Coal India to increase tenure of supply pacts with steel industry to 10 yrs

Coal India has decided to increase the tenure of fuel supply pacts to be signed with the steel industry to 10 years with a view to reducing the sector's reliance on imports for the fuel, according to a notice.

The new FSA tenure would be applicable from the fourth tranche of the auction of coking coal linkages for the steel sector to be held shortly, Coal India said in a notice to its subsidiaries.

"In view of substantial investment required for setting up of coal washing capacity by the consumer and with the aim to reduce dependence of steel sector on imported coal further, the tenure of steel sector linkage auction FSAs (fuel supply agreements) has now been increased to 10 years, which would be mutually extendable by another five years," Coal India Ltd (CIL) said in the notice.

The Cabinet Committee on Economic Affairs had earlier approved the allocation of coal linkages for the non-regulated sector only through auction.

Sectors included for the auction are cement, steel/sponge iron, aluminium, and others (excluding fertiliser, urea), the government had said.

Prior to auctions, the Standing Linkage Committee had been deciding on the allocation of long-term and short-term linkages for the sectors, including power and steel.

According to the ratings agency CRISIL, in absolute terms, coking coal imports are expected to increase to 58 million tonnes (MT) in FY23, from 47 MT in FY18.

CIL accounts for over 80 per cent of domestic coal production.