Coal India plans JV with Paradip Port

19 June 2017

State-owned Coal India is planning joint venture with government-controlled Paradip Port to sell blended coal as per consumer’s requirement for better value realisation.

CIL offers source-specific linkages for raw coal to power generation utilities. The company has subsidiary-based notified prices for different types of coal determined by gross calorific value (GCV).

The model suffers from a range of inadequacies. First, bulk of the thermal coal produced in the country has low calorific value and high ash content. For emission control and better techno-economics, gencos blends this with high value coal.

The high value coal can either be imported or domestically sourced. In India, mostly Ranigunj coalfield under Eastern Coalfields Ltd (ECL) produces such coal in limited quantities. But whichever route gencos take the cost is heavy. For example, the Tamil Nadu genco sources bulk of the fuel from Ib-valley and Talcher coalfields in Odisha, located more than 1,200 km away.

This is carried to Tamil Nadu using multi-modal logistics options. From mines, coal is first shipped to Paradip Port by rail and from here it would be shipped to Chennai. In the last leg, the coal will travel by road to power stations scattered across the State.

The story does not end there. Tamil Nadu sources its portion of quality coal from Ranigunj in West Bengal, located 1,700 km away. The end result is: the landed price of coal in Tamil Nadu is three times the price at pit-head. Railways, shipping companies, and truckers make money at the cost of electricity consumers in Chennai.

Coal India also stands to lose. The high-landed cost of fuel means lesser opportunity for the miner to extract higher prices for fuel. The miner sells fuel to gencos at 35-40 per cent discount compared to other users to keep the country’s electricity prices low.

A win-win solution lies in cutting down the logistics cost component in landed price of fuel and sharing the booty.

As per the initial plan, CIL-Paradip Port JV will source coal from different mines to Paradip where it will be blended as per GCV requirement of the consumer. CIL is keen to take users on board the JV to aSource-void quality disputes.

Being a private company, the JV will enjoy greater autonomy keeping costs on leash and entering price contracts.

Source – thehindubusinessline