India assures domestic coal supplies for steel, cement companies

19 June 2017

In another step towards zero coal imports, India’s Coal Ministry has offered assured domestic coal supplies to companies outside of the power generation industry.

Under the new framework, coal consuming companies in the steel, cement and fertiliser sectors, would receive coal supplies from Coal India Limited (CIL) to the extent of 50% of their import requirements. CIL will designate specific mines from which such supplies would be made, a government official said.

He said this was in line with a similar decision taken last month in the case of private thermal power producers or independent power producers (IPPs) who have also been assured domestic coal supplies to achieve zero imports during the current fiscal year.

Government owned and operated power companies led by NTPC have already stopped importing coal for their power plants, he added.

The country produces sufficient volumes of coal to enable the assured supply to power generation companies, as well as the steel, cement and fertiliser industries. According to government data, Indian thermal coal imports during 2016/17 has been pegged at 149.84-million tons, against 164.78-million tons in the previous fiscal year.

Imports of coking coal was estimated at 41.94-million tons during 2016/17 against 44.74-million tons in the previous year.

During May, India’s coal imports has provisionally been estimated at 18.5-million tons, down about 6% over May 2016. Total coal imports by power companies during 2016/17 have been estimated at 65-million tons, down 19% year-on-year, while the balance of coal imported during the year, of 84.84-million tons, used by companies in the steel, cement and fertiliser sectors.

At least two analysts have pointed out that the offtake of coal by non-power companies would ease in the medium term, with the Indian government pushing for greater use of natural gas.

Citing an example, the analysts said that India’s New Steel Policy envisaged the promotion of natural gas-based steelmaking facilities across the country as an alternative to reduce the operation of blast furnaces dependent on imported coking coal.

The national steel policy also envisages that coal-based direct reduced iron (DRI) steel producers shift to using natural gas.

But to enable these small and medium DRI units to do so in a cost effective way, natural gas would have to be made available to them at a cheaper rate so that the shift is not just from high cost imported coal to high cost imported liquefied natural gas, the analysts said.

It is understood that the country’s Petroleum and Natural Gas Ministry was currently engaged in exploring the option of extending the “pooled price mechanism” for natural gas to steel producers. Fertiliser companies already benefit from this mechanism.

Under the pooled pricing of natural gas for the fertiliser producing industry, the price of cheaper domestically produced natural gas and that of higher priced imported liquefied natural gas were averaged out and a single uniform price charged to the fertiliser companies.

Source – business-standard