AP coal supply fails to meet growing demand

Despite a spurt in imports and reasonable growth in indIgenous production the demand-supply gap for coal is increasing in the state.

The present annual demand for coal is estimated to be at around 40 million tonnes in and around Andhra Pradesh as against the expected production of 33.5 million tonnes by Singareni Collieries for the current financial year.

Main reasons cited for this situation are the expansion of existing power plants, cement companies shifting to local coal for their captive power generation requirements and the growing demand from sponge iron companies which are coming up in the state.

"Without opening new mines it is impossible to match the current demand," said Dr TRK Rao, executive director of Singareni Collieries Company Limited(SCCL).Beside the increases demand from the existing thermal stations due to capacity addition, the other major demand for coal is coming from sponge iron industries, which are coming up in a big way in Andhra Pradesh due to the abundant availability of limestone, which is essential for sponge iron production.

A cut in duties on coal imports is expected to not impact either topline or bottomline growth at SCCL. The cement companies in Tamil Nadu and Kerala are also turning to SCCL because of the steep increase in sea freight and non-availability of ships due to the unprecedented import of iron ore and other industrial raw materials by China.

Even though the coal prices of SCCL are considered to be higher when compared to Mahanadi of Thalcher in Orissa, it turns out to be the cheapest when compared to imported coal.

The per tonne landed price of coal at Chennai port is said to be between Rs3000 to Rs 4,000 while the price of the highest grade coal offered by the SCCL is Rs 1,470 per tonne. The 'G' grade coal, inferior quality coal, is available for just Rs 600 per tonne. G grade coal is used by the brick industry, limestone kilns and some few thermal power plants.

Companies located near ports are major importers of coal in the country. The total volume of coal imports in the country is estimated to be around 15 million tonnes of which about 50 per cent is non-coking coal. According to Dr Rao, coal imports in to Andhra Pradesh is almost zero

"Without increasing the prices for the last three years, we could achieve higher profits by improving productivity" Rao told Business Standard. SCCL has achieved a production of 33.24 million tonnes in 2002-03, recording an eight per cent growth.