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Pratim Ranjan Bose

Kolkata, Nov. 1 At a time when corporate India is busy estimating the downside risk of a credit squeeze and falling demand, Coal India Ltd is busy counting the upside potential, riding on price advantage in the domestic market, increasing demand for thermal coal from domestic utilities, and a group cash reserve of Rs 20,000 crore.

Though prices came down by 50 per cent from its peak of $201 a tonne in early July, thermal coal is currently sold at around $100 a tonne to power generators in Australia. The prices in fact moved up marginally due to increased buying from Asian utilities.

This meltdown, however, has little relevance to CIL selling the best quality thermal coal (raw coal) at Rs 1,800 (less than $40 at current exchange rate) a tonne. Assuming that beneficiated coal has double the heat value, a back-of-the-envelop calculation suggests that CIL coal if washed should be priced at around $80, a clear 20 per cent lower than the international price.

“Unless international coal prices melt down to the level of ruling domestic prices, we are safe from any negative impact of the global crisis. Also, considering the existing supply shortage, we do not foresee any demand slowdown in India in the next two to three years,” CIL Chairman, Mr Partha S. Bhattacharyya, told Business Line.

“We will go the length to implement the slew of capacity expansion and coal beneficiation projects lined up to reach the Plan targets,” he added. CIL is scheduled to enhance its production to 520 million tonnes by the end of the Eleventh Plan.

The company is expected to finalise the draft bid document for development and operation of high-capacity underground mines in seven virgin blocks by the third week of November. Bids are invited for one washery at BCCL. Bids may be invited for three more washeries in Eastern Coalfields and Central Coalfields shortly. All the projects will be financed by CIL.

“Any impact of the liquidity crisis on the vendors, however, may impact our expansion plans,” Mr Bhattacharya said.

Meanwhile, the company has marginally surpassed its annual production growth target in the first seven months. As against an annual growth target of 6.7 per cent, our production has till date increased by 6.8 per cent compared to last year.

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