India’s Jindal Steel mothballs $10bn coal project

Decision could aggravate the country’s critical power shortage.

Jindal Steel and Power is mothballing its $10 billion coal-to-diesel project in the wake of India’s Supreme Court decision of cancelling hundreds of coal-mining licenses in Asia’s third-largest economy.

In September, the country’s highest court said control over almost all coal blocks allotted since 1993 will have to be returned because they were granted “illegally.” The decision followed an August ruling that determined issuance of the licenses was arbitrary and no-transparent.

According to Reuters, Jindal Steel’s announcement makes it the first big casualty of the coal licences cancellation and could aggravate a critical power shortage in the country, which generated around 70% of its electricity by burning coal:

Naveen Jindal, the chairman of the company and youngest son of its founder, O.P. Jindal, said it seemed the government was not keen to support his plan of converting low-quality coal to 80,000 barrels per day of diesel. India is a big importer of crude oil that is refined to make diesel and petrol.

“The project was specifically to meet the strategic needs of the country,” Jindal said on Monday in an interview at his Delhi residence. “(But) the government does not seem to be interested. If there is no coal block, how can the project go ahead?”

So far Jindal has had nine of its coal fields withdrawn as a result of the court verdict. India is the world’s third-largest producer of coal, behind China and the U.S. Yet it relies heavily on imports because of mismanagement and an onerous bureaucracy in coal exploration, production and power generation. As a result, nearly a quarter of India’s 1.2 billion people have no electricity, according to the World Bank.

Image by JT_Palmer|Flickr Commons.