Coal India Ltd (CIL), the world’s largest coal producer, would finalise at least eight fuel supply agreements (FSAs) by Tuesday, said its new chairman and managing director, S Narsing Rao.
However, sources said the country’s largest power producer, NTPC, was yet to sign new FSA with the city-based company, as it wanted a rollback on the gross calorific value (GCV) system.
“Today only, we are finalising at least seven to eight new FSAs, out of the total 50 FSAs likely to materialise with power units. By the end of this week, at least 10 of these would be finalised,” said Rao, who took charge of the company today. At least four of these are with its subsidiary, Central Coalfields. “We are in talks with NTPC. But the firm wants a rollback on the GCV system of grading and it wants us to go back to the useful heat value system,” said N Kumar, director (technical).
The company’s board initiated the process of signing FSAs, after a Presidential decree directed CIL to abide by the instruction of the Prime Minister and sign FSAs with power companies that had set up plants by the end of 2011. Though it had gone back to imports as a strategy to meet the target, the penalty clause of 0.01 per cent of the value of the shortfall, if the firm fails to supply 80 per cent of the committed quantity, had invited ire from power companies.
Rao said with the new FSAs, CIL needed to supply an additional 50 million tonnes (mt) of coal to power plants scheduled to be in place by the end of this year. “During the last financial year, our supply to the power sector was about 311 mt, which will increase by another 50 mt with the signing of new FSAs this year. We also have a ground stock of about 72 mt. One of my main focus is to improve offtake. While our production target is 464 mt, the despatch target is kept at 470 mt,” Rao said.
The company is also looking at more private participation in coal offtake. “Currently, it is majorly supplied from railhead only. We may look into whether more private participation is possible,” he added.
Sets sight on less matured market for acquisition
Rao said it would be ideal for CIL to look at “less matured markets” for acquisitions, rather than looking at competitive markets like Australia and the US. “If we have to go for acquisition, I think the ideal option would be to go for African countries like Nigeria, where the market is less matured. Whether it is through bilateral level agreements like the two blocks we got in Mozambique or the other way round, it would be a better option for CIL,” he said.
The two exploratory blocks in Mozambique, A1 and A2, were allotted to CIL by the local government. The A1 block is estimated to have reserves of over one billion tonnes, including thermal and coking coal, covering over 224 square kilometres. CIL plans to invest $400 million there. Though the firm, sitting on a huge cash reserve, was in talks with Indonesia’s Golden Energy Mines, and US miners Massey Energy and Peabody Energy for assets in Indonesia, the US and Australia, it didn’t work out.
Rao said his priorities would be to raise production, get environment clearances and improve infrastructure facilities. “We need clearances for at least 70 projects, though all of them are not possible at one go. We are trying to take all stakeholders on board, like power and coal ministries and state governments. My focus would also be on infrastructure development and also on increasing production to meet the target,” he said.
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