“We are looking for a 50:50 JV with the partner,” he added. CIL had mooted the 1,600-MW coal-based power plant to utilise the coal from Vasundhara coalfields in Orissa. “If we want to raise production, there must also be consumption. We are planning for more thermal power plants at coalfields where there is inadequate evacuation infrastructure,” Jha said.

He said there were two more such locations where power projects could come up, one in Bandraigarh in Chatttisgarh and the other in North Karanpura in Jharkhand. At present, CIL tries to evacuate coal by selling it through e-auction and already has permission to sell 20% of the coal from these locations through the auction route.

Coal sold via auction is evacuated by buyers via road. Asked about coal supply to power plants, Jha said the supply to the sector is more than 80%, or 1 million tonne, a day. “We have already signed a fuel supply agreement for 600 million tonne and from availability of 250 million tonne, so how can we supply?” Jha said.

Remaining coal has to be imported. Either they import or we can import if there is firm commitment, he said. CIL had already mooted a new JV company with the Shipping Corporation of India for imported coal supply to consumers.

Meanwhile, CIL has expressed dissatisfaction with the progress of coal washeries projects due to delay in getting environmental clearances.
Agencies

“It all depends. If it is financially viable, then why not?” Coal Secretary Alok Perti told reporters when asked if companies under the ministry were open to buying stakes in other PSUs.

The secretary, however, categorically denied receiving any communication so far in this regard from his counterpart in the Finance Ministry. At the same time, he added that the Finance Ministry had recently sought to know the cash surpluses with Coal India and Neyveli Lignite.

While Perti sought to downplay the motive of the enquiry of the Finance Ministry, claiming ignorance, sources said the move might be aimed at meeting the government’s Rs 40,000 crore PSU disinvestment target for the fiscal.

The government’s disinvestment target for this fiscal has gone haywire on account of the precarious market conditions. Against the target, it has only been able to generate about Rs 1,150 crore so far this fiscal. It was also reported that the government might look at the “buy-back” option for meeting its disinvestment target for the current fiscal.

“I have not heard anything on buy-back of shares,” Perti said, indicating that the government might not consider that option, as of now.
Agencies

Business argues government is to blame. Last year the former environment minister declared a third of coal reserves “no-go” areas. The policy has since been reversed, but regulatory clearances for new mining projects remain hard to come by. Coal India, supplier of 80 percent of the country’s coal, may miss its supply targets for the current year. Power stations are running low on stock. The coal ministry projects a supply shortfall of up to 30 percent of its 2012 target.

While the industry is right to push for a resolution, the government has two legitimate concerns. First, coal reserves are predominantly located in densely-forested areas. Second, these areas are often inhabited by poor tribal communities. A new mining bill, which is yet to be passed in parliament, proposes firms share 26 percent of their earnings with the tribal communities they displace. That helps deal with the latter problem. But the government must still come up with a better environmental policy to replace the short-lived “no go” areas.

In the meantime, Indian companies are looking abroad. Even excluding Birla’s interest in New Hope, groups have spent US $10 billion this year on foreign mines. Though the quality of imported coal is better, it costs three times as much as the domestic variety. When the difference in quality is factored in, it is still 45 percent cheaper to use Indian coal to generate electricity. The more India relies on imports, the higher its electricity costs — though that is still preferable to power shortages.

However, even if India can resolve its environmental issues it is not likely the country would fully reverse the trend towards coal imports. While domestic supply may look cheap, new sources of coal are buried deeper underground, and speculative reserves require further exploration. Bringing new domestic supply on stream will still drive up prices. India’s overseas coal-buying spree looks set to continue.

CONTEXT NEWS
– Aditya Birla Group is considering bidding for Australia’s New Hope Corp, a US $5 billion coal miner that put itself up for auction last month.

– Coal India, which supplies 80 per cent of the country’s coal, may miss its supply targets for the current fiscal year.

– Coal India’s chairman said: “Last year we had zero percent growth. This year we’re in a negative growth. We’re not getting blocks, we’re not getting clearances.”

