Mining group Coal India is seeking a spate of deals with "the world's best" resources companies, as it hunts for cutting-edge technologies to help it hit a "tough target" to double production by 2020, the group's chairman says.
State-backed Coal India, the world's largest miner by output, is investing heavily to overturn a lacklustre heritage of missed targets and stagnant output that has left India chronically starved of fuel, hitting businesses in industrial sectors from power generation to steelmaking.
But recently appointed chairman Sutirtha Bhattacharya says the traditionally insular resources group, which has a near-monopoly on producing roughly 80 per cent of India's coal, must now team up with a new generation of global partners as it looks to shed its lumbering and inefficient reputation.
"Associations with the world's best, and replicating the world's best, will be the hallmarks of Coal India's plan," Mr Bhattacharya told the Financial Times in an interview. "We are alive to this idea. Productivity has to increase."
Coal India will invest more than Rs120bn ($1.9bn) in new mines and rail infrastructure next year, but its spending will "go up steeply" over the subsequent three years, Mr Bhattacharya says, opening up options for a range of deals with suppliers or joint venture partners.
"How the partnership will take place is a matter of details," he says. "We have an international vision, we are looking at companies operating anywhere in similar kinds of mines . . . We have to bring in the best technology."
Mr Bhattacharya's remarks are likely to catch the attention of global mining groups eyeing growth in an Indian market that is set to overtake the US as the world's second-largest coal consumer after China over the next decade, according to the International Energy Agency.
However, overhauling Coal India's weak production record is one of the toughest challenges facing Indian prime minister Narendra Modi, who wants to increase the miner's output to 1bn tonnes by 2020, up from 462m last year.
India has abundant reserves of coal, on which it relies for more than half of its energy needs. But inadequate domestic production threatens to put the brakes on economic growth, just as India recovers from a prolonged slowdown.
Coal India remains 80 per cent owned by India's government, but its progress in increasing output is also of interest to foreign investors, who earlier this year helped it raise $3.6bn through the sale of a 10 per cent stake, India's biggest-ever equity raising.
Mr Bhattacharya says the Kolkata-based miner plans to raise output to at least 908m tonnes by 2020, and even higher if it can bring in foreign technologies to boost productivity at its nearly 500 mines.
Many analysts cast doubt on that goal, however, citing a series of formidable obstacles including difficulties obtaining environmental clearances, a heavily unionised 350,000-strong workforce, and inadequate rail capacity to ship millions of tonnes of extra coal around the country.
Kotak Institutional Equities, a broker, says Coal India will miss its domestic production target by a wide margin, digging up just 623m tonnes by 2020 to leave India facing a 252m-tonne supply gap to be filled by expensive imports.
"It is a very tough target, no doubt about it, but all of us will have to become tougher and get going," Mr Bhattacharya says of his business, which has a market capitalisation of around $38bn, making it India's seventh most valuable company.
The group will adopt a "big mine" approach, he says, amalgamating less efficient operations. Improved mining technologies could boost output at underground mines, he adds, which employ most of Coal India's giant workforce but produce less than 10 per cent of its output.
However, Mr Bhattacharya, who was appointed in December, refuses to be drawn on whether India should open its coal sector to greater competition — a step many industry observers see as critical to long-term production increases.
Commercial mining is banned in India, which permits private sector companies only to extract coal to supply their own industrial facilities, not for sale on the open market.
But Mr Modi's government last week passed legislation that could begin to open up the sector, potentially opening the door for global miners such as Rio Tinto and BHP Billiton to compete with Coal India in future.
"This is an issue for the government; we can only focus on Coal India," Mr Bhattacharya says. "The country needs more [coal], so we will have to produce more . . . We have been thinking big, so now we have to act big."
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