World's largest coal producer now to import coal

September 25, 2008: In a significant move, Coal India Ltd (CIL) has been asked by the Coal Ministry to arrange for import of as much as 4 million tons (mt) of thermal coal in the next 12 months, a senior official of the company said.

"We have been asked by the ministry to gear up for importing 4 mt of coal and we have already started doing work in this direction," the official said.

The company has in the meanwhile not yet decided how it will go through the entire process. "We have not yet been able to come to a decision as to whether we will import through state trading agencies, or appoint private traders or importers for the job," an official in the marketing department of the company said.

He said the company has already done a lot of homework like how government companies like NTPC is importing coal and what is the prevailing price in international markets.

Incidentally, the new Coal Distribution Policy announced by the government in October 2007 had given the responsibility of meeting the country's coal demand to Coal India. Following this, CIL had the sole responsibility of meeting the country's coal demand by increasing its own production, and if required by imports as well.

The company is preparing a report, which would be placed before the ministry. The report will give details on how it wants to go ahead with import. The unprecedented growth in coal consumption by power utilities during the past five months and inability of the state agencies to import coal for small buyers meant that CIL will have to import about 4 mt of coal for the first time this fiscal to tide over possible shortages.

The Ministry of Power feels the small power producers may not want to pursue import of coal on their own. In a meeting with the power ministry in August, it was decided to import 4 mt of coal after the ministry felt there would be confirmed demand. This is uncharted territory for CIL because it had never imported before.

The company's former director (marketing) K. Ranganath had earlier said that they were in talks with MSTC and mjunction services limited to import coal through them.

The talks of coal import by CIL comes at a time when power utilities of the country imported far less coal then the amount they were supposed to, thereby putting a strain on domestic resources. The power plants were supposed to import 8.33 mt of coal between April and August 2008, but the latest data available with Coal Insights suggests that imports by them were only to the tune of 4.12 mt.

As recent as August 28, STC had floated a tender for importing 8.25 mt of coal in the balance eight months of current financial year for NTPC. Industry sources said power plants are finding it difficult to maintain cost of generation because international coal prices have almost doubled in last 15 months, and they have drastically reduced import of coal.

However, others say that imports are low because CIL has been able to meet the demands of the domestic power generators fully. Since the price of domestic coal is almost one-third that of imported coal, domestic companies prefer to buy from CIL though deliveries are delayed at times.

Source: Coal Insights