CIL drops long-term coal offtake plan

Maharatna public sector undertaking Coal India Ltd’s (CIL') plan to strike a long-term coal offtake deal is now on the backburner. It is now compelled to drop the plans as most of the consumers were unwilling to accept the offers.

The firm had shortlisted five international firms but failed to find any back-to-back agreement from the consumers. “It was supposed to happen by this financial year. Now, it is unlikely to materialise as we failed to find any takers among customers for the offers that we got,” said N C Jha, chairman and managing director of CIL. The strategy was to import coal from four countries — South Africa, Australia, Indonesia and the United States.

However, this means that the joint venture which the coal major had formed with the Shipping Corporation of India (SCI) may also be idle until the firm imports. An agreement was signed with SCI to deliver imported coal at the doorsteps of customers through a special purpose vehicle (SPV) in which like-minded parties like Indian Railways were also in talks to join. “Our plan was to import 10MT of coal this fiscal. When the deal itself is not happening, then clouds are there over the existence of this joint venture also,” said a top CIL official.

The Kolkata-based company had invited expressions of interest (EoIs) from global companies at a discounted price for long-term offtake agreements early this year.

It received 27 proposals from 16 companies and later the PSU had sent them requests for proposal (RFP) and they were advised to give proposals on quality and quantity of coal to be supplied. The last date to submit bids was May 25 2011 and it had received only 19 offers from five companies.

“Those power plants whom we had undertaken quotes are finding the prices to be higher,” Jha added.

In September, he had said that the offers that it got are not “lucrative” enough to go ahead but the firm will take five more months to finalise the deal. Though Jha refused to give the names of the firms that submitted the offers, those who submitted EoIs included global coal majors like Rio Tinto, Xstrata, Peabody, Massey Energy and Sinarmas.

Last year only, the delay had prompted one of the buyers NTPC to reportedly backout from the plans to source imported coal from CIL.

There was a verbal offer between the two firms to source about 4 million tonne of coal through the CIL’s long-term offtake plan.