Coal India's export plans now in cold storage over domestic demand

Coal India’s (CIL’s) plans to export coal to SAARC countries has been put on the back-burner as the state-owned miner is facing a steep challenge to supply adequate coal to domestic power plants.

“Some importers from Nepal have approached us to open a permanent export channel there and we are in talks with them,” a senior CIL official said.

However, keeping the coal shortage in mind, CIL has decided to first cater to the domestic power, steel, cement, and ancillary sectors and would thereafter consider opening a “serious export channel for SAARC (South Asian Association for Regional Cooperation)”.

“The first priority is to feed power plants. We have undertaken many rationalisation initiatives to smoothen the supply to power plants. Moreover, the demand from the steel and cement sector is reviving and we first need to make enough coal available to cater to their demand,” the executive said.

CIL has decided to opt for exports only if it has surplus stocks and a negotiated price with foreign buyers, namely SAARC countries.

Moreover, the company is targeting to reduce import of about 200 million tonnes (mts) of coal by 50 per cent in the ongoing fiscal and has set an internal target of 652 mt output, which is higher than the 630 mt target given by the coal ministry.

However, by the August-end, CIL’s production stood at 216.23 mt and as many as 15 power plants continue to reel under severe coal shortage.

In the early parts of last year, faced with a huge coal inventory of about 69 mt in face of a severe dip in demand from the power sector, CIL had initiated dialogues with Bangladesh, Bhutan and others. Although talks with Bhutan fructified, the total export quantity is extremely limited and is used by cement manufacturers there. 

On the other hand, talks with Bangladesh had an inconclusive end, although the coal behemoth began readying its subsidiary — Mahanadi Coalfield — to supply coal to India’s eastern neighbour from the Paradip port in Odisha to supply 2-3 mt coal.However, the coal crisis hit soon during mid-2017 and CIL began to rout the black diamond to the power plants on a war footing.

Previously, its optimism on the export frontier was strengthened as NTPC, CIL’s largest client, entered Bangladesh by setting up the Bangladesh-India Friendship Power Company (BIFPC), which is a 50:50 joint venture between NTPC and Bangladesh Power Development Board (BPDB) to construct two 660 Mw coal-based power plants at Khulna in Bangladesh at an estimated cost of $2 billion.

On one hand, to finance the JV firm, Indian Exim Bank is expected to provide $1.6 billion as loan, while on the other hand, Bharat Heavy Electricals, another  Indian government-owned firm, was awarded the contract to construct the power plants. CIL was then optimist that its coal would be used by this power project.

“But negotiating an agreement with Bangladesh is a tough job,” the executive said, adding, “Now our objective is to first ensure that domestic coal is available in sufficient quantity and then we can focus on exports.”

The government-owned power sector had earlier stated that this year, 525 mt of coal will be needed as against the requirement of 454 mt in the last fiscal year.

 Till August this year, CIL has supplied 197 mt to the power sector, as against the despatch of 174.8 mt in the similar period of the last fiscal year.

Story so far

Talks opened in 2017 for steady export of coal to Bangladesh and Bhutan
 

Negotiations, however, did not fructify
 

Coal India in talks with Nepal, but will export coal only if it has surplus reserves
 

Power ministry has told Coal India that it will need 525 mt of coal