Coal news and updates

WCL, non-power consumers bury hatchet

September 10: Western Coalfields Limited (WCL), a subsidiary of Coal India, and a section of coal consumers from the non-power sector, including captive power plants (CPPs), which was up in arms against a decision taken by the former, have decided to settle the issue amicably, sources informed ICMW.

Recently, the non-power consumers who were being serviced by WCL had even been planning to file a legal petition against the coal producer's decision, whereby, in a release dated August 14, 2013, the functional directors of the CIL arm had decided, at a meeting held on July 10, 2013 that "besides distribution of higher grade coal as directed by … the CIL board, coal from cost-plus mines, wherever available, shall be offered, first with pro-rata distribution from highest price to lowest price."

This clause was incorporated in addendum to the FSA against August 13 coal quotas, sources said.

"WCL had said that 100% of the coal supplied would be from the cost-plus mines. However, nowhere in the FSAs was the percentage of quantity allotment mentioned. No CIL directive mentions the cost-plus approach," sources said.

Sources further said that WCL had notified 2-3 cost-plus mines from where the offtake would have been at 40% above the notified price. Consequently, the additional cost incurred per ton would have been around Rs 1,100 ex-colliery.

They further said coal allotted from the cost-plus mines would have been of lower grade and not feasible for consumption since the quality available would have been of G-9 variety with an average gross calorific value of 3,500 k/cal whereas the user industries require coal with a GCV of (+) 4,500 k/cal.

Sources further said that non-power companies from sectors that include cement, food, glass, rolling mills, apart from the captive power plants (CPPs), would have been negatively impacted.
In a circular dated August 12, 2013, WCL had informed that existing non-power fuel
supply agreements (including CPPs) which expired in April, May and June 2013 and renewed up to July 2013 are required to be renewed up to August 2013.

The company had further said that existing non-power FSAs (including CPPs) expiring in July 2013 are also requested to execute the amendment to the FSA up to August 2013, along with the relevant documents.

Sources claimed: "All FSAs holders were under pressure to sign the FSAs by August 24, 2013, failing which the August 2013 allocated quota would not be released. If the FSA was signed beyond August 31 then it stood terminated."

However, ICMW could not confirm this.

A source said that lifting coal from the cost-plus mines would have hit the non-power consumers. "Many of the affected units are export-oriented and if they close down due to unavailability of coal then the country stands to lose precious foreign exchange earnings especially at a time when the rupee has recently weakened against the dollar."

WCL officials could not be reached for comments.