4 Coal Insights, March 2015

COnTEnTs

6 Steam coal prices volatile in March 8 Coking coal offers continue downtrend in

March 10 India’s coal production to cross 600 mt in 2014-

15 14 India’s coal import crosses 200 mt in 2014-15 18 New CSA allotment policy on anvil from April at

WCL? 20 India’s cement output up 3% in January m-o-m 24 SBI Cap suggests methodology for auction of

linkages 32 Budget offers a mixed bag for coal and infra

sectors 44 Tata Power aims to develop another 450 MW

project in Bhutan 45 Corporate updates48 US power sector coal use to fall 2.2% in 201549 Is China resuming imports from South Africa?50 Polish mining equipment makers keen to re-

enter India51 Coal, lignite continue to be Poland’s strategic

fuel for power53 Newly-formed Hydrotech SA eyes Indian

market57 Poland’s Damel SA eyeing Indian market for

selling its electric motors62 Poland’s Famur SA eyes big in India64 Social buzz65 Privatisation of major ports needed to improve

efficiency67 Railway’s Feb coal handling down almost 7%

m-o-m68 Rail budget hikes coal freight rates by 6.3%69 Supply data70 E-auction data72 Port data

Publisher’s Statement

Statement about ownership and other particulars about Coal Insights required to be published under Rule 8 of the Registration of Newspapers (Central) Rule, 1956.

FORM IV (See Rule 8)1. Place of publication : Kolkata2. Periodicity of publication : Monthly3. Printer’s Name : CDC Printers Whether citizen of India : Yes4. Publisher’s Name : Rajarshi Chattopadhyay Whether citizen of India : Yes Address : Tata Centre, 43 J L Nehru Road Kolkata 700071

5. Editor’s Name : Rakesh Dubey Whether citizen of India : Yes Address : Tata Centre, 43 J L Nehru Road Kolkata 7000716. Names and addresses of : mjunction services ltd individuals who own the Tata Centre, 43 J L Nehru Road newspaper and partners or Kolkata 700071 shareholders holding more than one per cent of the total capital

I, Rajarshi Chattopadhyay, hereby declare that the particulars given above are true to the best of my knowledge and belief. Sd/- Rajarshi ChattopadhyayDated: March 2015 Publisher

58 | COuNtRy FOCuS650 metres into the earth and back!A visit to Poland’s underground mines raises questions about India’s backwardness in mining technology.

41 | INtERVIEwDomestic market looks optimistic The growth in coal sector is fine, but conveyor belt industry faces challenges from within, says Smita Pandit Chakraborty.

66 | LOgIStICSIndia’s major ports on a spree to increase draftThe competition to attract bigger vessels will raise Indian ports’ efficiency levels.

34 | COVER StORywCL sets 60 mt output target by 2020The miner takes up 42 new projects and draws up ‘Vision 2020’.

26 | SpECIAL FEAtuRECoal forwardingAfter coal block auction, here comes auction of linkages; but will costlier coals derail ‘Make in India’ drive?

10 Coal Insights, March 2015

fEATuRE

Coal Insights Bureau

India’s coal production in 2014-15 may cross 600 million tons (mt), bringing relief to the government and the coal

user industries. Going by the trend for the first ten months (April-January), domestic coal production is expected to end up with a figure of around 600-605 mt in the current fiscal year. This would be lower than the targeted 630 mt, of course, but a healthy 6% growth on yearly basis – the highest growth in many years.

During April-January, 2014-15, India’s coal output stood at 485.12 mt, up 8.23 percent compared to 448.21 mt produced during the corresponding period of 2013-14, according to provisional data available with Coal Insights. However, production during April-January, 2014-15 was lower than the target of 505.10 mt set for the period.

Production in the month of January 2015 stood at 58.08 mt, up 1.66 percent from 57.13 mt in January 2014, the data showed. Coal output in January 2015 fell significantly short of the targeted 61.07 mt and was also below the December production of 58.37 mt.

