NEW DELHI: New bids for power projects are likely to allow pass through of fuel costs, but with a caveat. The Power Ministry is planning to further increase the cap on the upward variation of fuel costs.
In other words, the bid document will prescribe a percentage beyond which a developer cannot pass through the fuel cost to the consumer. Any pass through will result in higher electricity tariff for the consumer. Currently, the cap varies from project to project and goes as high as 30 per cent.
The new cap will be introduced in the bidding norms to be implemented for projects under the Twelfth Five-Year Plan. The move is aimed at preventing financial uncertainty that several units in the country are facing.
Industry watchers say policy changes inIndonesiahave raised the cost of imported coal. This was not expected at the time of bidding and the entire increase in fuel cost cannot be passed on to the buyer, according to current power purchase agreements (PPAs).
“It is seen that fuel cost have risen more than what was anticipated during bidding for many projects. If this cost is not passed on to the buyer, the project would become financially unviable. So, the cap on escalation of fuel cost would be raised,” a source said.
The Power Minister, Mr Sushilkumar Shinde, had told Business Line that “From the 12th Plan, we are bringing it in the bidding document itself for pass through. Otherwise, no developer would come to this country. Why should they invest their money?”
In a PPA there are two broad elements – energy charge and capacity cost. Energy charge would mean fuel cost that may be coal or gas, while capacity cost includes operation and maintenance, depreciation and interest costs, among others. All these elements are again classified into those whose cost can escalate and others where no cost escalation is allowed.
At the time of bidding for projects, the power producers on the basis of all these costs derive a weighted average levelised tariff.
The company that offers the lowest tariff wins the bid to set up the project. The cost escalation is measured according to CERC guidelines and prevailing rate of inflation.
However, each bidding has a cap on the total escalation cost
PM SETS INFRASTRUCTURE TARGETS TO REVIVE SENTIMENT
NEW DELHI: The government on Wednesday sought to revive investor sentiment by announcing ambitious targets for the infrastructure sector in the current financial year in a bid to lift flagging growth, amid a lack of success in pushing through key economic reforms.
Prime Minister Manmohan Singh reviewed and approved targets for various infrastructure sectors such as roads, power, railways and aviation at a meeting convened by him.
Singh said the government will take all possible steps to revive business and investor sentiment.
“We must work to create an atmosphere which is conducive to investment and to removing any bottlenecks to growth. We as a government are committed to taking the necessary measures to reverse the present situation and reviveIndia’s growth story. We are aware that we have to act on multiple fronts to achieve this and we will indeed do all that is required of us,” he was cited as saying in a release.
While railway minister Mukul Roy was conspicuous by his absence at the crucial meeting, Singh set targets in the sector only for public private partnership (PPP) projects as regular operational and investment targets are known.
The Sonnagar-Dankuni stretch of the dedicated freight corridor and the elevated rail corridor in Mumbai with a total investment of Rs. 20,000 crore will also be awarded as a PPP project in 2012-13.
The proposal and approach for a high-speed bullet train corridor between Mumbai and Ahmedabad will be finalized, while concessions for two locomotive factories at Madhepura and Marhowra are also to be awarded this year. Railway Board chairman Vinay Mittal said bid documents had not yet been finalized for the two plants.
The elevated rail corridor and the bullet train projects were part of recommendations by the Sam Pitroda committee in March this year. Mittal said feasibility studies have been completed for these projects.
For the smooth supply of coal, a major concern last year, the government has set a target of dispatching 470 million tonnes (MT) of the fuel to all sectors by Coal India Ltd, an increase of 8.8% from last year. Of this, it will dispatch 347 MT of coal to the power sector against 312 MT dispatched last year, an increase of 11.2%.
Recognizing that the economy is “running into more turbulent weather”, Singh said at the meeting that there was a need to revive business and investor sentiment. “There is a need to give a thrust to investment, both public and private. There is a need to create an atmosphere which is conducive to investment and to removing any bottlenecks to growth.”
Singh said the government is not only aware of the challenges but is committed to taking the necessary measures to reverse the situation and reviveIndia’s growth story. “These (measures) will turn aroundIndiaand take it back to a growth path of 9%,” he added.
The Prime Minister said the global economy was passing through difficult times with the euro zone being cause for all-round concern. “There is a flight to safety taking place globally. Then there has been the persistent problem of rising international petroleum and commodity prices in the last few years. Domestically, rising demand, along with supply side bottlenecks have contributed to inflationary pressures,” he added.
