Source: The Hindu BusinessLine
Australia can supply India cleaner thermal coal, as well as equipment and technology for India’s mining sector
In 1964 Donald Horne published his bestseller The Lucky Country. It was not an ode to Australia, it was an assault on mediocrity and complacency. Australia’s prosperity, Horne argued, came from its natural bounty and its Commonwealth ties, not from its leaders.
Abound it certainly does: Australia has the world’s largest economically proven deposits of iron ore, gold, nickel, and uranium, and is in the world’s top five for coal, copper, tin and lithium.
Australia got lucky again when the resources boom began at the start of this century. Luck, though, is what you make of it. The cold hard truth of bringing goods to market must be confronted. Horne’s error was to think that this was easy, something that could be done by second-rate leaders. That is not right. Australia has shown that its mining sector is, in fact, world leading.
It has the infrastructure, the transport and logistics, the technology and the skills to consistently deliver — and grow. In 2000, Australia produced 155 million tonnes of iron ore. We forecast that Australia will produce over 900 million tonnes of iron ore this year, on the back of a huge increase in investment in new mines, in research and development, and in digital technologies. Remarkably, it will do so at a cost per tonne lower than in 2000. Australia may not produce much steel, but a huge fraction of the world’s steel is elementally Australian.
India is poised on the edge of greatness. It has gone past Japan to become the world’s third largest economy. If it can lift its poorest out of poverty the way China has, India could become the largest. But it will need material resources to realise this promise, and it is unlikely to be able to do this on its own.
India has more than enough thermal coal reserves to meet its own needs. But it struggles to do so. This year it will import over 160 million tonnes, despite the government’s goal of self-sufficiency. From next year India is also set to become a net importer of iron ore as its demand for steel is about to escalate and will outstrip growth in domestic supply of iron ore.
Australia can be a steady partner. Peter Varghese, former High Commissioner to India, recently set out a detailed Indian Economic Strategy to 2035 for the Australian government. Its goals are ambitious: to lift India into the top three export markets for Australian goods and services, to make India a significant destination for Australian investors and, above all, to cement the Australia-India relationship as a strategic partnership. It identifies 10 sectors and 10 Indian States where opportunities exist for greater economic cooperation.
In the mining and energy sectors there are four major opportunities to seize.
First, most evidently, Australia has plentiful material resources to supply. It is already the major supplier of coking coal to India. These resources can underpin the Make in India strategy.
Second, India’s energy demand is set to skyrocket. Australia can provide coal, gas and uranium, as well as its expertise in deploying renewable energy. On any plausible scenario of India’s future energy demand and mix, thermal coal consumption will increase considerably. What is at issue is by how much and the extent to which imports will be needed. Australian thermal coal has higher energy content than domestic coal in India and imported coal from Indonesia and South Africa. That means less pollution for any given amount of energy generated, a major issue for residents of New Delhi.
Third, Australia has an advanced mining equipment and technology services sector. India needs to dramatically improve its mine efficiency, health and safety performance and environmental management, all areas in which Australian companies have deep expertise: like GroundProbe which uses radar to detect unstable slopes in open-pit mines as it is doing with Coal India Ltd.
Fourth, Australian universities and researchers are a leading source of Australia’s comparative advantage in mining. They can work with Indian mining companies to train their workforces and deepen their skills and solve applied problems. The Australia-India Mining Partnership at the Indian School of Mines provides a good template.
Australia is well-placed, willing and able to work with India to navigate its growth challenges in the decades to come.