New Delhi: International Coal Ventures Pvt. Ltd (ICVL), a company promoted by five state-owned firms two years ago to buy coal mines overseas but which hasn’t managed to close a single purchase, seems headed for a split with NTPC Ltd, one of the partners, wanting out.
“We are not keen on ICVL. Our interests are not aligned. Our requirements are different. We are not willing to invest in a coal mine today and use the coal six years later,” said a top NTPC executive, who did not want to be identified.
Steel Authority of India Ltd and Coal India Ltd own 28% each in ICVL. NTPC, Rashtriya Ispat Nigam Ltd and NMDC Ltd own 14% each.
According to NTPC executives, while the power producer needs thermal coal to fuel its power projects back home, ICVL’s stakeholders are more interested in metallurgical coal reserves to feed their steel mills.
And “the thermal coal that is being offered to us does not meet our technical requirements. We have been told informally that if we don’t want to stay, we should exit”, said a second senior NTPC executive, who spoke on condition of anonymity.
ICVL remains unfazed by NTPC’s declaration.
“Let them study their options. They should come to a conclusion,” said a top ICVL executive, who did not want to be identified.
“The steel ministry had conducted a review meeting last month where every issue was discussed... They never said that they want to get out,” added this person.
To be sure, NTPC can’t just walk out. “We simply can’t leave; it has to be a cabinet decision,” said the first NTPC executive.
ICVL’s performance hasn’t impressed most people.
“The objective of seeking mineral resources abroad through sovereign funds has been propagated successfully by the Chinese through well-coordinated arms of the government. In comparison, the Indian attempts look modest,” said Dipesh Dipu, director of consulting, energy and resources, and mining at Deloitte Touche Tohmatsu India Pvt. Ltd.
ICVL has an initial equity capital of Rs 3,500 crore and authorized capital of Rs 10,000 crore.
India faces a shortage of both metallurgical and thermal coal. In 2009-10, 23 million tonnes (mt) of the 40 mt of metallurgical coal used was imported, and the demand is set to increase to 90 mt by 2020.
NTPC, which generates 8 megawatts (MW) of every 10MW it produces by burning coal, is looking to increase installed capacity from 34,854MW now to 75,000MW by 2017 and 128,000MW by 2032.
It needs 160 mt of coal in fiscal 2012, of which around 16 mt has to be imported. The utility has already placed orders for importing 12 mt of coal.
NTPC’s desire to exit the venture isn’t the first time differences between the steel and coal groups have come out in the open.
Last year, then steel minister Virbhadra Singh had said that NTPC and Coal India could exit the consortium if they wished to.
The latest development comes at a time when ICVL is evaluating six potential purchases valued at a minimum of $1.2 billion (around Rs 5,785 crore).