For ports, a total capacity of 360 million tonnes per annum (mtpa) will be awarded this year with an investment of Rs. 35,000 crore. Two new major projects in Andhra Pradesh andWest Bengalare set to be taken up at a cost of Rs. 20,500 crore. The target for the year is a total 42 projects.
Road projects for a total 9,500 km will be awarded, an increase of 18.7% over last year. Investment in the sector will rise by 73.6%. Another 4,360 km of roads will be awarded for maintenance under the operate, maintain, transfer system for the first time, the government said.
The government plans to award contracts for new airports at Navi Mumbai,Goaand Kannur. “Three or four” of the airports atLucknow,Varanasi,Coimbatore, Trichy andGayawill be made international airports, the government said.
The government also aims to finalize an airline hub policy with such centres being operationalized atDelhiand Chennai.
“By end-July 2012, additional PPP projects would be finalized for 10-12 existing airports and for 10-12greenfieldairports. These would be awarded during the year,” the statement said.
In the power sector, 17,957 mega watts (MW) of capacity addition has been targeted. This will include 2,000 MW to be added by the Kudankulam atomic power project. The power generation target has been raised by 6.2% to 930 billion units.
POWER CAPACITY ADDITION TARGET LIKELY AT 90,000 MW
NEW DELHI: The new power generation capacity addition during the 12th Plan is likely to be pegged at 90,000 MW. The nodal Power Ministry and Planning Commission were at loggerheads over this target.
According to Power Ministry, the achievable capacity addition was 76,000 MW, while the Plan panel wanted the target of 1,10,000 MW.
“National Development Council (NDC) will finalise Twelfth Plan target by August-September. New power generation target is finalised at 90,000 MW,” a source said.
COAL INDIA CAN ASSURE ONLY 60 PER CENT COAL SUPPLY TO POWER PLANTS: POWERMIN
NEW DELHI: In a setback to thermal plants facing fuel shortage, CoalIndiahas informed power producers that it can assure only 60 per cent of supply and would “gradually” reach the 80 per cent mark in the coming years.
“CoalIndiais saying 80 per cent coal supply to power plants is not possible, they can only supply up to 60 per cent and would increase it to 80 per cent in the next four years,” a Power Ministry official said.
This proposed arrangement would be applicable for thermal power plants commissioned after March, 2009.
Meanwhile, the Power Ministry is insisting on a minimum supply level of 65 per cent, if CoalIndiafinds its difficult to meet the mandated commitment of 80 per cent.
“At least 65 per cent (supply) should be there, failing which Coal India should be penalised… and it should ramp it up to 80 per cent in the next four years,” the official said.
Prime Minister’s Office, in March, had asked CoalIndiato sign Fuel Supply Agreements (FSAs) with power generation companies at minimum supply level of 80 per cent of total requirement.
Under the pact with power companies, the coal producer will have to commit itself to supply at least 80 per cent of the fuel to these users.
“The spirit of the directive was to arrest the uncertainty of coal supply to power plants,” the official said.
On the other hand, CoalIndiahas suggested a 0.01 per cent penalty on not delivering the fuel in time, but the penalty would only be applicable after three years of signing the pact.
NTPC and many other power companies have refused to ink fuel supply pacts with CoalIndia, disagreeing with introduction of some clauses in FSAs.
At present, 14 power utilities have signed the FSAs with CoalIndia.
Coal major, which produces 436 million tonnes presently plans to enhance this capacity to 464 million tonnes by the end of the current financial year (2012-13). It has also earmarked a supply of 347 million tonnes for the power sector.
BSEB PURCHASES POWER AT HIGH RATE
Patna: To minimize the gap between demand and supply, Bihar State Electricity Board (BSEB) is purchasing 400MW electricity from the open market at the rate of more than Rs 4.30 per unit to supply the same to its consumers at the rate of Rs 2.80 per unit.
