November 30, 2010 / 9:54 AM / 8 years ago

UPDATE 2-India's coal shortage to deepen next year

* Coal shortage in FY12 seen up 23.8 pct on FY11

* Environment issues biggest roadblock to mining-KPMG

* Underground mines, cluster mines seen as solutions

(Adds quotes from industry members)

By Ruchira Singh

NEW DELHI, Nov 30 (Reuters) - India’s coal deficit will deepen sharply next year, its coal minister said on Tuesday, forcing Asia’s third largest economy to import more of the fuel on which it relies.

The coal shortage will be 104 million tonnes in the next fiscal to March 2012, Sriprakash Jaiswal said, a jump of 23.8 percent from the current year’s estimate.

Delegates at a coal mining summit on Tuesday said difficulties over land acquisition, social and environmental hurdles and low investments would be a drag on output growth.

“The deficit will keep on increasing,” said Vivek Ojha, vice president of Global Coke, a coking coal producer. “The resource that we have is not seeing that much development.”

Coal Minister Jaiswal said in a statement to the summit which he did not attend that coal will continue to be a dominant resource for India.

“While India continues to produce a majority of the coal that it consumes, imports of coal are also rising at a fast pace, already contributing to over 10 percent of coal consumption,” he said.

Availability of coal, which accounts for more than half of the country’s power generation capacity, for the power sector was seen at 388 million tonnes in the current fiscal versus a requirement of 440 million tonnes, the minister said.

WAY AHEAD

Participants at the summit said Indian miners would have to combine expansion at home and a search for assets overseas to keep coal availability up.

“India should have a continual thrust on underground mining,” said D.N. Abrol, executive director raw materials at Jindal Steel & Power (JNSP.BO) referring to the few underground mines the country has. “India should go more for bigger projects such as large cluster mining.”

Miners need to give better incentives to attract young professionals and invest in technology, Ganesan Natarajan, director of Ennore Coke (ENCK.BO) said.

India has set a goal of adding 62 gigawatts of generation capacity over a five-year period ending March 2012, with the bulk of that coal, in an attempt to reduce peak hour power shortages and provide electricity to millions of rural households.

But coal shortages have limited the power generation.

Jaiswal said India’s projected coal demand for 2031-32 was about 2,500 million tonnes.

India is expected to import nearly 84 million tonnes in the current financial year, on top of local production of 572.37 million tonnes, Jaiswal told Reuters in an interview in September. [ID:nSGE68L03D]

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