– India’s coal ministry has promised more coal to existing power plants, but according to a report by the Press Trust of India on 27 Oct. around 33 power plants currently have coal supplies that can keep them running for just four days. Power plants usually stock around 10-15 days of coal.

– Indian firms have already spent over US $10 billion this year to acquire coal mines overseas. Adani paid US $2.72 billion for Linc Energy’s Australian mines. Reliance acquired three mines in Indonesia and GVK spent US $1.26 billion on three Australian coal mines.

– Reports in the Indian media suggested that the Indian government’s group of ministers on coal had reached a compromise which would ease current policy embargoing coal mining in so-called “no-go” areas.
(Jeff Glekin, the author is a Reuters Breakingviews columnist. The opinions expressed are his own)

“The Ministry of Coal is regularly reviewing the coal stock position with the power plants of the country and government coal companies have been directed to give the highest priority to coal dispatches for the power sector,” an official statement said.

In a bid to improve the stocks position at power stations, a total of 141 rakes carrying coal were dispatched to various units on October 30, it said. “In addition to that, seven rakes and another 1,88,000 tonnes of coal were dispatched through the MGR (Merry-Go-Round transport mode, an exclusive arrangement made by the power stations themselves) to the power stations,” it added.

In October, the railway load dispatched daily from CIL sources was 157 rakes, out of which 128 rakes were destined for power stations. As per data released by Central Electricity Authority (CEA), 33 power plants with a total generation capacity of 39,054 Mw across the country were facing an acute fuel shortage and had coal stocks for less than four days on October 28.

Power plants usually maintain 10-15 days of coal stocks. The situation is considered critical if the reserves fall below seven days’ generation requirement. The Coal Ministry said, “The stock position in the power stations of northern India has also been continuously reviewed. The average loading to these stations during the current month has been 44 rakes per day.”

On October 30, a total of 51 rakes were dispatched, out of which 24 rakes were sent to the power stations of Uttar Pradesh alone. While three rakes were dispatched to the Unchahar plant, the Dadri project was sent 10 rakes. In addition, the thermal power station at Faridabad was sent 10 rakes and the Panipat plant four rakes.

During the last three days, 166 rakes have been dispatched to power stations in northern India. Regular coal supply is being maintained to power plants in Andhra Pradesh as well. The Coal Ministry has attributed the shortage of coal to a number of factors, including lower production by Coal India on account of heavy rains in August-September and a strike at Singareni Collieries Company (SCCL), which has been called off.

Regular coal supply from SCCL has been restored, the ministry said last week, adding that it will take some more time for these plants to build up their coal stocks.
Agencies

NMDC Board will meet this week before submitting the bid, the source said, adding, “it will be a low cost acquisition and NMDC is eying to acquire 100 per cent stake in Vincy Coal.”  The source declined to disclose the bidding amount.

Of late, NMDC has been working on acquiring several “low cost” assets and in September, it had entered into a deal to acquire 50 per cent stake in Australia’s Legacy Iron Ore for little over Rs 90 crore. On October 20, it signed a share subscription agreement with Legacy for the acquisition.

This includes, buying “some properties” of one of the iron ore companies in Australia, the source said, adding that properties of Brazil’s Greystone Mineracao do Brasil and 50 per cent stake in Wonarah phosphate deposits of Australia’s Minemakers are also on NMDC’s radar. However, the Indian mining major has sought some more information from Greystone before entering into a deal, the source said, declining to comment further.

NMDC has been in talks for the past few months to acquire a substantial stake in Greystone Mineracao from London-based Zamin Advisors, a private company controlled by NRI Pramod Agarwal. The proposed mine area of Greystone is understood to have reserves of 260 million tonne of iron ore.

While for Minemakers’ phosphate deposits in Wonarah, NMDC already has an MoU with the Australian firm for acquiring 50 per cent stake, both the companies are currently engaged in a pre-feasibility study of the deposits. The Indian miner may also repay Minemakers the costs already incurred for Wonarah — the largest undeveloped rock phosphate project in Australia — as and when it enters into the deal for acquiring the stake, according to the source.

