Financial Daily from THE HINDU group of publications
Friday, Aug 30, 2002
Industry & Economy
Cement units to sort out coal supply `problems'
KOLKATA, Aug. 29
ABOUT three or four cement plants belonging both to the private and public sectors will soon approach the Coal Ministry to sort out "some technical problems" before signing the final coal linkage agreements.
Already, more than 90 per cent of the leading cement producing units have, for the first time, signed individual coal supply agreements, with Coal India Ltd (CIL) and its subsidiaries.
The units facing "technical problems" are ACC's Chaibasa plant, the Srinagar unit of the Jammu and Kashmir Cement Company (a State Government unit) and probably another unit of Orissa Cements Ltd," industry sources told Business Line.
All these are old cement plants which had traditional linkages with the coal companies. However, with time, coal shortages developed and supply to these units was made by other subsidiaries of Coal India. The problem that has arisen now is that while the cement units concerned had linkages with a particular coal company, actual supplies were being made by other units, industry sources explained.
The issue was referred to the Coal Ministry and the Government had agreed to modify the coal linkage agreements accordingly to resolve these "technical hassles''.
"The ACC plant had a linkage with Eastern Coalfields, but supplies were being made by South Eastern Coalfields. Similarly, the J&K unit had a linkage with Central Coalfields, but Eastern Coalfields supplied the coal," industry sources said.
Earlier, the issue of coal supply to cement plants was decided by the Standing Linkage Committee, which had representatives from the Ministries of Coal, Power and Industry, apart from the Railways and the cement industry itself.
Monthly quotas were issued, but Coal India found that its annual supplies suffered as buyers never utilised their full quota. This was one reason why Coal India insisted on individual agreements and it was expected that the new system would help the financial bottom line of the coal major.
Currently, cement companies do not have much of an option but to get their coal from Coal India because imports are no longer financially attractive.
Discussions between coal and cement companies began in May 2000 and the first agreement was signed in mid-2001. These are three-year agreements with a clause detailing an annual review by either side after every year. The first review will come up next month.
A top official of the Cement Manufacturers' Association said that the major players who had signed the coal linkage agreements were Birla Corporation, Grasim Aditya Cement, Grasim Aditya Raipur, Grasim Vikrant, Jaypee Rewa and Jaypee Bela.
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