Opinion Strategic imports need foreign policy support
The PMs Economic Advisory Council chairman C Rangarajan has specifically mentioned coal,along with oil and gold,as the major areas of worry for the current account deficit
The PMs Economic Advisory Council chairman C Rangarajan has specifically mentioned coal,along with oil and gold,as the major areas of worry for the current account deficit. Especially coal,considering that imports of the fuel have jumped over 40 per cent over the last two years.
Along with the concerns that increasing coal imports pose for the deficit,there are vagaries of pricing. Especially in the wake of the lessons learnt from Indonesia,from where India imports much of its coal. In 2010,Indonesia decided to annually benchmark all coal exports to international market price and also announced the levy of higher royalty and income tax on these exports,adversely affecting the operationalisation of close to 20,000 MW of power projects in India. In FY13 Indonesia accounted for about 80 per cent of all thermal coal imports into India,of which over 90 per cent were by private generators. Much of the uncertainty witnessed in the countrys power sector can be attributed to the decision by Indonesia to change the rules of the game in its coal sector three years back.
There can be a view that power projects awarded to private generators through global competitive bidding makes it their responsibility to hedge for such risks. But,given the strategic nature of these transactions impinging on the countrys energy security,there seems to be a compelling case for the Government of India to bring such deals under the overarching theme of the countrys strategic diplomacy framework. More so,given the large exposure of Indian commercial interests in Indonesia. India is projected to overtake Japan as the biggest buyer of Indonesian coal. Japan,for instance,has a process of dialogue in place with major trading partners,primarily aimed at leveraging its position as a big-ticket buyer of commodities. In March this year,the fifth Japan-Indonesia coal policy dialogue was held in Tokyo wherein a dialogue on promoting bilateral cooperation,from coal exploration and development to coal utilisation,was inked. Indonesia happens to be Japans second largest supplier of coal after Australia,accounting for 20 per cent of the coal imported by Japan.
In the years ahead,given our infrastructure revamp targets,Indias country-risk exposure in strategic minerals,including coal,oil,and gas,will go up. The increasingly widespread trend of resource nationalisation and change in regulations mean that expropriation risks too are high in these sectors. Leaving the private sector to entirely hedge against these risks,without any support from Indias foreign policy establishment,can be counterproductive.
Anil is a senior editor based in New Delhi.
anil.s@expressindia.com
Share
