Coal news and updates

Coal swap policy in the works

The cabinet will take up a new policy under which companies will be allowed to use coal from their captive mines, allocated for a specific steel or power plant, for another project.

The policy will ensure that mines are put to optimal use and also reduce transportation costs.

For instance, a coal mine in Odisha is allocated to a power project run by a company in Gujarat, which uses only 60 per cent of its annual production. The remaining 40 per cent can be used by the company for another power plant in Tamil Nadu. It can also swap coal mined in Odisha for coal mined near Gujarat with some other company to reduce transport costs.

The government plans to expand the scope of the policy at a later stage. Officials said they would then allow surplus coal from a mine owned by a company to be swapped or sold to another firm that required it. Officials were, however, not clear whether steel and power plants that do not have coal linkages would be able to buy coal from companies that mine it.

However, only a percentage of the coal mined will be allowed to be swapped or sold. This will act as a safeguard and ensure that companies who had gained captive mines do not merely turn into mining entities and shut down their power or steel projects. "The whole aim of this policy is to encourage higher coal production and more efficient use of mined coal," officials said.

The policy will enable state-run NTPC to save up to Rs 9,000 crore by swapping coal used in various plants.

Captive mines contribute to around 10 per cent of the country's output, or 54 million tonnes. Officials said there could be a 20-25 per cent growth in production in this segment by simply switching to a more rational swapping policy.

India plans to mine 1.5 billion tonnes of coal by 2020 and captive mines are expected to account for about a quarter of it. The country uses coal to fuel power plants, fire steel furnaces and produce fertilisers.

Officials said plans were also afoot to allow the smooth transfer of captive mines in the case of mergers or acquisitions.

The difficulty in the transfer of captive mining rights to the merged entity is one of the factors that has been holding up power project buyouts.

source: http://www.telegraphindia.com