Indian coal supply gap may widen after state-owned CIL exits foreign acquisition vehicle

India could have trouble closing a shortfall in the supply of coal, after the world's largest coal company pulled out of a consortium to help India buy overseas coal reserves, The Economic Times reports.

The news site reports that the board of state-owned Coal India Limited (CIL) decided on Friday to exit ICVL, a joint venture between Indian companies SAIL, CIL, RINL, NTPC and NMDC incorporated in 2009 to source coking coal and thermal coal assets:

"Coal India (CIL) board agreed to walk out of ICVL. The board felt that it was not advantageous for Coal India to be part of the consortium. Rather, the venture on the part of CIL involved financial burden without commensurate advantage," a source close to the development said.

The pullout comes amid a growing shortfall of coal in India, says The Economic Times, quoting an official document:

The gap in the demand and supply of coal widened to 161.5 MT last fiscal. In 2010-11, the shortfall of coal was about 132.8 MT, while in 2009-10 it was 90.5 MT.

In related news, The Wall Street Journal reported earlier this week that India's hunt for foreign mines is not going well.

WSJ says Indian mining companies looking to make overseas acquisitions are running into difficulties:

Among the major disappointments is the inability of a consortium set up by five large state-run companies to buy coal mines overseas.

Private sector companies have fared no better in their bid to acquire overseas mines.

Resource nationalism, on the rise in mineral-rich developing countries, is a major roadblock.

India needs raw materials to manufacture goods and to power factories, but is restricted in what it can mine domestically. It can take a mining company years to acquire a mining licence, and illegal mining of iron ore, limestone and bauxite has damaged the environment and given mining a bad name. Last year, for example, iron ore mining was banned in the state of Karnataka to prevent further environmental destruction. The government's system of allocating mines is also rife with corruption.