India's quest for foreign coal looks here to stay

That explains why Indian firms like Aditya Birla Group, which is considering a bid for Australia's $5 billion New Hope, are gobbling up overseas acquisitions.

Business argues government is to blame. Last year the former environment minister declared a third of coal reserves no-go areas. The policy has since been reversed, but regulatory clearances for new mining projects remain hard to come by. Coal India, supplier of 80 percent of the country's coal, may miss its supply targets for the current year. Power stations are running low on stock. The coal ministry projects a supply shortfall of up to 30 percent of its 2012 target.

While the industry is right to push for a resolution, the government has two legitimate concerns. First, coal reserves are predominantly located in densely-forested areas. Second, these areas are often inhabited by poor tribal communities. A new mining bill, which is yet to be passed in parliament, proposes firms share 26 percent of their earnings with the tribal communities they displace. That helps deal with the latter problem. But the government must still come up with a better environmental policy to replace the short-lived no go areas.

In the meantime, Indian companies are looking abroad. Even excluding Birla's interest in New Hope, groups have spent $10 billion this year on foreign mines. Though the quality

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