The Hindu Business Line : Global coal majors scouting for long-term deals with power cos

Sources said here that among the companies scouting for long-term coal supply contracts with power utilities include Australian, South African and Indonesian companies.

The Australian companies included, Rio Tinto, Anglo Coal, BHP Ltd; Shell (South Africa), and Enviro Coal (Indonesia). Most of these companies are already supplying coking coal to the steel industry. The sources said that the interest in India was fuelled by the falling western demand as some of the new capacities there have shifted to natural gas. Besides, coal demand was expected to grow in India in view of the large power generation requirements.

None of them presently have direct supply contracts with any of the power utilities. But some private sector players are beginning to work out long term - 15 or 30-year supply arrangements with these companies. Discussions were still in the incipient stage, the sources added.

However, some of the State-owned power utilities have begun pushing the Centre for permitting them to source coal from some of the international suppliers through long-term contracts.

The States have intensified pressure in view of 17 per cent price hike by public sector Coal India Ltd (CIL), which is currently the monopoly supplier.

So far, the major users of imported coal include some of the coastal thermal plants. These include the Tuticorin and Ennore thermal plants of the Tamil Nadu Electricity Board, Andhra Pradesh's Vijayawada and Visakhapatnam plants. Besides, some of the private sector plants of the BSES and Tata Power also import coal at least for part of their requirements.

After last month's price hike, the thermal coal for power stations costs close to about Rs 1,800 a tonne. CIL hiked thermal coal prices by Rs 290 per tonne. This hike has blurred the price distinction between international and domestic coal. The effective price translates into about $41 per tonne. International prices, on a CIF (cost insurance and freight) basis presently cost in the region of about $75 a tonne. Customs duty on imported coal is currently 5 per cent and was in the form of countervailing duties.

On the face of it, domestic coal appeared cheaper. However, coal delivered by international suppliers had a calorific value of about 6,200 kilocalories per kg. Domestic thermal coal on the other hand was only 3,000 kilocalories per kg. Besides, imported coal had considerably less ash and sulphur contents, the sources added. Consequently, unlike domestic coal, investments on washeries would be eliminated considerably, bringing down costs.

This would mean that less of imported coal was required for power generation. For instance, presently the estimated requirement for a 500-mw thermal plant is about 15 lakh tonnes per annum for operating at 80 per cent plant load factor. If imported coal were used, the requirement would be about 8 lakh tonnes, the sources said.