Australia approves outback rail plan for Adani coal mine

SYDNEY (Reuters) - Adani Mining on Thursday took a step closer to the development of a A$2.2 billion ($1.94 billion) coal mining project in Australia after the federal government approved construction of a rail haulage line.

The Australian unit of Adani Enterprises (ADEL.NS) needed the approval of Environment Minister Greg Hunt to proceed with the 300-km (186-mile) line, after last month gaining clearance from the state of Queensland.

Known as the North Galilee Basin Rail project, it is being designed to connect collieries owned by Adani and potentially other developers in the largely unpopulated Galilee Basin to the east coast port of Abbot Point.

Despite analyst views that Adani's project would be unprofitable at current coal prices, the company remains committed to pushing ahead with it to supply power stations in India.

India is home to the world's fifth-largest coal reserves but still needs to resort to imports as state-owned Coal India (COAL.NS), which accounts for about 80 percent of the country's output, frequently falls short of its output target.

"Today's approval is a significant milestone in the life of our integrated mine, rail and port project, helping transition from approvals to the build phase," said Jeyakumar Janakaraj, Adani Mining chief executive.

Environmental groups have protested against Adani and Indian company GVK Hancock (GVKP.NS) developing mines in the Galilee Basin as it could require dumping sand within the boundaries of the Great Barrier Reef to allow for the expansion of a nearby coal port.

Earlier this month, Adani and GVK Hancock agreed to resubmit proposals offering alternative dumping sites on land.

(1 US dollar = 1.1339 Australian dollar)

(Reporting by James Regan; Editing by Joseph Radford)