Union Coal and Power Minister Piyush Goyal’s decision to cap Coal India’s open-market sales and divert the extra fuel for electricity generation may have more pitfalls than meet the eye.
In July, the minister ordered CIL to limit e-auction offerings for 2014-15 at 25 million tonnes, down from 58 mt (12 per cent of total sales) in 2013-14.
Many casualtiesWith 17 mt of coal already sold through this route during April-July, CIL practically stopped open market offerings from August.
Open-market sales contributed over a quarter of the national miner’s pre-tax profit of ₹15,420 crore in 2013-14. The capping could therefore affect CIL’s profits, starting from the July-September quarter.
More importantly, the steel and cement sectors, which have not been granted firm supplies since 2007 and depend on open market purchases, have been left high and dry, says Subhasri Chaudhuri, secretary-general, Coal Consumers’ Association of India (CCAI).
Responding to a preliminary enquiry by the Competition Commission, CCAI demanded that e-auction quantities be reserved for such sectors.
The capping decision has not gone down well with the Odisha government either, as it threatens the many iron and steel plants that dot the Jharsuguda region.
Also up in arms are transport contactors as over 90 per cent of e-auction coal was transported by trucks to consumers. Without loads, some 5,000 truckers of Gajrajnagar in Odisha’s Ib Valley had decided on an “economic blockade” beginning September 4. The strike call was withdrawn after CIL promised to reconsider the issue.
Pit-head stock to riseOne question that has arisen about the intention to divert coal to the power sector is whether the fuel can be reached to the plants.
According to industry sources, it will be difficult, considering the rail capacity constraint. (There is an embargo on long-distance road movement of coal.)
Coal India’s busy season production starts in October, and the sources say coal tends to pile up at the pit-head every year as the Railways has difficulty finding rakes, with the farm sector demand also kicking in.
This year, if the cap on open-market sales remains, CIL will need more rakes than usual to move the coal to power plants. Else, the pile-up at the pit-head will be higher.
The numbers tell the tale. Between 2003 and 2012, Coal India’s production grew by 129 mt, 40 per cent of which would be dumped at the pit-head.
Over the last two years, open-market sales cleared the stocks, with pit-head iron and steel and cement plants absorbing the coal. What now?