KOLKATA (miningweekly.com) – In preparatory meetings around the auction of coal supply linkages to user industries, the Indian sponge iron industry has sought to reserve high-grade captive coal mines specifically for the sector.

In an interministerial committee (IMC) meeting held on Tuesday, the sector, while acknowledging that the auction of coal supply linkages to sponge iron plants might not be legally tenable in view of court verdicts, argued that coal allocation to the sponge iron industry should not be grouped with other user industries, such as cement, fertiliser and thermal power plants, as the grades of coal required by sponge iron manufacturers were different to that required by other sectors.

The Sponge Iron Manufacturers' Association (SIMA) pointed out that coal was used as a heating fuel in the power, fertiliser and cement industries, while sponge iron manufacturers used coal in the direct reduction of iron-ore. The grade of the coal used determined the quality of the end-product and manufacturers' production efficiency.

According to minutes of the September 15 meeting, the SIMA called for a sufficient number of high-grade captive coal mines to be set aside to meet the present and future requirements of the sponge iron industry.

The association said that, even if coal supplies were to be allocated based on auctions, overcoming legal hurdles, specific quantities should be earmarked for sponge iron plants.

Such a specific volume should be based on an empirical study of present coal consumption by sponge iron plants and future demand for all plants that entered production post 2007.

India is the largest sponge iron producer in the world, with an installed capacity of 46-million tonnes a year and with as much as 90% of production using coal as a raw input material.

Meanwhile, cement manufacturers, who were also represented at the IMC meeting, held that coal supply auction linkages to cement plants should be considered by the government only after the Coal Ministry ensured 100% fulfilment of current cement industry fuel supply agreements (FSAs) and the finalisation of 175 FSAs for cement manufacturers presently pending with the ministry.

The Cement Manufacturers’ Association said that most manufacturers had invested in captive power plants to ease pressures on the commercial electricity grid and reduce the cost of production. The association called for coal to be supplied to these captive power plants on the same terms and conditions as those applicable to thermal power plants.

However, a Coal Ministry official has indicated that this suggestion might not find favour with government, as coal supplies to thermal power plants were priced differently, owing to the regulation of electricity tariffs by government. The cement producers, on the other hand, had the flexibility of passing on higher energy costs to consumers.