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Few takers for CIL coal import, despite fuel shortage

While formulating its fuel supply agreements (FSAs) with power producers, state-run Coal India (CIL) was earlier forced to keep a provision for imports, after a directive from the Prime Minister’s Office (PMO) in 2012.

However, as CIL gets ready to make its maiden import, it is doing so for a requisition from only a handful of plants, with a total requirement of less than a million tonnes, even as power units are grappling with acute coal shortages.

“We have got requirements from only seven or eight plants,” said a top CIL official. The total import requirement is only about 80,000 tonnes.

MMTC, to import for CIL, has been asked to initiate the process. “MMTC would float a tender and tie-up parties. We hope for delivery of imported coal by year-end,” said the official.

The low import requirement was something CIL did not expect. “Before floating the expression of interest (for the import), we had meetings with power plants and the initial estimate was that we would have to import five million tonnes. Given the talks of low stocks, we thought it would go up. It has not happened. However, plants have the option to import on their own,” said another official.

This comes when the Central Electricity Authority had said of the 100 power plants monitored by it, 27 have less than four days of stock.

According to the FSA formulated in 2013, the company will offer 65 per cent domestic coal to the post-2007 plants and and to meet the balance obligation of 15 per cent, CIL offered to import for willing power producers on a cost-plus basis.

CIL officials argue this low requirement for imported coal vindicates its stand that the primary reason for low stocks is power plants’ failure to make prior arrangements.

CIL was initially opposed to the idea of import. Even after the PMO issued a directive to make adequate coal supplies to power producers on its own or through import, the then head, Zohra Chatterji, said: “We are not in the business of importing coal… it is one of the ways to meet the demand, theoretically.”

On power producers’ dally over import, an industry source said, “International coal prices are higher than domestic coal, though this has come down significantly. But everyone wants to ensure their fuel requirements are fulfilled through more of domestic coal. Another reason could be that some are waiting for the international price to further go down.”

According to Rupesh Shanke, a senior analyst at Karvy, the price gap between domestic and international coal is still about 30 per cent.


DEALING WITH COAL SHORTAGE

  • 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 signed accordingly. CIL agrees to import for willing power plants
     
  • Sep 2013: Following meeting with power plants, CIL indicates it would have to import 15 mts
     
  • 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
     
  • Sep 2014: CIL gets requisition 7-8 plants with a total requirement of about 0.8 mts

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