Coal India floats tender to import 2.4 million tonne coal
State-run Coal India (CIL) has floated an international e -tender for importing 2.416 million tonne (mt) of coal for 26 power plants, following the government’s decision to rope in the mining behemoth as the centralised agency for importing coal.
The initial volume of imports, being much lower than expected, may not produce the economies of scale or any significant bargaining strength for the state-run coal miner, analysts say. By entrusting the task to import coal for blending by power plants with CIL, the government was aiming to curb the cost increase that imports would inevitably result in for power producers.
The imports were necessitated due to a paucity of the fuel in the domestic market, and depleting stocks with many power plants. According to agency reports, the government had directed CIL to be prepared to import 12 mt of coal for power utilities over the next 13 months.
According to the initial plan, power producers, including plants run by state governments, themselves were to import coal, but the compliance with a power ministry directive in this regard has been low.
CIL hasn’t imported coal for the last few years, as it focused on increasing production. At the same time, the government has been taking steps to populate the coal mining sector with more players, and attract global and domestic capital and technology in its efforts to boost coal production.
After the power ministry wrote to all the power producers to indicate their coal requirement for blending, CIL received indents from seven state gencos and 19 independent power producers (IPPs) and decided on a short-term import for the July-September period of the current fiscal.
The states that have asked CIL for imports are Punjab, Gujarat, West Bengal, Tamil Nadu, Jharkhand and Madhya Pradesh. “The imports would be source-agnostic,” a CIL executive said.
Sources had told FE earlier that while CIL has received indents for importing 2.4 mt, another 7 mt would be imported by states on their own as they have already started the process of tendering for the imported coal.
Apart from this, NTPC and DVC will also import around 23 mt of the dry fuel.
CIL’s board on June 2 had decided to proceed with the issuance of two international tenders for sourcing coal from overseas, a short-term and a medium-term tender. CIL, within a week of receiving indents from the seven state gencos and 19 IPPs, for a total of 2.416 mt of coal, finalised and floated the tender.
So far the state gencos have been making their own imports for blending but the government’s sudden decision to rope in CIL as a centralised importing agency is intended to bring in uniformity of coal’s landed prices and quality.
This may cut down on the cost of overall imports, a coal ministry official said, though he agreed that the volume being imported for the short term is too low to achieve any economies of scale, and imports to be routed through nine eastern and western coastal ports might bring about pricing disparity from plant to plant.
While CIL didn’t want to make any comment on the issue, there are fears that the move might bring about some additional financial burden on the company.
“CIL doesn’t have any expertise on import activities nor has it any experience of handling third-party logistics. Whether the procurement through CIL will sustain or not has to be seen,” a former CIL chairman said, though he didn’t want to be named.
The last date for the receipt of bids is June 29. There would be a pre-bid meeting on June 14 and a probable price discovery is likely to happen before the successful bidder is chosen for coal supplies. The state-owned coal miner shall enter into back-to-back agreements with state gencos and IPPs to whom coal has to be supplied.
The successful agency, selected through the bidding process, shall deliver coal at the doorstep of the power plants of state gencos and IPPs, CIL said.
However, the import supplies will not impact fuel supply agreements and power plants would continue to get coal as agreed in FSA with the committed trigger level. CIL has been given a target to produce 700 mt in FY23 and it has been stepping up supplies to the power plants for meeting its requirement.