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Badal Sanyal

Kolkata , Jan. 21

INDUSTRIES which largely depend on imported coal are facing a crisis situation in view of the sharp increase in landed cost of imported coal. This is because during the last couple of months the price of coal has shot up in the international market as also have shipping freight rates.

In the circumstances, the reduction of import duty from 25 to 15 per cent and abolition of 4 per cent special additional duty (SAD) on non-coking coal have hardly provided any succour to user industries mostly located in the coastal states, according to sources close to bulk coal consuming industries.

Among the affected industries, the Tamil Nadu-based Madras Aluminium Company Ltd (Malco) of the Sterlite Group, seems to be badly hit because it has to bear an additional cost of about Rs 15,000 more for producing a tonne of aluminium metal, using its own power generated with the help of imported non-coking coal. As aluminium manufacture is a highly power consuming process, Malco fears that the company may not be able to compete with other domestic metal producers unless a special fiscal concession is provided.

The Malco management is understood to have approached the Union Ministry of Finance with a plea that the import duty on non-coking coal be reduced to 5 per cent as is applicable in the case of coking coal imports by steel plants. A similar duty has been sought by paper mills, which use imported non-coking coal.

Incidentally, the Centre has recently given aluminium and paper sectors the core industry status similar to that of steel, power, cement and fertiliser.

It is learnt that Malco's letter has been forwarded to Coal India Ltd (CIL) for its comments. A CIL source said Malco's case was interesting because it has no option but to import coal at a high cost. This is because its captive power plant boiler is not designed to use high ash domestic coal.

One view has it that it will be difficult for Malco to generate power at competitive rates even it is allowed to import non-coking coal at "zero" duty, at prevailing international market prices.

According to the CIL source, many coal based companies in the coastal belt had approached Coal India and its subsidiaries for domestic coal supply. Even a couple of months ago, they were averse to using domestic coal when the standard steam (non-coking) coal price was ruling in the world market at around $32 per tonne against the current average price of $48 per tonne. On top of this, importer will have to bear higher freight.

It is learnt that the domestic availability position of high grade non-coking coal is a bit "tight" because of the drop in production in Eastern Coalfields Ltd and Bharat Coking Coal Ltd. On the other hand, demand has increased in recent times given the buoyancy in the manufacturing sector. The source indicated that CIL might not be able to supply the additional quantity of coal to non-linkage consumers to compensate for the shortfall of imported coal.

More Stories on : Outlook | Aluminium | Coal

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