CIL pushes high-grade coal at lower price to boost offtake

Coal India's (CIL) recent decision to bring down the effective price of higher-grade coal, while increasing the price of the lower grades points to the miner's intention to push up the offtake of higher grades, while making more money by selling the lower grades at higher prices.

The higher G1-G5 grade coal that has gross calorific value (GCV) of 5,800-7000 kilo calorie per kg is dug out of underground mines in which the company has invested heavily over the years. However, power-plant boilers are not equipped to take such high GCV coal.

Although about 40 million tonnes of higher-grade coal are produced annually on an average, it has low demand mainly confined to power plants in West Bengal, Bihar and Jharkhand, which have the capacity to absorb the higher GCV.

"We have invested heavily in the underground mines and cannot let the high quality produce lie idle. Stockpiling it will lower its quality, resulting in a financial loss," a Coal India executive said.

Coal India is adopting systems like continuous miner technology and longwall technology with the super block concept wherever feasible, besides undertaking thorough geo-mining investigation before formulating projects.

Apart from skilling its workforce, Coal India is replacing manual loading with machines like side discharge loaders and load haul dumpers in conjunction with belt conveyors.

"We are creating adequate infrastructural facilities for ventilation, bunkerage, coal evacuation, out-bye transportation, mechanised tunnelling, shaft sinking, and roof supporting," the executive said.

Last month, Coal India lowered the effective prices of the G1-G5 grades by 1.79-29.16 per cent, while raising the prices of G6-G17 grades by 13.40-18.75 per cent. This has resulted in average coal prices climbing 6.29 per cent, which will enable the company to earn an extra Rs 3,234 crore.

Coal India had earlier decided not to charge a premium from buyers for the higher-grade coal in case the requirement exceeded 90 per cent of the fuel supply agreement.

The price revision, company executives said, would not only help in bringing parity with global coal prices but also aid Indian power companies to adapt to the long run.

"Over the next 10 years, we will have to shift to underground mining as the opencast mines will deplete," another Coal India executive said. Higher-grade coal would be in abundant supply then, he added.

Coal India's 256 underground mines, which eat up 60 per cent of its annual labour costs, contribute eight-nine per cent to the company's total output, while 174 technology-intensive opencast mines contribute over 91 per cent to the total annual production. Company executives said the scope for maximising technology was limited in the underground mines.

The country does not have large contiguous underground coal deposits, which makes it difficult to deploy the longwall mining technology. This method was first introduced during the 1970s and 1980s but did not yield satisfactory results then.

After this, Coal India focused on opencast mines, which produce coal of lesser gross calorific value. The country's power-plant boilers were also aligned to this type of coal, making them dependent on the G6-G17 grades.

"We need to procure equipment for underground mining from domestic companies. If the equipment is procured from foreign players and a snag develops, it takes a long time to get spares," an executive said.

Bharat Earth Movers has been supplying equipment to Coal India. The company intends to procure 5,263 items of equipment over 2016-2020 but wants the gear tailored for underground mines.