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Lanco Infratech's appears to have swamped competition to secure the mine developer and operator (MDO) contract for the Gare Pelma II coal block of the Maha Tamil Collieries in Chhattisgarh by submitting a negative bid of Rs 112 per tonne of coal mined. In effect, Lanco will pay Rs 112 for every tonne of coal excavated.
The Maha Tamil Collieries tender called for the mining cost per tonne of coal and for establishing a 15-million-tonne capacity mine, supply 23 per cent or 3.45 mtpa of the coal produced to the Maharashtra State Mineral Corporation and convert the balance production to power by setting up a 2,000-MW power plant.
Competitors' bid
L&T, GMR, GVK, Jindal Power, Reliance Coal, and Sterlite, who were in the fray, sought payment for the mining operations. The closest to Lanco, was Sterlite, which was said to have sought Rs 175 a tonne, industry sources said.
Mr Nagaprasad Kandimalla, CEO – Business Development, Lanco Infra, said “We have carefully understood and analysed the energy sector with specific focus on issues with constrained domestic coal supply and long-term fuel security.”
Coal costs
While there were apprehensions that Lanco had overstretched as about Rs 13,000-14,000 crore of investment would be needed for the project, experts said it was carefully thought out to bag the order.
It is obligatory on Lanco to supply 630 MW to the Tamil Nadu Electricity Board where coal cost cannot be passed on, and 740 MW to Chhattisgarh, of which 30 per cent is optional on the part of the State to address the coal cost.
Even if 50 per cent of the power is on concession basis, the overall coal cost appears comparable as the company should be estimating it at around Rs 650 a tonne by bringing in very high efficiencies of operation, given the close proximity of the power station.
Most power producers today get near 50 per cent coal through linkages at around Rs 1,000 a tonne and the balance from the e-auction and import route which is about Rs 2,500 a tonne. Hence the average coal cost works to Rs 1,750 a tonne
Even if Lanco was to offer 50 per cent power free, the coal cost can but double, which in any case is lower than what other players shell out. More importantly, the quality of coal is assured as also the supply which is a distinct advantage, they said.
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