Even as the great Australian rush seems to be catching up around the globe, it has evoked strong interest among Indian companies. Scouting for coal and mineral assets is now the favourite past time of major Indian entities, which are impressed with no roadblocks or red tape approach in doing business in that country.
In the recent past, two Indian companies have made major acquisitions there. Adani Enterprises purchased Linc Energy's Galilee coal tenements for $2.7 billion in August last year. Second, power producer Lanco Infratech had recently acquired Griffin coal assets for $750 million. Three other major Indian groups — Essar, GVK and Lanco — are bidding for $2-billion coal mines put up for sale by Hancock Coal. “India is now in league of nations such as Japan, South Korea and the U.S. which have been traditional investors in Australia. The ease of doing business in Australia is the most attractive factor. The whole framework is very open and transparent without any bureaucratic hassles. Our application to the Foreign Investment Review Board was cleared in 30-45 days,” a senior official of a power company said.
It takes just two days to register a company in Australia, and most of the work can be done through e-mail. With an annual production in excess of 800 million tonnes, Australia is the world's largest exporter of coal. New coal areas such as the Galilee Basin in Queensland and the Gunnedah Basin in New South Wales provide opportunities for Indian companies willing to fund infrastructure developments as part of a partnership agreement. The country is well on the path of dethroning Indonesia as the favourite destination for coal hunting.
Once the most favourite destination of Indian companies, Indonesia is now falling behind due to certain changes made in the law last year. Tata Power, which is at present developing imported coal-based 4,000 MW ultra mega power project (UMPP) at Mundra, acquired 30 per cent stake in two coal mines of Bumi Resources for $1.1 billion in 2007. The very next year, Reliance Power bought three coal mines in South Sumatra region with an investment commitment of $2 billion. In 2009, GMR acquired Indonesian coal company Barasentosa Lestari for around $80 million.
However, things changed after Indonesia tightened its mining policy with regard to coal exports imposing regular tax of around 30 per cent on exports and surcharge on profits. These laws, formulated by the end of 2009 and effective since 2010, also have made it tougher to own mines. Under the new laws, companies that acquire mines cannot employ a turnkey contract miner, because it is required that they are involved in some part of the value chain. Besides, companies now require clearance from municipal authorities along with the Federal government, making the process lengthier.
The Australian grade coal, especially thermal coal, has an average calorific value of 6,500 KCals.
India is now in league of nations which have been traditional investors in Australia