For financial year 2014-15, India’s coal production target stands at 630.25 mt of which 507 mt is to be produced by Coal India, 55 mt by Singareni Collieries Company Ltd (SCCL) and 68.25 mt by captive coal mines.

India’s coal production, April-January (in mt)

* Figures include Meghalaya production

0

10

20

30

40

50

60

70

2012-13 2013-14 2014-15

Captive blocks’ output up 23% Coal production from the captive blocks in India rose 22.8 percent to 6.14 mt in January 2015, compared to 5 mt produced in the corresponding month of 2014. In January, production from captive block surpassed its monthly target of 5.69 mt.

On a month-on-month basis, however, coal output from captive blocks fell slightly

from 6.29 mt recorded in December 2014. In November, output from captive blocks stood at 5.63 mt.

During April-January, 2014-15, coal production from the captive blocks stood at 55.56 mt, up 29.84 percent from 42.79 mt recorded in the same period of the last fiscal.

The target for the first 10 months was 56.87 mt, which means output from

the captive blocks during the period fell short by 1.31 mt.

Production target for the captive blocks for the month of January was 5.69 mt, same as in each month from June to December. The annual production target for the captive blocks in 2014-15 stands at 68.25 mt.

CC output falls 6.9% in JanIndia’s coking coal (CC) production in January 2015 fell 6.95 percent to 5.09 mt against 5.47 mt produced in the same month of 2014, according to the provisional data.

On a month-on-month basis too, coking coal production in January fell from 5.19 mt produced in December 2014, the data revealed.

India’s coking coal output for the month of January was slightly down from the target of 5.51 mt. The annual target for coking coal production in India is set at 57.99 mt for 2014-15.

In the April-January period of the current financial year of 2014-15, India’s coking coal

India’s coal production to cross 600 mt in 2014-15

fEATuRE

Arindam Bandyopadhyay

Proving the trade pundits wrong, India’s coal imports surged to more than 207 million tons (mt) in the first 11

months of 2014-15, a whopping 27% growth over the same period last year, according to provisional data available with Coal Insights. The data obtained from 31 major and minor ports handling the bulk of coal cargo further shows that total coal and coke imports till February was around 217 mt. However, the February data is yet to be revised.

Imports of thermal coal stood at around 170.7 mt during April-February, 2015, while that of coking coal was 37 mt.

The huge increase in imports proved many a trade analyst wrong as the general perception was that imports would remain

restricted in 2014-15 primarily due to logistics bottlenecks. Later on, the increased domestic production in later months was thought to have dampened the appetite for imported coal.

“Logistics constraints in India will be hampering growth in Indian coal imports in 2014-15,” an industry analyst had told Coal Insights at the start of the year. There were others who cited the “pile-up of coal stocks” at the ports and the clearance issues as possible reasons for lack of growth in imports expected during the year.

“Till the time this situation improves, fresh imports will be restricted to inventory replacements only,” an industry player had said during December 2014.

Even the conjecture that increased domestic production would restrict imports

did not hold water as figures for January-February showed a robust growth.

Imports of thermal and coking coal jumped 31 percent in February from a year ago, as new power plants ramped up output. Shipments through the 31 coal-handling ports in India stood at 17.94 mt in February compared with 13.72 mt a year ago. Imports in January 2015, however, were much higher at 20.29 mt, compared with initial estimates of 15.79 mt, according to the data based on monitoring of vessels and information from shipping companies.

As it stands now, total coal imports may touch 215 mt in the current year. Coal and coke imports may go up to 225-230 mt.

The current year’s imports may elevate India to the second spot among the major coal importing countries in the world, toppling Japan. India was a marginal importer of coal till as late as 2004, but the ambitious power expansion programme since 2003 saw dramatic growth in coal demand, resulting in increased dependence on imports. In fact, both China and India witnessed their imports picking up from around 2006. India exceeded South Korea in 2012 to become the third largest in the

India’s coal import crosses 200 mt in 2014-15

14 Coal Insights, March 2015

26 Coal Insights, March 2015

Coal forwarding

Madhumita Mookerji

In India, a lot can happen over coal and indeed the last few months have been quite action-packed. In a far-reaching move and which could

be a game-changer for the Indian economy, the government recently passed the Coal Mines Special Provisions Bill, deftly harnessing the support of the regional parties in the Rajya Sabha, where it is in a woeful minority.

