KOLKATA (miningweekly.com) - The Indian government has compelled Coal India Limited (CIL) to make arrangements to import coal in order to ensure a 20-year mandatory supply for 50 000 MW of power generation, which was scheduled to come on stream by March 2015.

Compelling CIL to conclude long-term coal import agreements was a result of a direct intervention by Prime Minister Manmohan Singh, who was personally monitoring power projects stalled by coal supply shortages, and who has held several round of talks with government and private power producers on the issue of sufficient fuel supply agreements (FSAs).

Over the past two years, CIL had received supply offers from 11 overseas coal companies including Rio Tinto, Xstrata, Peabody, Massey Energy and Sinar Mas. However, the world’s largest coal miner failed to conclude import agreements for various reasons including a shortage of delivery solutions to customers, a lack of stockyard facilities, and railway bottlenecks.

"CIL will make arrangements for supply of coal through imports or through arrangement with public sector companies who have been allotted coal blocks. The proposed course of action has been approved by the Prime Minister,” an official statement issued from the Prime Minister’s Office (PMO) said.

“The proposed set of arrangements is being seen as a major step forward in solving the problems of the power sector in the country and is likely to boost investors' confidence in India's power sector," the statement said.

According to the directive of the PMO, CIL, which has been struggling to ensure supplies to power companies, would be penalised if it failed to supply a minimum of 80% as per the FSAs but would receive government incentives if 90% or more was achieved.

However, analysts were unconvinced fresh attempts at securing long-term imports by CIL would meet with success since issues responsible for earlier failures had not yet been addressed.

“Many Indian coal mines were operating at one-third of capacity as the rail system cannot move more freight. The situation is very severe,” Coal Secretary Alok Perti said.

According to India’s Planning Commission, the total coal demand by 2017 would be one-billion tons and the Indian Railways would need to build new capacity of at least 700-million tons, including capacity to carry 200-million tons of projected coal imports. To put it in context, the total revenue-earning freight of Indian Railways between April and December 2011 measured 704-million tons.

In a recent approach paper the Planning Commission noted the severe capacity constraints at Indian ports, most of which do not have the minimum draft requirement of 18 m to facilitate the handing of 150 000 DWT Capesize vessels. Most ports were equipped to handle only 75 000 DWT Panamas vessels, except for the two ports of Gangavaram, in Andhra Pradesh, and Mundra, in Gujarat.

Australia, the most favored source of coal imports by Indian power producers, gives priority to Capesize vessels but these cannot be accommodated at most Indian ports.
 

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