No FDI likely in coal; govt must ensure rock bottom prices

A coal mine in India
The GST Council meeting scheduled for October first week is an opportunity to provide some relief to the industries such as power, metal and mining.

Paris Climate Agreement gives the world nations a small window to use carbon fuels before banning them altogether to reduce greenhouse gas emissions. India must use this window efficiently to boost its economy and industry, says VR Sharma, managing director, Jindal Steel and Power Ltd, in an interview with Anisha Nayar Dhawan. Edited excerpts:

You said during the discussion earlier that India may not be able to use its mineral deposits 20 years from now. Do you see any urgency in the country to make good use of this small window?

India needs 900 million tonne coal every year and we produce only 650 million tonnes. We are currently importing 250 million tonnes annually. The country must increase its coal output to one billion tonnes. If India could mine and utilise its coal deposits, the economy will get a big boost. We could reduce power tariffs across the country from Rs 4.50-12 per unit to below Rs 3 per unit. Second target should be coal gasification. Syngas thus produced could be utilised in several sectors such as fertilisers, power, sponge iron and PVC to reduce cost of production. We could also reduce our oil imports in a big way. Coal India should be given the target to produce at least one billion tonne coal by 2021 so that the availability is improved.

India must make best use of the coal deposits: VR Sharma

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The government has introduced several policies for the sector. But the production is not looking up…

Mining is a very important sector for the economy and it is capital-intensive. From coal to coal washeries then to coal gasification and to the power plant, it is a big value chain. The government must come up with a business-friendly policy where coal is available for free, just at a royalty. An increase in the cost of coal means an increase in the cost of power, cost of fuel, cost of fertilizers, cost of olefins and cost of plastic parts. My suggestion to the government is that domestic industries must be offered coal at zero cost.

At the auctions, industries are getting coal mines at a huge premium…

At the last round of auctions, coal was coming at Rs 100-230 per tonne. There was one case where Vedanta had to pay a four-figure price. I don’t think anybody in India will bid at such high prices. Coal prices in India should not exceed Rs 200 per tonne. The minors will have to spend a lot to buy the land, do the mining, wash the coal and spend on CSR. As the government runs Coal India, it knows the cost.

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The Narendra Modi government is incentivising the sector by making it attractive for FDI. Do you think this will help?

I don’t think FDI will come in coal sector because Indian coal has high ash content. And it is unviable to do mining and export the coal. The rest of the world is not buying coal as the industrialised countries have pledged to reduce coal consumption. Developing countries like India will not be allowed to do mining after, say, 20 years. So better utilise it today than to wait for tomorrow.

What is stopping India from using its coal deposits?

My suggestion to the government is that double the coal output. Let Coal India to produce 3-4 times more coal and supply to the industries. Coal India should be given a target to produce two billion tonne coal in three years. Then there will be no need for FDI. Coal India can list on New York or London stock exchange to raise money. There were several controversies in the sector like the Coalgate scam. If coal India is producing coal for the entire country, there won’t be any controversies or complaints.

 

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