According to official sources, BSEB got 200MW power from Ahmedabad-based Adani Powers Limited, one of the largest private sector thermal power producers in the country, through a midterm agreement at the rate of Rs 4.41 per unit. The agreement is valid till December 31, 2015. The BSEB has got the remaining 200MW of electricity from NTPC Vidyut Vyapar Nigam Limited at the rate of Rs 4.31 per unit. BSEB spokesman H R Pandey said the power board was not charging any extra amount from its consumers for paying higher price to the private firms. “We are still facing acute power crisis in the state, including in the capital. We are getting only 1,500MW of power, including from the open market, against the state’s overall demand of around 3,000MW during peak hours,” Pandey told TOI.
Bihar’s lone thermal power station at Barauni (unit 6&7) in Begusarai district has been shut down for renovation and maintenance work till the end of this year. Similarly,Bihar’s joint venture power plant (unit 1&2) at Kanti in Muzaffarpur, has also been shut down for renovation and maintenance since November 3 last year. This plant is also not likely to start power generation till December. In such a grim scenario,Biharreceived approximately 1,100MW of power only on Wednesday from the central sector as against its sanctioned allocation of 1,772MW. In addition, the state received 400MW of power from the open market. In total,Biharreceived 1,500MW of power on Wednesday as against its peak hours demand of nearly 3,000MW.
In order to minimize the impending crisis during summer, BSEB had to buy additional 400MW of power through power trading agreement at the premium rate. Out of the approximately 1,500MW of power available, the never-ending demand of the Patna Electric Supply Undertaking (PESU) has already crossed 500MW during peak evening hours. “We are unable to meet the ever-increasing demand of the state capital,” he said.
“The city’s demand for power grows more than 15% every year. With the substantial increase in the number of multi-storey apartments, commercial complexes and shopping malls, the city’s power requirement has increased manifold. Air coolers have been replaced by ACs”, said a senior PESU official. As a result, prolonged power cuts in almost all the localities is common. Complaints of local power fault, voltage fluctuation and replacement of transformers are endless.
POWER: BRPL GOT UNDUE LOAN, DID NOT PAY PENALTY ON DEFAULT
NEW DELHI: The CAG report has also dug up dirt in the power sector. It alleges that the government favoured Reliance-backed BSES Rajdhani (BRPL) not only while granting it a loan under the power stabilization fund (PSF) but also by not charging penal interest of Rs 3.67 crore when BRPL failed to repay the loan on time. The report takes Delhi Transco Ltd to task for not imposing a penalty of Rs 80.91 lakh on a contractor for delay in completion of work, and states that Indraprastha Power Generation Company Ltd ( IPGCL) suffered a loss of Rs 22.64 lakh due to delay in awarding a contract for sale and lifting of fly-ash.
The report states that deficiencies were noted in the use of PSF by the holding company Delhi Power Company Ltd (DPCL). Under the rules, PSF funds could be loaned to distribution companies Tata Delhi Power, BRPL and BYPL in the ratio of 29.18%, 43.58% and 27.24%. “It was, however, observed that DPCL…gave the entire short term loan of Rs 400 crore to only BSES Rajdhani,” says the report. While the loan tenure was capped at one year, BRPL was given an extension after it defaulted. Also, it was not charged penal interest at the rate of 2.75% for eight months. As a result, “DPCL faced a financial crunch,” the report says. The interest lost amounted to Rs 3.67 crore. “The government stated that they cannot charge interest as it would affect consumers (sic).”
Delhi Transco also failed to penalize a slow contractor, the report notes. M/s Kamal Builders was awarded a contract worth Rs 838.25 lakh for supply and filling of fly ash and earth at the Mundka sub-station. The work was to be completed in six months. However, the contractor was given extensions first on December 22, 2008 and then on March 26, 2009. Although the contract allowed for a penalty at the rate of 1% of the awarded value for each day, “On both occasions, the contractor was not penalized for the delay and undue benefit was given by not imposing penalty of Rs 80.81 lakh”.
The report faults Indraprastha Power Generation Company Ltd (IPGCL) for delay in awarding a contract for sale and lifting of fly-ash. The company took six months just to decide and start the process for inviting bids. Although approval was accorded on March 26, 2009, tenders were invited in September 2009 and the contract was finally awarded on October 23, 2009. “Due to delay in decision making and finalization of tender and contract, the company lost the opportunity to earn additional revenue of Rs 22.68 lakh,” says the report.
ALSTOM T&D INDIA BAGS RS 41 CRORE SUBSTATION CONTRACT
NEW DELHI: Alstom T&D India on Wednesday said it has bagged a Rs 41 crore contract from Power Grid Corporation of India Ltd (PGCIL) for supply, erection of a substation.
