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State-owned Coal India Limited (CIL) has submitted its final report on social sector spending in its Mozambique project to the coal ministry, bringing it a step closer to starting overseas production.
The extent and mode of local expenditure has been a bone of contention between the Indian and the Mozambique governments and a major irritant stalling the progress of the world's largest miner's maiden project abroad.
“We submitted our report to the coal ministry in May end, pegging expenditure on setting up Apex Planning Organization (APO) and Apex Training Organization (ATO) in Mozambique at Rs 250 crore. It has been sent to the external affairs ministry,” a senior CIL official told Business Standard. “We plan to start the third and final round of exploration in December and start mining in 2016-17.”
For the past few years, CIL has been allocating Rs 6,000 crore annually for overseas investments, but has failed repeatedly in its acquisition plans. The miner had earlier shortlisted Australian miner Peabody Energy’s Wilkie Creek mine and US-based Massey Energy Co’s Sidney mines, but failed. It had considered buying a stake in Indonesia’s PT Golden Energy Mines Tbk (GEMS) but lost the deal owing to bureaucratic hurdles. Infrastructure conglomerate GMR later bought 30 per cent in GEMS in 2011.
In Mozambique, Coal India was allocated two blocks with reserves exceeding a billion tonne in a government-to-government deal in the Tete province in 2009. But, progress on the project has been slow, owing to procedural delays in outsourcing drilling contracts and the inter-governmental differences over the pattern of funding. “The lack of local infrastructure support, including roads and ports, has been a major issue. We are assuming that by the time we start mining in 2016, the Mozambique government would build infrastructure for evacuation,” the CIL official said.
Broadly, the idea is to import the entire quantity of coal available in the African nation to India, to bridge the gap in demand and supply of coal, which currently stands at over 130 million tonnes for domestic industries. CIL has already missed the original deadline of starting production by 2013. “The delay occurred largely because the Indian government’s own interest in the African region hijacked what was a completely commercial deal for us,” another CIL official said.
