The companies include Rio Tinto, Anglo Coal, BHP, Shell (South Africa), and Enviro Coal (Indonesia), most of which already supply coking coal to the steel industry. India is an attractive market given its massive power generation requirements.

The Hindu said none of the companies presently have direct supply contracts with any of the power utilities but long term supply arrangements of 15 to 30 year duration are on the table.

Another factor driving interest is that domestic coal in India is becoming more expensive. Monopoly supplier Coal India recently put up prices for its coal by 17% bringing costs for thermal coal for power stations close to about Rs 1,800 a tonne.

This price increase has blurred the price distinction between international and domestic coal resulting in an effective price that translates to about $41 per tonne. International prices, on a CIF (cost insurance and freight) basis are in the region of about $75 a tonne. Customs duty on imported coal is currently 5% and was in the form of countervailing duties.

While domestic coal appears cheaper, coal delivered by international suppliers has a calorific value of about 6200 kilocalories per kg, over double that of domestic thermal coal. Imported coal also has considerably less ash and sulphur than local coal.

This would mean that less of imported coal was required for power generation. For instance, presently the estimated requirement for a 500-mw thermal plant is about 15 lakh tonnes per annum for operating at 80% plant load factor. If imported coal were used, the requirement would be about 8 lakh tonnes, the newspaper said.