The 400/220 kV high voltage alternating current substation at Daltonganj, Jharkhand will be delivered from the company’s manufacturing facilities at Padappai in Chennai, Pallavaram in Chennai, Hosur in Tamil Nadu and Noida, a company statement said.
Alstom T&DIndiamanaging director Rathin Basu said the Daltonganj substation is critical for the eastern grid.
Jharkhand is a mineral-rich state but is facing a shortage of power generation and an unreliable power transmission system. With the eastern regional strengthening scheme, the state will experience a reliable power transmission network to support the region’s growth and development, the statement said.
GE ENERGY TO LOCALISE PRODUCTS FOR INDIA’S WIND ENERGY SECTOR
BANGALORE: The US-based GE Energy is focusing on localising products for the Indian wind energy sector.
The company will be launching products of larger capacities to capture low wind speeds as prevalent inIndia, Mr Banmali Agrawala, President & CEO, GE Energy, told Business Line. “The products will be coming out in a year’s time and have been developed here,” he said. Also, the company is seeing interest in these localised products from other emerging markets as well, Mr Agrawala added. GE at present makes wind turbines of 1.5 MW and 1.6 MW capacities.
Going forward, apart from manufacturing products, GE Energy would be open to providing support to customers in the development phase of the project. “ o take our products to customers if it needed to extend and provide additional services, we will do so,” Mr Agrawala said. Support would be in things like financial structuring or helping with development model and also installation, transportation or commissioning of projects.
However, the company, unlike many others in the business like Suzlon or Gamesa, will not provide “packaged services” of providing land along with wind assets. “It does create uncertainties for the business, but we recommend to customers that the land should be acquired by them,” Mr Agrawala said. (Typically, developers find it easier to sell packaged wind assets rather than individual equipment without land for the projects.)
According to Mr Agrawala, renewable energy especially wind is a “critical part of our business and therefore we are increasingly localising products for the Indian market.” In the renewable energy sector, the company currently manufacturers equipment for power projects, like wind turbines, inverters and switch gears.
The products are manufactured at its plant in Pune and the company is in the process of expanding its facility there. While the products will be made for the Indian market but will also use it as a base for exports, Mr Agrawala said.
FE-EVI GREEN AWARDS DOFF HAT TO SUSTAINABLE DEVELOPMENT
NEW DELHI: Emphasising the need for a new corporate culture to make businesses more sustainable, Union minister for corporate affairs Veerappa Moily has urged India Inc to balance equity and growth. “Sustainability is a major concern for the corporate sector and business community, especially in developing countries like ours. We have to look at our present without compromising the future. Global warming is the true challenge when it comes to environmental damage,” the minister said while presenting the FE-EVI Green Business Leadership Awards 2011-12 at a glittering ceremony in the capital on Tuesday. The event was organised jointly by The Financial Express and Emergent Ventures India.
The award ceremony was accompanied by the launch of the FE-EVI Green Business Survey 2011-12. MK Venu, managing editor, The Financial Express, said: “The core elements of sustainable development are gradually becoming part of the consciousness of corporate entities. FE-EVI Survey has strived to play a catalysing role in this regard.” The FE-EVI Green Business Survey helps businesses that are fighting climate change and undertaking sustainability initiatives by benchmarking, measuring progress and tracking the industry outlook. It details the sector-wise outlook of firms on climate change and sustainability issues.
At the FE-EVI Green Business Survey & Leadership Awards ceremony, Moily’s address was followed by a pertinent panel discussion whose topic was ‘Will Rio bring some light at the end of the tunnel?’ The panelists included notable personalities from the government and private sector like Development Alternatives founder Ashok Khosla, former Tata BP Solar CEO K Subramanya and former petroleum secretary RS Pandey.
Deliberating on the topic, Subramanya gave vital insights into the state of environmental affairs in the Indian context. The government, he said, was planning to make corporate social responsibility (CSR) mandatory.
“At the moment, CSR is softly mandated. It is time to focus on Millennium Development Goals without sacrificing any benefits,” he said.
Khosla, who is one of world’s leading experts on environment and sustainable development, said thatRiomay be a disappointment because governments – both small and big – are negotiating on an equal footing on issues they see as national threats. “It reflects the incapability of Asian countries to look beyond the short term. We want to see leadership from our delegation there (inRio) because sustainability only means natural and people resources and capital investment is required to gather these resources,” the former director of the United Nations Environment Programme said.
