TCI rides on green missive to push for coal washing

Says new rules would impact two-thirds of Coal India production, improve pricing power and profitability of the miner

The amendments proposed by the Ministry of Environment and Forests have come as a shot in the arm for UK-based hedge fund, The Children’s Investment fund (TCI), in its ongoing tussle with the coal ministry. TCI holds around one per cent in Coal India Ltd (CIL), the state-owned monopoly coal producer, and has been pushing for mandatory washing of coal produced by CIL to improve the pricing power and profitability of the miner.

In a notification issued earlier this month, the green ministry has put in public domain the draft rules to amend the Environment (Protection) Rules, 1986 inviting comments. “Notice is hereby given that the said draft rules will be taken into consideration by the Central Government on or after the expiry of a period of sixty days,” the notification said.

According to the draft rules, coal-based thermal power plants that fit a certain description “shall use raw or blended or beneficiated coal, with an ash content not exceeding 34 per cent and gross calorific value (GCV) not less than 4,000 Kcallkg on a daily average basis.”

“The implementation will have a material impact on the thermal coal washing requirements for Coal India as soon as Jan 2014. Around two-third of Coal India’s thermal coal has GCV below 4,000, of which 75 per cent is sold to thermal power plants. This translates into 50 per cent of the total coal output that needs to be washed,” said Oscar Veldhuijzen, partner, TCI, in an email.

He added this would be very favourable for the environment, de-bottlenecking of the railway system and greater consistency of coal which would help the power stations and Coal India’s profits.

Mandatory washing of all coal produced by Coal India is one of the long standing demands of TCI. TCI says while the coal washing would help Coal India price coal 50 per cent more, the cost of power for end consumers will go up by “only eight per cent”.

According to TCI, currently, 30-50 per cent of CIL’s thermal coal is ash and dirt that should be washed. Coal washing only marginally increases the cost of electricity while the environmental benefits and benefits to the power companies are substantial. “Coal India has significant strength in its argument for appropriate pricing of the better quality coal, which it delivers from coal washeries. The power industry would benefit enormously, in terms of operational efficiency, saving of transportation cost, and above all by the appropriate management of ash disposal and environmental mitigations,” TCI had said earlier.

According to the MOEF notification, the draft rules would cover any standalone thermal power plant located beyond 500 kilometers from the pit-head and any captive thermal power plant, of installed capacity of 100 Mw or above, and located beyond 500 km from the pit-head.

It will also cover any captive power plant above 100 Mw or standalone thermal power plant “located in urban area or ecologically sensitive area notified by the central government or critically industrial polluted cluster or area irrespective of its distance,” the draft rules said.