India's Aggressive Quest for Foreign Coal Backed by Sovereign Fund

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The Indian government is proposing to create a sovereign fund for the acquisition of overseas coal assets, coal minister Sripraksh Jaisawal said at a round table conference organized by the Confederation of Indian Industry in New Delhi on issues regarding overseas coal acquisition.

The sovereign wealth fund would be similar to those operated by other countries, and although the state-owned Coal India Limited (BSE:533278) (CIL) (Kolkata) holds surplus resources for overseas investment, it was felt that the government needed to offer support in the acquisition of very large assets abroad, both for political and economic reasons, said the minister.

The country is unable to meet its energy requirements with domestically available resources, and needs to acquire significant coal assets abroad in the light of domestic production constraints, with a growing demand for coal by a range of consuming sectors, steel and power.

The country's energy requirements are forecast to increase to about 1.67 to 2.08 billion tons by 2031-32, according to projections made in the integrated energy policy committee report.

The overall import dependence of the energy sector in 2031-32 is projected to be between 58% and 67%. This kind of growth in energy demand, and the increasing gap between domestic supply and demand, will make it imperative to secure energy supplies through imports, the minister said.

Saying that India needs to be more aggressive in acquiring energy assets abroad, the minister stressed that, from the energy security point of view, the government had been encouraging both public- and private-sector companies to acquire energy assets abroad. While there have been successes with coal and oil companies, increased aggression was required.

CIL has prioritized Australia, South Africa, Mozambique, the U.S. and Indonesia for both coal and oil, based on a combination of factors, such as the availability of good coal resources, infrastructure, and foreign direct investment that is favorable for coal miners.

CIL has floated a global expression of interest to select strategic partners in Australia, the U.S., South Africa and Indonesia.

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