Pandey further explained that it is a redeem-or-perish situation because almost 88% of the world’s energy comes from fossil fuels and every country is in a difficult position due to this. “Efficient use of resources, technology and human resource development are the areas of difficulty when discussing business – irrespective of whether a country is developed or developing,” he reasoned.
The panel discussion made way for the awards, presented to a cross section of industry sectors, including Mahindra & Mahindra, Shree Cement, Tata Chemicals, Tata Coffee, Cognizant Technology Solutions, Essar Steel, Larsen & Toubro and Jain Irrigation System as winners in their respective categories. The winners were shortlisted and selected from nearly 600 companies, each with a revenue of Rs 1,000 crore, on the basis of the impact their initiatives have made in areas like climate change and environment, natural resources management and governance for sustainability.
Two more companies – Cleantec and Greenlight Planet – were given special recognition for their innovative initiatives in sustainability.
What the UN is trying to achieve at a global, inter-governmental level is something FE-EVI survey has been trying to do in its own modest way – to get companies to start reporting regularly on sustainability measures which are becoming integral to their businesses.
‘COAL INDIA MUST MODERNISE TO INCREASE OUTPUT’
NEW DELHI: Coal India Ltd (CIL) must modernise its system to increase output to meet the ballooning coal demand in the country.
“Improvement is required in the management of CIL and need to focus on production to meet the demand instead of looking at margins,” said Mr Alok Perti, Advisor, Ministry of Coal.
Strategies planned while launching CIL’s initial public offer (IPO) have not been achieved.
Mr Perti said for the last few months, CIL is giving projection and has been unable to increase production due to the lack of modernisation.
At the same time, the Indian coal sector may witness the shift from monopolistic pattern to an all inclusive competitive regulated by the coal regulator, said MrD. C. Garg, Chairman and Managing Director of Western Coal Fields Ltd , a subsidiary of CIL.
Mr Garg further added that the mine size and equipment size would be upscaled with a major thrust on automation of operations in opencast and underground mines.
CBI TO BEGIN FIELD INVESTIGATIONS INTO ALLEGED COAL SCAM
NEW DELHI: The Central Bureau of Investigation (CBI) is set to begin field investigations into the alleged coal block allocation scam, as part of its preliminary inquiry to ascertain whether there were irregularities in allocating these blocks to private companies between 2006 and 2009.
The controversy over the allocation, alleged to have led to undue gains of thousands of crores of rupees, is set to gather pace, with the principal opposition party, the Bharatiya Janata Party (BJP), today asserting some companies had already sold the blocks allotted to them.
Under the field investigations, a CBI team would visit 65 coal blocks and collect mine-level data. “This might be followed by quizzing of companies that had been allocated the blocks,” a senior CBI official told Business Standard. The official, however, did not divulge the names of companies to which the 65 blocks had been allocated.
The matter had recently been referred to the investigative agency by Central Vigilance Commission (CVC), following a complaint by the BJP. The CBI had registered the preliminary inquiry on June 1. Last month, anti-corruption crusader Anna Hazare’s team had held Prime Minister Manmohan Singh responsible for the alleged scam. Singh had said he would quit public life if the allegations were proven.
Based on the CVC reference, CBI has been asked to look into three allegations—why the allocations were continued during 2006-2009 despite the pending legislative amendment needed for auctioning, whether these blocks were allocated in a fair and transparent manner and whether the coal blocks allotted to companies had been misused.
“Our focus is more on the last two allegations, as the first is regarding a policy matter, which is not CBI’s mandate,” the official said. He, however, added a formal case would be registered in case definite evidence of any violation of law was found in the preliminary enquiry in the other two allegations.
The BJP, meanwhile, has upped the ante against the government over the issue of corruption, which it said, might have taken place during the allocation. “We have information that some of the 143 private companies that were allotted 83 coal blocks, with over 17 billion tonnes of reserves, have sold the blocks,” BJP spokesperson Prakash Javadekar told Business Standard.
The party argues the government should not have allocated the blocks through the screening committee route, as a decision to adopt the auction method, considered more transparent, was taken in 2006. “The government hastened the entire process of allocation. While earlier only three to four blocks were allocated annually, the government allocated as many as 20 blocks every year between 2006 and 2009,” Javadekar said.
