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The proposed import of coal through long-term off-take contracts may elude Coal India Ltd (CIL), thanks to its failure to solve the logistics riddle — offering an end-to-end delivery solution to customers.
Sources suggest that despite having evaluated bids from 11 prospective suppliers (such as Rio Tinto, Xstrata, Peabody, Massey Energy and Sinarmas) having mining assets abroad, the company is far from securing firm purchase commitment from Indian users without which the board of directors will not approve any import plan.
As per the original schedule, the coal major was scheduled to complete the entire procedure and seek board approval — to strike MoUs (memorandum of understanding) with the overseas suppliers — in September. Imports were scheduled to take place from this financial year.
“We do not see an opportunity to firm up plans in the next couple of months,” a company official told Business Line
Elaborating the reasons, the source said that while Indian users demanded delivery of coal at their factory gate (as is done by private sector importers) CIL has failed to solve the logistics riddle.
Talks going nowhere
The company has already proposed a JV with Shipping Corporation but is yet to incorporate the same. Even if the shipping logistics are in place, no solution could be struck on evaluating the coal from ports to the customer end.
Though CIL previously approached Indian Railways for possible participation in a three-way JV — to ensure complete end-to-end solution for its import plan — latest information suggests that the discussions did not progress beyond the preliminary stages.
Earlier, CIL invited bids for long-term off-take contracts from the US, South Africa, Australia and Indonesia. Accordingly, the company received 18 proposals to import a total of 360 million tonnes of coal for a period of 10 years.
Power major NTPC has already expressed interest to source a part of its import requirements (12 million tonnes a year) through CIL. Also on the queue was Kolkata-headquartered thermal power utility Damodar Valley Corporation (DVC). Neyveli Lignite Corporation expressed interest to procure 2.5 million tonnes of coal for the proposed “coal-based power plant at Tamil Nadu.”
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