The Hindustan Times is reporting that a government investigation in India could put the huge Kentucky-India coal deal in question. This is the $7 billion trade deal that was announced last month to much fanfare. Under the terms of the deal, Abhijeet, an Indian company, contracted with Appalachian operators to receive nine million tons of coal a year for 25 years.
But the Central Bureau of Investigation—India’s equivalent of the FBI—raided 30 cities earlier this week, and according to the article, this has injected uncertainty into the deal.
There are doubts on the Raisina Hill whether the embattled Abhijeet Group will be able to honour its commitment on Kentucky coal import, considering that it was allotted 10 coal linkages and now stands accused of misrepresenting facts and making false claims in applying for blocks in India and later selling stake in an irregular manner.
“As far as we are concerned, the deal will go through as it was planned. We don’t have any information about any worries in the deal from any quarter,” said Abhishek Mathai, deputy manager of communication with Abhijeet Group.
The first-ever long-term coal purchase agreement with the US was celebrated within the India-US diplomatic and business circles, but there are few red faces today as the allotment scandal could generate a negative sentiment for Indian companies in the US.
Government sources said while it was for Abhijeet Group to inform FJS Energy about the CBI investigations, the involvement of the power and steel group in the controversy had been taken note of by the US government through its mission in Delhi.
If the deal falls through, it could potentially pave the way for other coal export deals for Appalachian coal producers. But this contract was one of the few bright spots on the horizon for Kentucky’s coal industry, as market forces, competitive natural gas and stricter environmental controls cause less demand for coal.