The coal ministry and the Prime Minister’s Office had, through separate statements, clarified the allocation process had to be continued in the larger interest of economic development, as demand for coal in the critical infrastructure sectors of power and steel had shot through the roof.
COAL INDIA OUTPUT UP 5.6% IN APRIL-MAY
KOLKATA: State-run CoalIndiahas posted a 5.6% rise in production and 6.2% growth in offtake in the first two months of 2012-13, bringing some cheer to power firms that have been grappling with fuel shortages.
It produced 69.38 million tonne Coal during April and May, about 1% more than its target, chairman Narsing Rao told ET. The production growth in the year-ago period was 3.6%.
“We are keeping a strict vigil on production and offtake,” Rao said. “Our officials are interacting with railways on a daily basis to make sure that adequate rakes are available for evacuating the mined coal.”
He said CoalIndia’s stocks have gone down by 7mt during the two months. The company had stocks of 70.88 million tonne on March 31.
MCL HOPES TO FIND PARTNER FOR 1600 MW POWER PLANT BY JANUARY 2013
KOLKATA/BHUBANESWAR: Coal India subsidiary Mahanadi Coalfields Ltd (MCL), which intends to use huge reserves of coal lying at one of its mines for power generation, expects to find a suitable partner for the proposed 1600 Mw plant by January next year.
The company has got 41 responses after its Expression of Interests (EoI) meeting in August last year, where companies such as Tata Power, Adani, Nalco, GMR, Essar Power etc participated. The company will shortly go for Request for Qualification (RFQ) meeting for the bidders.
“The combined application (permission seeking state government nod) has been accepted by the state and it has been referred for the clearance to the state level single window clearances authority (SLSWDA). We will be going for RFQ by July and the successful bidder will be awarded the contract by January next year,” said Kulamani Biswal, director of finance, MCL.
The total project cost is pegged at Rs 8,000 crore. MCL will supply coal for the power plant from its Basundhara mine and will also arrange land for the project. To produce 1600 Mw power, the thermal power plant will require about eight million tonne coal a year. Currently, the Basundhara mine produces 12.5 million tonne (MT) per annum and the production is expected to up to 34 MT a year in future.
MCL proposes to build the project through a joint venture (JV), where the coal miner will hold at least 26 per cent stake. The share holding may be revised upward to 49 per cent later. In the upcoming RFQ meeting, MCL will decide whether the bidder will be allowed to only produce power and take its profit or to sell power in commercial market and share the profits with MCL.
“We are yet to discuss these things and hope to come out with a solution before the RFQ meeting in July, as it will be immediately followed by request for proposal (RFP) meeting, where bidders will quote commercial and financial figures for the JV,” explained Biswal.
MCL has created a special purpose vehicle for the power project, named as Mahanadi Basin Power Limited. It has recently concluded environment impact assessment study for the project.
HIGHER COAL AVAILABILITY FROM COAL INDIA HELPS TO INCREASE POWER GENERATION IN MAY
MUMBAI: Higher coal availability from CoalIndiain May 2012 has helped increase in coal based power generation by 12.5% year-on-year, off-setting 16% year-on-year decline in gas based power generation and 12% decline in hydro generation. Overall generation of power increased by 5.1% to 78.9 billion units.
This higher generation was mainly due to higher generation of NTPC and other private utilities. NTPC. NTPC’s y-o-y generation in May 2012 increased by 11% y-o-y while that of private utilities increased by 42%.
NTPC’s generation mainly increased due to capacity addition at Simhadri and Sipat plants and higher plant load factor (PLF) or higher capacity utilization.
In the private sector, Lanco Infratech’s generated increased 17% y-o-y, mainly due to higher capacity utilization (90% in May 12 versus 74% in April 12). Among other big power utilities, Tata Power’s Mundra plant Unit I(800 MW) which became operational in March 12, operated at 85% PLF and Maithon Unit I (525 MW) operated at 55%. Adani Power has started generation at its ninth unit and now has reached 4620 MW. Reliance Power’sRosaPlant (660 MW) plant operated at around 76% PLF.
TATA STEEL EUROPE TO GET CHEAP COAL FROM MOZAMBIQUE
MUMBAI: Tata Steel Europe will get coal at less than market prices from the Benga coal project in Mozambique, which, part-owned by the company’s Indian parent Tata Steel Ltd, will start production soon, a company official said.
