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Interest in importing coal has declined: CIL

Coal India Ltd’s (CIL) Rs.3,000 crore plan to import 5 million tonnes (mt) of coal in fiscal year 2014 to bridge a shortfall in domestic production has been pushed to the next fiscal year amid slowing demand for imported coal and a lack of interest among importing agents, two senior company executives said on Friday.

“I don’t think any consumer is really insisting on (import) contracts,” S. Narsing Rao, chairman of Coal India, said. “Maybe their requirement has changed.” Rao said that in the year ending 31 March, demand for imported coal may have slowed down owing to a fall in the purchasing power at consuming companies and slower industrial growth.

“Many of the power producing companies are oversupplied,” Rao added, citing the state-run power producers of Haryana, Gujarat and Rajasthan. “They are asking us not to give more coal.”

A second official close to the handling of Coal India’s tender seeking commodity importers for buying overseas coal, also said interest in importing coal has declined. “We have received a bid from MMTC Ltd and we are evaluating it,” the official, who did not want to be named, said. “It looks unlikely that it will be finalized this fiscal year.” Coal India, floated a tender in November for import of coal, but it did not get any applicants. Experts said stringent terms and conditions coupled with a bar on private applicants was responsible for the poor response. The company reissued the tender with some modifications in the terms and conditions earlier this year though private companies contained to be barred.

Coal India’s production of about 482mt (target in the year to March) is below India’s demand of over 600mt of the fuel a year—the reason it tried to import coal to supply its clients. After several boardroom tussles last year, the company’s directors agreed to import coal but only if clients paid fully for it. The executive close to the tendering process said Coal India could import coal next year too if clients made specific requests.

A senior analyst said India is likely to import less coal in the next 2-3 years owing to sufficient supplies and lower capacity utilization by power plants.

“The capacity utilization from power plants has been lower and going forward that will limit demand,” said Dhananjay Sinha, head of research–institutional equity, at Emkay Global Financial Services Ltd. “There can also be an improvement in coal supply from Coal India going ahead.”

Sinha said coal imports are estimated at 149mt in this fiscal year to end on 31 March, higher than the 138mt the previous year but marking a much slower rise than those seen in previous years.

Source: Livemint