National Thermal Power Corp. Ltd (NTPC), India’s largest power producer, has started talks with the Shipping Corp. of India Ltd (SCI) for a long-term contract to ship the coal it imports to fire its power plants.
Top executives at the two state-run firms discussed the plan at a meeting last week, two persons briefed on the subject said.
The plan involves shipping thermal coal sourced by NTPC from abroad to ports in India for periods ranging from 5 to 10 years.
“NTPC has approached us with a proposal for long-term contract for shipping their coal imported into India,” said K.S. Nair, a director looking after SCI’s bulk carrier and tanker division.
India currently imports about 28.5 million tonnes (mt) of thermal coal, with NTPC alone accounting for some 12.5 mt of it.
The government estimates the power industry will grow by 9.5% annually until March 2012, as it aims to end blackouts and sustain economic expansion.
India, one of the world’s five biggest buyers of coal, uses the fuel for more than half of its power generation capacity.
India’s biggest ocean carrier is seeking long-term tie-ups with steel makers and coal producers that ensures steady business for a number of years. “There is so much volatility in the shipping freight market that companies are looking at having their own shipping divisions or getting into joint ventures with shipping firms to control costs,” Nair said.
SCI and Steel Authority of India Ltd (SAIL) have decided to form an equal joint venture company to provide various shipping-related services to SAIL, such as importing coking coal required for its steel plants.
SCI has also flagged off talks with state-run Coal India Ltd (CIL) to float a joint venture shipping company to cater to the requirements of CIL.
Other Indian steel makers and power producers, including Tata Steel Ltd, Tata Power Ltd and the JSW Group, have also forged joint ventures or tied up long-term contracts with shipping firms to have strategic control over logistics.