CIL targets 10Mt imports in 2012/13

By: Ajoy K Das
10th April 2012
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KOLKATA (miningweekly.com) - Coal India Limited (CIL) has forecast that it would have to import ten-million tons of coal during 2012/13 if the miner was to conclude fuel supply agreements (FSAs) with power producers, as directed by the government under a Presidential order.

“CIL will first have to see how much of the increased demand can be met through higher production. If required, CIL will import ten-million tons during the current year,” chairperson and MD-designate S Narsing Rao said.

Compelled by the government, CIL would be concluding at least 50 FSAs before end-April with various thermal power producers for an aggregate generating capacity of 28 000 MW.

Last month, CIL’s board of directors refrained from taking a decision on signing new FSAs stipulating a graded penalty system for failing to supply a minimum of 80% agreed offtake, owing to stagnating mine production, inadequate logistics, infrastructure and a lack of expertise in global trading to import coal and meet domestic supply shortfalls.

This was despite directives from the office of the Prime Minister that CIL should urgently resort to importing coal to tide over the crippling shortage of coal faced by thermal power producers.

Having failed to force the world’s largest coal miner to sign FSAs and meet the demand-supply gap through imports, the Indian government issued a Presidential order to CIL, by virtue of being the largest equity stakeholder in the company.

The Presidential order, power reserved by the government to direct public sector companies, was used rarely, such as in the case of national emergencies, and according to the Coal Ministry the shortfall in coal supplies threatening power generation warranted the issue of such an order to CIL.

“CIL is in a bind. It has no choice but to adhere to government's directive and import to meet shortfall. But the higher the imports, the higher will be the losses for the miner,” a CIL official said.

The landed cost of imported coal would be based on gross calorific value (GCV) of the coal, as in international practice. But CIL’s domestic sale price was based on useful heat value of seven grades, A to G.

Earlier this year, CIL had implemented a price regime for the domestic market based on GCV but was forced to abandon it in the face of opposition from political parties and power producers who argued that the new pricing would increase the power tariff burden on consumers.

However, Coal Ministry officials said that a second attempt would be made to restart GCV-based pricing shortly. During financial year ended March 2012, CIL’s production of raw coal remained almost stagnant at 435.84-million, or 4.52-million tons higher than the corresponding previous period, a mere 1% growth.