India tries to keep lights on with Kentucky coal in $7 bn deal

New York: This private sector coal purchase agreement could be a boon for India which suffered a super blackout in July,highlighting that India needs to focus on grids and fill an acute coal shortage. India's Abhijeet Group is importing 9 million tons of coal a year from Kentucky and West Virginia.

Anand Kumar, executive director of the Abhijeet Group touted the 25-year, $7 billion agreement between his company and Kentucky-based Booth Energy Group and River Trading Co, as a means of providing Indian thermal power producers with a reliable fuel source.

"The import of coal will help us meet India's increasing demand for energy and steel," Kumar said in a statement released on Wednesday.

"This partnership is an example of the strong potential between American producers and Indian customers," he added.

Some 600 million people lost electricity across India on 30 July when three regional grids collapsed. India just hasn't been able to generate sufficient power because of the shortage of fuel, particularly coal. Roughly 70 percent of India's electricity comes from coal-fired power. Despite having one of the largest global coal reserves, India's power plants are crippled by acute shortages and operate at 70-80 percent of their top capacity. They import coal mostly from Australia, Indonesia and South Africa to meet surging demand.

 India tries to keep lights on with Kentucky coal in  bn deal

India's Abhijeet Group is importing 9 million tons of coal a year from Kentucky and West Virginia. Representational Image.Reuters

The $7 billion deal with the Abhijeet Group for supplying 9 millions tons of coal a year over 25 years has given a new lease of life to Kentucky coal miners. Kentucky, which is the third largest coal producing US state, has been searching for foreign customers as the US moves away from coal-fired power plants. Overall, only 40 percent of American power generation is now coal-based.

Governor Steve Beshear, is so thrilled by the deal that he plans to visit India "shortly." He hailed the deal as "good news" for US coal miners who have lost their jobs because of a decline in US coal sales.

"It's no secret that the coal industry is in a state of flux, what with erratic market conditions, the uncertain regulatory atmosphere and the ever-changing energy picture," Beshear told Associated Press.

"This creates challenges in Kentucky where mining has been a huge source of jobs and a pillar of our state economy."

The first shipment of Kentucky coal will arrive next month at Kandla port in Gujarat and the Abhijeet Group is expecting monthly shipments initially.

Environmental opposition to the deal

Governor Beshear may be thrilled but clean energy advocates want to block coal exports to India and China. They say they don't want the two energy-hungry countries to contribute to global warming using American coal. They suggest India invest in renewable sources, because coal-generated power causes greenhouse gas emissions and uses a lot of water, which is in short supply.

Coal expert Justin Guay, the Washington Representative of the Sierra Club International Climate Program said India's big power blackout in July exposed the failure of having a coal-fired grid. He said India's over dependence on coal was not helpful in meeting peak power shortages.

"Coal operates at a steady output 24 hours a day - it's baseload," Guay told The Christian Science Monitor. "But coal can't be ramped up quickly to accommodate quick peak surges in demand."

He told the magazine that solar energy, improved efficiency, and natural gas are much more plausible solutions for ramping up and delivering energy when India needs it - at peak times, such as when millions flip on their air conditioners.

There is little doubt that India's own race to tap coal resources willy-nilly is causing massive deforestation and water contamination in coal-rich Indian states like Meghalaya and Jharkhand.

Updated Date: Dec 20, 2014 11:16:39 IST