India to Build $3 Billion Steel Plant in Indonesia, Buy Coal, Misra Says

India plans to invest $3 billion to build a steel plant in Indonesia and buy coal from the Southeast Asian nation as part of an initial accord. 

International Coal Ventures Ltd., combining Indian state- run metal and energy companies, will sign an agreement for the plant, which will start with a capacity of 3 million metric tons, Steel Secretary P.K. Misra said today in an interview before the signing ceremony in New Delhi. Indonesia will supply coal to the plant and to the power producers in the group, he said. 

Indonesia expects its $540 billion economy to grow at 7.7 percent by 2014, President Susilo Bambang Yudhoyono told reporters in New Delhi today. Gross domestic product expanded 5.82 percent in the three months ended Sept. 30 compared with a 6.19 percent growth in the quarter ended June 30. 

Indian companies are seeking coal mines overseas to secure raw material supplies for making steel and generating power as international costs increase and the nation grows at over 8.5 percent. Reliance Power Ltd. and the Essar Group are among companies that have bought mines in Indonesia to feed their power stations in India. 

Yudhoyono today began a three-day visit to India and signed $15.1 billion worth of deals in areas including mining, infrastructure and manufacturing. Yudhoyono will be the chief guest at India’s Republic Day celebrations tomorrow. 

The proposed plant, to be located in East Kalimantan, may have a final capacity of 7 million tons, Misra said, without giving a timeframe. 

Surging Coal Demand

India’s coal demand may more than triple in the next two decades as Asia’s second-fastest growing major economy seeks the fuel to generate electricity and run steel, cement plants, Coal Minister Sriprakash Jaiswal said Sept. 24. 

India’s government pledged to provide electricity nationwide by 2012 and needs to increase installed generation capacity to 200,000 megawatts to sustain economic growth, according to the power ministry. More than half of the country’s current capacity of 169,749 megawatts is fueled by coal, increasing demand and forcing companies to seek supplies from overseas. 

Coal India Ltd., the world’s biggest producer, and Steel Authority of India Ltd., the nation’s second-biggest steelmaker, each hold about 28 percent of International Coal Ventures. NTPC Ltd., India’s largest power generator, NMDC Ltd., its top iron- ore producer, and steelmaker Rashtriya Ispat Nigam Ltd. own about 14 percent each. 

International Coal Ventures may also decide this week to bid for Riversdale Mining Ltd., rivaling a A$3.9 billion ($3.9 billion) offer from Rio Tinto Group, Chairman C.S. Verma said Jan. 22. 

Aries Mines

Essar Group agreed to buy the Aries coal mines, which hold as much as 100 million metric tons of the power-station fuel, in Indonesia in March. Tata Power Ltd., India’s largest non-state electricity generator, agreed to pay $1.3 billion in March 2007 to buy a 30 percent stake in two Indonesian coal mines owned by PT Bumi Resources. GMR Group said it bought Indonesia coal mining company PT Barasentosa Lestari in February 2009. 

Reliance Power, controlled by billionaire Anil Ambani, may invest $5 billion to build a railway and develop coal mines in South Sumatra, Yopie Hidayat, a spokesman to Indonesia’s Vice President Boediono, said in Jakarta Aug. 24. The company in June bought three coal mines in Indonesia. Source: Bloomberg