding power station capacity to meet its needs, but some plants are idle because of fuel shortages.

The government sold off a 10 percent stake in Kolkata-based Coal India in 2010, raking in $3.4 billion.