Coal India arm asks buyers to transport one-third of deliveries by road

First the Union coal minister Piyush Goyal put a brake on e-auction of coal, triggering huge protest from the local transporters cartel catering the local industries.

Now to pacify the protesters threatening to stall mining operations in Odisha – producing almost a quarter of the total domestic coal - the Sambalpur-based Mahanadi Coalfields Ltd (MCL) resorted to an unique arrangement.

The Coal India subsidiary convinced large local buyers – like Vedanta, Hindalco, Jindals - to take one-third of contracted deliveries by environmentally polluting and exorbitantly costly road transport.

“All consumers of Mahanadi Coalfields Ltd who have a fuel supply agreement with the company will have to transport 30 per cent of the FSA quantity by road if the destination point is within 50 km from the mines,” said a company press release issued on Saturday.

MCL sources say the move, which was duly supported by Coal ministry, will protect annually 12-18 million tonne of road cargo that was lost due to curb on e-auction.

There is, however, a distinction between the two. The coal sold through e-auction was largely consumed by numerous ferroalloy makers in the vicinity, each consuming limited quantities of fuel making it a fit case for road movement.

A couple of large industries (like Bhushan Power and Steel), also participated the auction as a stop gap arrangement till their captive mines were ready. They were buying coal at Rs 3,000 a tonne from e-auction and didn’t mind paying Rs 600-900 per tonne as road freight.

But FSA consumers like Vedanta, Hindalco – drawing huge volumes at contracted price of Rs 800-850 a tonne (ex-mine) had set arrangements for rail movement of coal at merely Rs 150 a tonne.

The new arrangement will increase landed cost of fuel to such consumers, for one-third of the supplies, to double or more.

Environmental norms

One can understand MCL’s desperation to strike the deal and keep the production running. However, it was intriguing how one arm of the government could ignore the concerns raised by the environment ministry on road movement of minerals.

Throughout the last decade, the Union environment ministry has been insisting on rail movement of coal as a pre-condition to grant environmental clearance to mines so as to curb air pollution in the mining districts.

The MCL release, however lauds the role of the Union coal ministry and local BJP MP and junior petroleum minister, Dharmendra Pradhan, for “whole hearted support” to the initiative.

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