“All these are going to be low-cost acquisitions, totalling US $500 million and is aimed to be sealed by the end of this year,” said the source. The NMDC Board had also met on October 10 to decide on the proposals but it could not take a final call as there were “some unanswered issues” related to the acquisitions, the source added.
Agencies

The five biggest unions, which called a nationwide one-day strike on October 10, will continue to push for higher payments, Tapan Sen, general secretary at Centre of Indian Trade Unions, said, without giving a date for the strike. The unions may consider a six-day work-to-rule, said Rajendra Prasad Singh, general secretary at the Indian National Trade Union Congress.

Labor unions globally are stepping up demands for higher wages and improved conditions as record commodity prices swell profits at mining companies, including BHP Billiton Ltd. (BHP) The daylong strike at Coal India caused a production loss of Rs 1.2 billion  and supply shortages at utilities, including state-run NTPC Ltd, the largest power producer, chairman N C Jha has said.

“We’re holding talks with the unions to resolve the matter,” R Mohan Das, director of personnel at CIL, said. “I’m not able to say what the outcome may be.”

Supplies from five units of Coal India that account for about 70 percent of NTPC’s contracted quantity have been affected, the utility said October 12. Heavy monsoon rain and the one-day strike caused reduced deliveries and a 4,000 Mw generation shortfall at eight of NTPC’s stations, Jha said.

Coal India’s profit for the year ended March 31 rose 13 per cent to Rs 108.7 billion. The company plans to use its US US $9.2 billion of cash to increase production and pay more dividends, Jha said in  September.

“When both profit and dividend payout have risen, why are the workers deprived?” Sen said.

Coal India, which produced 431.3 million metric tons of coal in the year ended March 31, or 81 per cent of the nation’s output, plans to increase production by about 5 per cent this year to meet demand from utilities and steelmakers. Production in the first five months ended Aug. 31 fell 6.7 per cent short of a target of 163.5 million tons after heavy rains flooded mines. The gap may have widened, Jha said on Oct. 10.

“The coal situation in the country is critical and I’m sure the company will not invite another stir from the workers,” said Singh, whose union is backed by the Congress party.

Work-to-rule is a situation where workers follow the terms of their contract to the letter and refuse additional duties. The work-to-rule will stall the working of earthmovers, dumpers and shovels, Singh said.
Agencies

Work on the plants has almost ground to a halt while the firms lobby the Indian authorities to be able to pass on the multi-fold rise in coal costs, which were less than US $50 a tonne CIF when deals were done but are now over US $120. “Coal prices are much higher now anyway than they were five years ago because demand is higher and it’s true that Indonesian coal now has to be at minimum prices approved by the government but the real problem was aggressive under-bidding on the tariffs,” said a power producer who asked to remain anonymous.

“Those tariffs of 2.2, 2.3 rupees were always way too low and they have got to rise, it’s the only way,” he added. Bidders had to go in with very low tariffs because the Indian authorities have not forgotten Enron’s Maharashtra coastal plant for which the state paid Enron 4.6 rupees per power unit but collected only 1.89 rupees from customers. India’s coal imports are set to hit 150 million tonnes a year within a few years, a large chunk of which will be low-grade coal for the so-called Ultra Mega Power Projects (UMPPs), most of which are coastal and which would take all or partly imported coal.

India is likely to import around 70 million tonnes in 2011 according to importers. “Four UMPPs are nearly built but halted, ours at Mundra, three of Reliance,” said Amulya Charan, Managing Director of Tata Power Trading Company Limited, who chairs the power producers’ association which represents the developers and is lobbying on their behalf. “We are stuck based on the power and coal contracts which we have but we are lobbying the ministry of power, the procurers, the finance ministry and the Prime Minister – we are actually meeting on a daily basis,” Charan said. “There will be some impact on the rate of coal import growth because of the delays to the UMPPs but I hope there will be a resolution quickly, within four months,” he added. “I’ve told the coal suppliers if you want to increase your imports to India, first the power tariffs must rise,” he said.

