Coal India Ltd. to focus on coal contracts, instead of buying mines

The government will now prioritise getting contracts for coking coal imports at competitive prices instead of trying to buy coal mines, as it was planning earlier. “The plan is to not acquire assets but only freeze orders in advance to get coal at competitive prices,” said Union Coal Minister Pralhad Joshi to Business Standard, on the sidelines of the 8th Asian Mining Congress and Exhibition.

Coal India Chairman Anil Kumar Jha said while getting the contracts is a priority, the company will consider picking up stakes in coking coal companies instead of an outright purchase.

Till now, Coal India has been considering whether to buy coking coal mines or pick up stakes in companies in Australia, Canada, the US and Russia. It is also about to float a tender to select merchant bankers who will guide Coal India through the process.

Coal minister Joshi said the decision was been taken to protect the forex outflow, which stood at Rs 2.71 trillion last year. In the same year, India had imported 235 million tonnes (mt) of coal; 50 mt of it was coking coal.

Coking coal is scarce in India and is a key ingredient to make steel. With the government keen to develop infrastructure, steel availability and the cost of production — which will impact prices — is crucial.

Around 10-15 per cent of the 55-60 mt demand for coking coal in India is met by domestic supply, while the rest is catered to via imports, from Australia, the US, Canada and other countries.

Estimates suggest that by 2030, the steel sector will be demanding 180 mt of coking coal when steel production is targeted to reach 300 mt. The US holds the largest recoverable coal reserves in the world at 230 billion tonnes (bt), while production hovers at about 685 mt every year. Russia, which holds the world’s second-largest reserves at 160 bt, produced 433 mt of coal in 2018.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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