A labourer unloads coal from a supply truck at a yard on the outskirts of Ahmedabad August 21, 2013. REUTERS/Amit Dave/Files

By Krishna N. Das and Sonali Paul

NEW DELHI/MELBOURNE (Reuters) - India's plans to attract badly needed foreign investment and technology to its coal sector are getting a cool response from some miners and trading houses, even though the country is one of the few bright spots for global coal demand.

Seeking to curb a growing reliance on imports, Prime Minister Narendra Modi passed an order in December to allow private firms to mine and sell coal for the first time in more than 42 years.

But even with India on track to overtake the United States as the second-largest coal consumer after China this decade, executives at Japanese trading houses and some of the biggest global miners said they were currently not looking to invest.

Red tape, problems with land and environmental approvals, and the quality of its coal have been cited as issues deterring investment, while on top of this Asian coal prices are languishing near six-year lows.

Despite huge coal reserves, India's failure to modernise mining means it has become the world's third-biggest importer, shipping in coal from countries such as Australia and Indonesia.

Asked about progress attracting investors for auctions that may start later this year, Coal Secretary Anil Swarup told Reuters talks were going on with several global firms on upgrading mining technology, although nothing had been finalised.

"It is not just about mining on their own but also to provide technology to Coal India and Indian companies," he said.

Up to now only state firms have been allowed to mine coal, but the sector is being opened up to help meet surging demand for coal for power.

Indian conglomerates such as the Adani Group and GVK are expected to bid for coal blocks, but foreign firms will be harder to attract after previously facing obstacles to investing.

For example, global miner Rio Tinto has had to wait more than a decade to secure approvals to start mining iron ore in India.

Japanese trading firms have recently been increasing investments in coal, but executives at two firms said they did not intend to invest in India.

"We have no plan to consider joining coal mine projects in India even (as) it opens up, as there are other countries which we are focusing on and where it is easier to manage projects," said an official at a trading firm, declining to be identified.

Another senior executive at a rival firm said the quality of coal in India was not very high and the firm preferred to sell coal to the country rather than join in projects.

Among global miners, a spokesman for BHP Billiton, the world's biggest coking coal producer, declined to comment on India specifically but pointed to recent management statements that the miner planned no new coal investments.

Anglo American was also unlikely to be interested since it is focusing on divesting South African coal assets, said a source familiar with the miner's plans.

Rio Tinto Chief Executive Sam Walsh said the firm had not looked at Indian coal investments yet but was open to opportunities, while Peabody Energy said it would "evaluate investments to serve India's rising coal needs as appropriate".

India wants to more than double coal output to 1.5 billion tonnes by 2020, but its mining is deeply inefficient. Coal India, the world's largest coal miner, produces 1,100 tonnes of coal per employee a year, compared with 36,700 tonnes for Peabody Energy and 12,700 tonnes for China's Shenhua Energy.

Despite the lack of foreign interest in mining coal, both local and overseas investors flocked to a 10 percent stake sale of state-run Coal India that raised about $3.6 billion. However, this interest may also indicate how government firms will continue to have an edge in navigating India's maze of clearances.

(Additional reporting by Silvia Antonioli in LONDON, Yuka Obayashi in TOKYO and Nidhi Verma in NEW DELHI; Editing by Ed Davies; Editing by Henning Gloystein and Ed Davies)