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Coal India May Turn Importer Of Coal

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[In a bid to meet the obligations of supplying a minimum assured quantity of coal to power producers under the Presidential directive, Coal India may resort to imports, its Chairman and Managing Director designate S Narsing Rao said on Friday. "We have to see how much we can increase production to meet the commitment. CIL will do the imports if it is inevitable," Rao, who is currently heading state-run Singareni Collieries said. The company had earlier said it was not in the business of importing coal. The government on April 3 issued a Presidential directive to the Maharatna PSU to sign fuel supply agreements (FSAs) with the power producers assuring them of at least 80 per cent of the committed coal delivery in face of strong protest from independent directors on the Coal India board. The directive came in the wake of Coal India failing to meet the deadline of March 31, set by the Prime Minister's Office for CIL to enter into FSAs with power producers for minimum assured supply. However, even a Presidential directive is unlikely to relieve domestic coal shortages in the near-term, as was pointed out by ratings agency Fitch on April 4. "The FSAs signed under this directive will initially have little effect on domestic coal supply as the reasons for lower output, including infrastructure bottlenecks, lack of environmental clearances, problems in land acquisition, high rainfall and labour, need long-term solutions." "Over the long-term, we believe FSAs signed under the directive could help overcome some of the bottlenecks and improve the long-term availability of coal," the agency said. When asked about the options of imports following PMO's directives to ink FSAs, CIL's acting Chairperson Zohra Chatterji in February had said, "We are not in the business of importing coal...it is one of the ways to meet the demand theoretically." Rao, who is due to take the charge of the company shortly, said the PSU would weigh various options of importing coal that will include direct imports, if required. "Coal India may import directly. At the same time there are public sector undertaking like MMTC which are there for a long time in the business. They have expertise...All options we should see if that (import) is inevitable...," Rao said. Asked, how, he views the Presidential directive at a time when the company is battling on various fronts including delays in regulatory clearances, Rao said, "It is a very logical directive. They are only saying that supply more coal." Rao, who was handed over the appointment letter for Coal India's top post on April 4, added that apart from imports, the company may also think of diverting coal meant for e-auction to power firms. The Rs 50,000 crore PSU is the largest domestic producer of dry-fuel and recorded an output of 435.84 million tonnes (MT) of coal in the just-concluded fiscal, missing its revised target of 447 MT. It's production is almost stagnant for the last three years as the company says it is battling to get various regulatory clearances for expansion to augment production. India's non-coking coal production grew by a mere 13 MT over FY09-FY11, sufficient to fire only 2.3 GW of coal capacity, whereas over the same period thermal capacity addition was nearly 16 GW. "We believe coal will remain the dominant fuel for the Indian power sector due to lower-than-expected gas production from existing fields and no new major gas discoveries," the rating agency observed. The Indian power sector received strong investor interest during 2008-2010 and this Presidential directive is part of the Government's efforts to save that investment from going bad, it noted. "Although improvements in coal supply over the medium to long-term could help save investments that were recently completed or are in the pipeline, fresh investments in the coal-fired power generation sector are likely to remain subdued," the rating agency added.