“It’s not very much, but yes, the rates will be slightly lower (than market prices). At this point, we can’t say by how much,” said the official, who did not want to be identified.
Tata Steel owns a 35 per cent stake in the Benga project, with the rest being held by Australian mining giant Rio Tinto. According to an offtake agreement Tata Steel has signed with its partner, the Indian steel maker can use 40 per cent of the total coal production in Benga. The coal from Benga will feed Tata Steel Europe’s operations.
Tata Steel Group Chief Financial Officer Koushik Chatterjee declined to comment on coal prices, but said supply would commence soon. He, however, did not rule out a bit of cost saving in terms of “trade discounts”.
Karl-Ulrich Kohler, managing director and chief executive officer, Tata Steel Europe, on May 18, had told Business Standard the Benga coal would come at market rate, but its quality was high. “For me, it’s good quality coal, secured by offtake agreement and, therefore, we can optimise our production plans accordingly and improve our processes and situation to make coke,” he had said.
The company plans to ship 0.85 million tonnes of coking coal and 0.2 mt of thermal coal in the current financial year. Some coal will also come to Tata Steel’sJamshedpurplants. The company is self-sufficient on iron ore and meets 60 per cent of its coking coal needs from Indian mines. The rest is imported.
The Benga project, along with the DSO iron ore project inCanada, is crucial for Tata Steel Europe, as the company is striving to be self-sufficient on raw materials. Tata Steel wants the European arm to have at least 25 per cent raw material integration in the next few years and a lot of it will come from the Benga and DSO projects.
The Benga project was initially owned by Tata Steel and Australian miner Riversdale Mining. Last year, Rio Tinto acquired Riversdale. Tata Steel, which had a 26.27 per cent stake in Riversdale, also sold its stake to Rio Tinto for $1.1 billion, but retained its interest in the Benga project
The company had paid $88 million (around Rs 484 crore on Wednesday) in 2007 for the 35 per cent stake in the Benga project.
AUSTRALIAN PM ATTACKS QUEENSLAND GOVT OVER GVK COAL PROJECT
MELBOURNE: Australian Prime Minister Julia Gillard has lashed out at theQueenslandgovernment over its handling ofIndia’s GVK Group’s huge $10 billion Alpha Coal mine project, claiming it had shaken investor confidence in the state. The federal government on Tuesday halted the approval process for GVK’s Alpha project amid a dispute over environmental assessments affecting theGreat Barrier Reef.
In a sharply worded letter sent to Queensland Premier Campbell Newman, Gillard also accused him of threatening the Great Barrier Reef by cutting corners on the proposedGalileeBasindevelopment in the coal-rich state.
The Alpha project which is expected to generate 4,000 jobs at peak is being run by Hancock Coal in which 79% owned by Indian infrastructure giant GVK and 21% owned by Gina Rinehart, the world’s richest woman.
“Queensland’s decision has immediately put at risk community and business confidence,” she wrote to Newman. “I am surprised at the inadequacy ofQueensland’s assessment of this project. Outside observers may well question the state’s commitment to robust environmental protection as a result of this decision,” Gillard was quoted as saying by The Courier-Mail newspaper.
Gillard upped the ante by writing to every other state and territory leader on Tuesday night, warningQueensland’s actions were “inconsistent withAustralia’s national and international environmental obligations” and would threaten national plans to cut approval times.
“Rather than fast-track and streamline environmental approvals,Queensland’s current approach will only serve to undermine confidence, delay approvals and increase uncertainty for project proponents,” she said.
“The Commonwealth will, as a result, work directly with Alpha Coal to complete the assessment process and resolve any remaining uncertainties for the project,” she wrote. “I would urge you to reconsider the approach taken to the Alpha Coal project.”
But in a letter to deputy premier Jeff Seeney, Broe said the assessment was developed after thorough on-ground surveys of aerial photography and expert advice. But federal environment minister Tony Burke said he had “stopped the clock” and would now work directly with Hancock Coal. He also warned the state government could be suspended from involvement in all major projects and has given it a 10-day deadline to persuade him against this step.
GVK, according to The Courier-Mail, said Burke’s comments did not mean the project would not proceed and it was in discussions with the Federal Government on “additional information and clarification of existing information”.