“The power is needed urgently already,” Charan said. “I’m in Delhi and there were two hour power cuts across the city yesterday so I’m optimistic,” he said. Other Indian power producers and Indonesian coal suppliers with contracts to supply them were not convinced a swift solution will be found. “There’s no question that India needs the power and while the economy has slowed, the need remains so I’m sure the tariffs will rise to allow the UMPPs to continue but these things take time,” one of Indonesia’s biggest coal exporters to India said. “The coal demand which would come from these UMPPs will be pushed back by anywhere from 6 months to a year, it’ll slow the rate at which imports grow,” he added.
Agencies

However, since it is unable to fill the gap despite that, the state is eyeing power cuts ranging from two to eight hours across the regions and sectors, official sources said. The thermal stations of the Power Generation Corporation of Andhra Pradesh (APGenco) have reported a drop in production by 1,900 Mw, as against the installed capacity of 5,000 Mw due to severe shortage of coal. Officials of APGenco briefed Chief Minister N Kiran Kumar Reddy at a high-level review meeting said that the coal stock position at their thermal stations, which was around 7.7 lakh metric tonnes before the commencement of the strike on September 13, has now come down to 2.61 lakh MT. As the coal stocks would be sufficient hardly for the next five days, the thermal stations are facing the threat of shutting down.

“The thermal stations which can normally deliver 120 million units of power per day, are giving only around 75 MU to 77 MU per day,” the officials explained. Four thermal units, with an installed capacity of 600 Mw, have been taken out for overhaul due to shortage of coal.
Agencies

However, the company did not state how much quantity of coal it will get from Amelia block. “The addition of Amelia will significantly extend coal availability from Essar’s captive blocks for Mahan I from the current estimate of approximately 12 years. Both blocks are within very close proximity to the power project,” it said. The state government has formally notified that Essar Energy and another company, DB Mining Power, will jointly be allocated 40 per cent of the coal from Amelia. The block is being operated by Madhya Pradesh State Mining Corp (MPSMC).

Amelia is estimated to have around 214 million tonnes of coal reserves, according to the Ministry of Coal. The block still requires environmental and other approvals before mining operations can begin.
“Essar Energy will be supplied with its entitlement of coal from Amelia by MPSMC under a long term linkage arrangement once a Fuel Supply Agreement has been signed,” the statement said.

It added, “The FSA is expected to be signed once the required environmental and other approvals have been obtained. The coal will be supplied at prevailing Indian coal linkage prices.”

The company said it still expects to secure a separate shorter term tapering coal linkage arrangement to secure fuel for Mahan I until the Mahan block produced sufficient coal. The Mahan block will supply fuel to Mahan I, which is due to be completed by March, 2012.
Agencies

 “…We are hopeful of overcoming the situation and meet the projected target of 452 million tonne for the current fiscal,” he added. This year, rainfall was 1.5-3 times more than the normal rainfall and caused heavy damage to roads and mines in Orissa, West Bengal and Jharkhand, leading to lower coal production.

Jha said despite production hit, the plan to revive 18 abandoned mines of CIL through PPP model could not take off as bidders were cautious about viability with the tender terms. “We have taken suggestions from the shortlisted bidders and now we will invite fresh tenders on it. This time the number of mines will be less as four mines have already been delisted by BCCL for revival,” Jha said.

Asked if the abandoned mines could be leased out, Jha said it was not possible because of the people staying in the vicinity of the mines. Jha said the process of rationalisation of linkages had already begun and that once a policy is framed, allocations would be done.

“Total coal quantity has not been changed, but there will be rationalisation of allocation between users depending on their urgency of demand,” he said. Meanwhile, there has been a net reduction of manpower to the tune of 13,000, in CIL for 2010-11.
Agencies