DAMODAR VALLEY CORP ALREADY IN DEAL WITH EASTERN COALFIELDS
Use of new generation technology, enforcement of stricter pollution control norms and a marked improvement in efficiency of the power generation sector requiring an assured supply of low-ash coal in much larger volumes than ever before, may finally offer some breathing space for Eastern Coalfields Ltd (ECL), the ailing subsidiary of Coal India Ltd.
ECL, despite having the country's best thermal coal reserves (known as Ranigunj coal), has perennially remained the highest loss making coal company, largely due to low notified prices of coal, not covering even half of the production cost of Rs 3,800 a tonne from underground mines. The barrier was first broken by Damodar Valley Corporation (DVC) in December when it entered into an understanding with ECL for an assured annual supply of a minimum of 0.8 million tonnes of A and B grade thermal coal at an import parity price. The price was fixed in a manner so that DVC could get coal at a price lower than the landed price of imported coal but much higher than the notified price (Rs 1,800 a tonne for the A grade coal), This is over and above the committed linkages to DVC at notified price."The landed cost of similar varieties of imported coal is now available at $85 (Rs 4,000) a tonne. Considering the cost uncertainty in imports due to fluctuations in exchange rate, this arrangement is beneficial to us," a DVC official said. Low-ash coal is required for blending with the low-cost high ash coal -- which constitute the bulk of the total raw material consumption -- and limit the fly-ash generation and disposal. Thermal power stations are governed by strict fly-ash disposal norms adding on to the cost of power generation. While DVC is ready to consume more coal through this arrangement, the mechanism caught the fancy of almost all generation companies, including the State utilities of West Bengal Power Development Corporation Ltd (WBPDCL), Durgapur Projects Ltd (DPL) and the private sector CESC Ltd.
SIMILAR ARRANGEMENTS
"WBPDCL, DPL and CESC have approached us for similar arrangements. The details are being worked out," a senior ECL official "We expect to supply in the current fiscal approximately 4-5 million tonne high quality low ash coal through such arrangements. This is over and above meeting the linkage (now fuel supply agreements) commitments at notified prices," he said.
MORE SALES REVENUE
Sales under the new arrangements are expected to bring home an additional Rs 700-900 crore revenue during the year, enough to wipe out the projected loss of Rs 720 crore (if the entire production is sold at notified price) in 2009-10, the official adds. ECL posted a loss of Rs 1,985 crore in 2008-09. "It is high time that ECL gets remunerative price for producing the best quality coal in the country. Alternatively, the impending situation may sooner or later force it to restrict operations," a CIL official said.
