CIL to scout emerging markets in bid to increase output

Coal India chief S Narsing Rao on the first day in office on Wednesday underlined that increasing production is the primary objective of the state-run company and said it will be “challenging” to meet the demand after signing pacts with power companies for fuel supply.

Stating that increasing production was his main objective, he said, the company is also looking at overseas acquisitions in emerging markets through bilateral deals. Rao said the company would try to secure coal blocks in emerging countries in Africa like Nigeria and Tanzania on a bilateral basis. “We are looking at blocks through bilateral negotiations,” he said.

So far, CIL had failed to secure stake in coal blocks through bidding process in countries like Australia and Indonesia. The exploration activity in Mozambique block secured earlier would also be expedited, he said. On the domestic situation, Rao said 70 projects were waiting for environmental clearance which would be pursued with the government.

The last mile connectivity for higher evacuation infrastructure is also on his priority agenda, he said. CIL is targeting to achieve 468 million tonne production in 2012-13. Last year, the company had produced 432 million tonnes of production.

He also said country’s biggest power producer NTPC, which has not signed the fuel supply agreement with CIL, prefers the old pricing formala to the new one. “The main issue is that they (NTPC) are not agreeing to accept the gross calorific value (GCV) formulae and want to go back to old useful heat value (UHV),” he said.

Under the new system, prices are linked to the actual calorific value, or quality, of coal, while earlier it used to follow a pricing mechanism based on the UHV of coal, which deducted ash and moisture content from the standard formula. The development comes close on the heels of CIL despatching the model of fuel supply agreements (FSAs) to subsidiaries for inking pacts with about 40 firms for minimum assured supply of coal.

Rao said the power major has objected to the new pricing mechanism and “this is not only for new FSA but also for old contracts.” NTPC is supposed to sign the pacts for additional supply

of about 25 million tonnes for capacity addition between 2009 and 2012. No immediate reaction could be obtained from NTPC.

Following a government directive to CIL to commit a minimum of 80 percent of fuel supply to power producers having a capacity of less than 30,000 MW, CIL board last week had approved signing of agreements for minimum assured supply of the fuel.

On meeting the additional demand after the government directive for CIL to sign FSA with power plants, Rao said, “It’s not tall but challenging.”

Rao, who assumed the office of Coal India CMD on 24 April, further said diverting coal meant for e-auction to meet the demands of the power plants which are facing shortage of the dry fuel is also a possibility. Pithead stock of 70 million tonnes can also come handy in meeting the additional demand, he noted.

PTI