India’s stampede into Australian coal has been a remarkable development over the past year for a number of reasons, including:

• The prices offered by Indian coal producers and power generators being so attractive that everyone else, including Chinese rivals, have been pushed aside.
• The proposed carbon tax, which is expected to cut the value of coal assets, seemingly being ignored by Indian buyers as they toss money around.
• Those concerns about lower future coal prices, and high asset-value expectations, appearing to help derail the latest attempt by Clive Palmer to float his Resourcehouse group.
• A high-priced deal in Western Australia involving an Indian company starting to run off the rails, and possibly serving as a warning about some buyers not understanding how business is done in Australia.

That cocktail of issues can seem disconnected. They’re not, because taken together they are part of a troubled outlook for Australian coal, with higher taxes the most obvious problem but with buyers who have paid too much for assets potentially causing as much grief.

But before considering the Indian invasion, the latest on tax, because it now seems a certainty that coal will cop the double whammy of a minerals resource rent tax and a carbon tax.

That seems clear after the Australian government dismissed objections from the coal industry about the carbon tax being applied, despite claims that it will put local miners at a disadvantage with overseas competitors.

The Australian Coal Association complained bitterly, only to have its objections fall on deaf ears, perhaps confirming that the carbon tax is as much about the government needing to raise additional revenue as it is about the environment.

For Palmer, who has struggled to successfully market Resourcehouse for much of the past year, the prospect of two new taxes was probably the killer for his latest attempt to float the business.

His next step is to try and use debt from Chinese banks to develop coal and iron ore mines, a move which sent a shudder down Hogsback’ spine because he has always seen debt and mining having the same mixing ability as oil and water.

In a boom, the two can co-exist. In an environment of rising taxes, global economic uncertainty, and a whiff of rising interest rates everywhere thanks to fear about a severe outbreak of inflation, however, it might not be the best time to go too deeply into debt.

Despite the failure to float Resourcehouse, and despite the double tax threat, the Indians keep on coming – but whether they’re walking into a trap is an interesting question, with an even more interesting one being how they will extricate themselves if they are paying too much.

Some of the recent Indian deals include:

• Adani buying assets from Linc Energy, and then topping up with a deal to buy the Abbot Point export terminal.
• GVK talking with Hancock Prospecting about buying two proposed Queensland coal mines, and
• Lanco Infratech buying coal assets from the failed Griffin Coal in WA, and holding its hand up for additional WA coal assets being sold by Wesfarmers.

Interestingly, Australia is not the only target of Indian coal buyers. Over the past year Indian companies have blasted all rivals out of the way to acquire coal assets, spending an estimated $2.4 billion on acquisitions (about 15% of global coal deals) as well as rushing to the top of Indonesia’s list of coal customers.

But, and this is the big but: are Indian companies overpaying in their rush to acquire assets?

And if so, what can they do to rectify the problems they are creating for themselves?

Well, in WA a glimpse of the future might be on display in the way Lanco Infratech, which paid $830 million for coal assets from the failed Griffin group, is reported to be demanding a sharply higher coal price from local power station customers.

The latest claim is that Lanco wants to double the domestic price, because that’s what it might get for WA’s low-grade coal on the export market.

The WA Government has weighed into the deal, warning Lanco about its coal-supply obligations under a state agreement, while a separate deal to sell Griffin’s Bluewaters power station is in doubt because of the coal-price demand.

Now for the big question: Did Lanco know what it would get for its $830 million, or did it always plan to try and double the coal price to justify the cost of the acquisition?

That’s a question which touches on something Hogsback has seen repeated over many years – asset buyers over-paying because they are in a rush and then trying to sort problems out later.