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Coal India gets few takers for imported coal in maiden year

State-owned Coal India, told by the Prime Minister’s Office to keep a provision for imports in fuel supply agreements with power producers, imported less than half a million tonnes in the first year because there were few takers.

After the provision for imports was included in fuel supply agreements, Coal India imported coal for the first time in 2013-14. It was expected the miner would receive requisition for about five million tonnes but Coal India ended the financial year importing only 460,000 tonnes of coal.

Coal India was initially opposed to the idea of imports. After the Prime Minister’s Office issued a directive to arrange for adequate coal supplies to power producers on its own or through imports in 2012, Coal India’s then chairman, Zohra Chatterji, said, “We are not in the business of importing coal. It is one of the ways to meet the demand, theoretically.”

When asked, Coal India Chairman and Managing Director Sutirtha Bhattacharya, however, said, “Time changes. We cannot blame anybody now. Anyway, it is not bothering us because unless there is a firm order and payment, we are not importing.”

“Our core area is not to trade and import coal. But in the national interest, we were directed to do this and being the national miner we will do it,” he told Business Standard.

According to the fuel supply agreements formulated in 2013, following a presidential directive, of the minimum assured quantity of 80 per cent of the annual contract for power plants commissioned after 2009, Coal India will offer 65 per cent of domestic coal and to meet the balance 15 per cent, it offered to import for willing power producers on a cost-plus basis. Coal India engaged MMTC for arranging imported coal.

Coal India had to finally import only 460,000 tonnes, though power units were grappling with acute coal shortages during most of 2013-14. Explaining this, an official said, “Power plants have been importing coal for many years. Most of them prefer their own imports than coal imported by Coal India.”

Before floating the expression of interest for imports last year, Coal India held meetings with power plants and the initial estimate was the miner would have to import five million tonnes. Given low stocks, many thought Coal India’s imports would be higher than the initial estimate. But this did not happen because power plants preferred importing their own coal.

According to an industry source, power plants want to ensure their fuel requirements are fulfilled by domestic coal. As they decide to import at the last moment, they do not like to ask Coal India to do it for them.

For 2015-16, officials say, CIL may have to import about 1.9 MT according to initial estimates. However, as it was the case last year, the miner finally end up importing much less.

Timeline:

    Feb 2012: PMO asks CIL to supply adequate coal to power producers on its own or through imports
    Feb 2012: CIL acting chairman Zohra Chatterji responds to the directive, saying the company "is not in the business of importing coal"
    Aug 2012: CIL board agrees to supply a minimum of 80 per cent of the contracted quantity of the fuel to power firms, meeting 15 per cent requirement through imports
    Aug 2013: Fuel Supply Agreement (FSA) signed accordingly. CIL agrees to import for willing power plants
    Sep 2013: Following meeting with power plants, CIL indicates it would have to import 5 MT
    Nov 2013: CIL floats tender for selection of agency from government department or government-owned company or public sector entity for supply of imported coal. Finds no bidder
    Jan 2014: CIL floats tender for the second time
    May 2014: MMTC selected for import
    March, 2015 : CIL ends the fiscal importing 4,60,000 tonnes

source: http://www.business-standard.com