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Business News/ Industry / Energy/ Coal India against proposal to borrow surplus coal from others

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Coal India against proposal to borrow surplus coal from others

2 min read 06 Sep 2013, 12:47 AM IST

Kirthi V Rao , Aman Malik

CIL could not agree to the clause that demanded a future supply obligation on its part

According to the proposal, which was proposed by the industry lobby group Power Producers Association of India, surplus coal from captive coal mines held by power and steel companies would be made available to Coal India to meet its fuel-supply obligations. Photo: Bloomberg (Bloomberg) — According to the proposal, which was proposed by the industry lobby group Power Producers Association of India, surplus coal from captive coal mines held by power and steel companies would be made available to Coal India to meet its fuel-supply obligations. Photo: Bloomberg (Bloomberg)

New Delhi: A government proposal aimed at reducing India’s dependence on expensive imported coal by letting state-run Coal India Ltd borrow surplus coal from the captive mines of power and steel companies to meet shortages in the local market has hit a roadblock.

The coal miner has rejected the proposal on the grounds that it may not be able to return the coal at a future date to the entities from which it would procure, two senior government officials said.

The government officials, who declined to be named, were present at a meeting on Thursday of the committee constituted to consider the proposal.

The meeting was chaired by Planning Commission member and former cabinet secretary B.K. Chaturvedi . Other officials present in the meeting were the coal and power ministry secretaries and Coal India officials.

According to the proposal, which was proposed by the industry lobby group Power Producers Association of India, surplus coal from captive coal mines held by power and steel companies would be made available to Coal India to meet its fuel-supply obligations. Coal India would act as a “bank" and be obligated to return coal to each captive coal mine holder at a future date. In effect, Coal India would become a custodian of all the surplus coal available with the captive mine holders.

“It is unlikely that the proposal will take off," one of the officials cited above said. The second official had stated categorically that it could not agree to the clause that demanded a future supply obligation on its part.

A third official also present in Thursday’s meeting said the movement of the proposal would depend on a response by the law ministry.

“The committee has sent the proposal to the law ministry, which will examine whether coal banking is permissible under the coal nationalization act," the third official said.

The spokesperson for Coal India couldn’t be reached for comment Thursday evening.

The Coal Mines (Nationalisation) Act, 1973 governs the right of ownership and transfer of coal in the country. At present, no private agency can sell coal in the open market within India.

Reuters reported that India’s coal imports this fiscal could touch 165 million tonnes, topping last year’s record coal import volume of 135 million tonne.

July coal imports at 13.4 million tonnes were 33% higher than the same month last year.

Mint reported on 21 August that the mining and metals sector, which includes coal imports, contributed about 35% to the current account deficit that shot up to 4.8% of gross domestic product in the year ended March.

The government will have to devise a way that is beneficial to all parties concerned, said Chintan J. Mehta , a Mumbai-based analyst with Sunidhi Securities and Finance Ltd .

“The coal will have to be sold at a price higher than what Coal India currently charges but substantially lower than the price of imported coal. If that happens, then such a mechanism would be beneficial both to the government as well as the private producers and help India cut its current account deficit," he said.

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Published: 05 Sep 2013, 11:55 PM IST

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