The law empowers the government to allow private Indian and overseas companies to mine and sell coal in the open market, ending 40 years of monopoly enjoyed by state-run Coal India Limited (CIL) and its cousin Singareni Collieries Company Limited (SCCL).

M e a n w h i l e , auctioning of 33 of the 204 blocks in the first round got over recently with an upbeat government declaring that the sale proceeds could cross a whopping `200,000 crore. There was also an additional bonus from Piyush Goyal, Minister of State for Power, Coal & New and Renewable Energy (Independent Charge), who assured the Rajya Sabha that the auctions will not impact prices of coal in the country.

He further said that reduction in coal/

fuel costs of `97,000 crore is expected which will give immense relief to consumers, particularly the poor.

“This will benefit Chhattisgarh, Jharkhand, Madhya Pradesh, West Bengal, Odisha and Maharashtra enormously over the years. The money will be spent on developmental activities to meet the

aspirations of the people. This will have a game-changing impact on state finances and ensure that development in these states occurs on a fast track,” he said.

Goyal also said the government was creating ways to meet demands of 8-10 crore women who need 2-4 kg of coal but procure the fuel at high premiums of `20-25/kg.

sPECIAL fEATuRE

The last couple of months have kept the Ministry of Coal on its toes, what with the end of the first round of auctions, preparations for competitive biddings for more blocks and

linkage/LoA auctions and lastly, passage of the Coal Mines Special Provisions Bill in Parliament. The last one probably offered the Narendra Modi-led government a huge relief since it is a minority in the Upper House (Rajya Sabha).

“The onus is on us to ensure that they receive cheap coal for cooking and other domestic uses.” Similar allowances, he said, are being made for small scale industries such as brick kilns, those operating small refineries and boilers.

The minister said, coal auctions will also kick-start the investment cycle and make the Indian economy more competitive. “The ‘Make in India’ programme will receive an impetus and millions of jobs will be created. It will also assuage the concerns of bank NPAs. …,” he wrote on his Facebook page.

The auctions took place across two categories of blocks, those already producing (18) and those ready-to-produce (13) across a span of three weeks or so. The period saw enough action with bids touching as high as `3,502 from HINDALCO for one of the Gare Palma blocks. The lowest winning bid came from Jindal Power Limited at ̀ 108/ton for Gare Palma IV/2&3. This bid, however, has come under the government’s scanner.

The government is now preparing to auction 16 more mines by April-May while the coal Ordinance lapses on April 5. But by the time the last bid was heard, controversy erupted with regard to 9 blocks with whispers of cartelisation doing the rounds. Putting an end to the mystery whipped up over the allegetions, Coal Secretary Anil Swarup tweeted late on March 21 that “bids for Gare Palma 4/1, 4/2, 4/3 and Tara coal blocks not accepted.”

Acting pricey However, even as the gong went off for the last time in the first round, a few echoes are

still reverberating across the corridors of India Inc. Will the winning bid prices be viable in the long run? Will the next phase of coal reforms in the form of auctioning off of linkages and letters of assurance be prudent for the industry? What sort of an impact will the government’s policies have on commercial mining?

WCL sets 60 mt output target by 2020

Coal Insights, March 201534

COvER sTORy

Rajiv Ranjan Mishra, the Chairman-cum-Managing Director at Western Coalfields Limited (WCL), a mini-

ratna Category I PSU, (Government of India) and a subsidiary of navratna public sector undertaking Coal India Limited, came into being in 1975 with its head office at Nagpur in Maharashtra. It is engaged in mining through 79 mines spread in its 10 areas located in Madhya Pradesh and Maharashtra and marketing of coal with a strong customer base that comprises power, cement, steel, chemicals, fertilisers, paper and brick kilns etc in the south, north and central India.

Prior to joining WCL as CMD on October 11, 2014, Mishra had worked in Central Coalfields Limited as Director (Personnel) and at the Central Mine Planning and Design Institute Limited (CMPDIL), Ranchi as Head of Personnel & Administration.

Known for his team-building capabilities and strategic outlook, Mishra is now a man in hurry as he has set his goal to augment coal production by 50 percent by FY2019-20 to reach an annual output of 60 million tons (mt) against the present level of 41 mt per annum. The goal attains significance if placed with the fact that the Indian coal sector has been historically growing in single digit percentage per annum. In a wide ranging interview, Mishra tells Rakesh Dubey of Coal Insights about his vision, mission and stragegies.

Coal Insights, March 2015 35

COvER sTORy

You took over as the Chairman-cum-Managing Director of WCL more than 6 months back. What has been your assessment of the company’s prospects and challenges?I joined WCL in October 2014. The company had produced 39.73 million tons (mt) during financial year 2013-14. This financial year (2014-15), we will produce marginally over 41 mt, thus registering a growth of 5.7 percent against last year.

Considering the challenges and prospects, we have already set a way forward for the sustainable growth on the following issues:

♦ Long-term coal production plan from existing mines, ongoing projects and future projects has been finalised;

♦ 42 new projects/blocks of the rated capacity of 82.01 mtpa have been identified in the command area of WCL;

♦ Erstwhile unviable coal projects of the company on account of not meeting the investment criteria of 12 percent internal rate of return (IRR) have been revisited and many projects have been brought within the ambit of viability by revising the older norms for formulation of the project reports, capacity enhancement in some of the projects wherever possible and amalgamation of adjacent projects.

♦ In order to achieve quality parameters, we have planned the largest project of the company, that is the Penganga OC, with a rated capacity 4 mt, with the deployment of surface miners. The mine is slated to be inaugurated on March 22, along with two projects, namely Makardhokra OC (2 mtpa) and Bhanegaon OC (1 mtpa) being dedicated to the nation, at a function organised at Wirur, Gadegaon, Wani area, district Chandrapur, Maharashtra.

♦ Fulfil social responsibility and also undertake sustainable environment mitigation measures.

What are the new initiatives you are working on currently?We are primarily working on initiatives for creating an environment conducive to implementing the 42 projects with the active involvement of all the stakeholders. We are working on the following areas:

♦ Massive consultation drive with all the stakeholders, including managers, unions, workers, government agencies (states/Centre), consumers, contractors/vendors/transporters, regulatory bodies, local bodies, villagers in the surrounding areas of our operational areas are on for taking them on-board and sensitising/re-orienting them for mutual trust and creating a conducive environment of growth;

♦ Initiatives for technology up-gradation in underground mining and adopting information technology for improved productivity and system improvement;

♦ Initiatives for team-building and developing human capital, so that the cohesive team of the WCL family is well prepared to shoulder future responsibilities;

♦ Vision -2020 document for the company has been prepared and formalised for implementation with an objective to achieving 60 mt of coal production

by FY2019-20 and 100 mtpa in the next phase. All the departments of the company have submitted detailed action plans for implementation, focused on schedules and accountability with the scope of innovative process improvement and refinement.

♦ Young generation executives (GenNext) have been mobilised to form a cohesive force in the decision-making process through large-scale brainstorming. Transformation of GenNext into future leaders to shoulder responsibilities and fill the generation gap in the management echelon has been set in the motion and has been identified as “WCL – Model”.

♦ The R&R policy has been modified liberally for facilitating faster physical possession of land.

♦ We have already implemented several IT initiatives, such as biometric attendance (HQ), file tracking system, official e-mail

The contribution of WCL to the 1 billion tons production programme of CIL by 2019-20 is 60 mt, which is almost 19 mt more than the present

production level of above 41 mt in 2014-15 with a growth of 42 percent. For achieving 60 mt by 2019-20, we have set our year-wise coal

production plan as thus: 2015-16: 45 mt; 2016-17: 48 mt; 2017-18: 50 mt; 2018-19: 55 mt and by 2019-20: 60 mt.

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Coal Insights, March 201574