NEW DELHI: To increase coal availability to the non-regulated sectors (NRS) like cement, steel, sponge iron and captive power units, the Union coal ministry is planning to provide them with long-term linkages, without end-use restrictions.
The plan is to modify the policy guidelines for NRS coal linkages issued in 2016, which made it mandatory for these industries to avail coal from state-run coal companies through the auction route, and with specified end uses. Stakeholders’ consultations in this regard are scheduled to be held by the coal secretary on June 13, according to sources.
Supplies by Coal India to the (regulated) thermal power sector is five times the dispatches to the NRS units, but in recent quarters the NRS consumption of the fuel has been rising at a much faster rate.
“Looking at the current and future market dynamics, increased availability of coal and with an objective of reducing coal imports, there may be a need to have a fresh look at the current arrangements of coal supplies to the non-regulated sector with a view to move ahead from a regime of auction of coal linkages for not only specified end uses but also to a regime of coal linkages for coal consumers without any specified end use,” wrote the ministry outlining the agenda for the meeting.
Power utilities are the largest coal users in the country, consuming nearly 810 million tonne of the 1 billion tons of fuel produced domestically in FY24. However, coal demand by NRS users is also seen to be rising significantly with higher output of critical raw materials for infrastructure development and the construction segment. The government expects the thermal coal requirement of the NRS users to be 380.56 MT in FY30, around 100 MT more than current levels.
According to government data, as much as 60.91 MT of coal was supplied to the various captive power plants in the country in financial year 2023-24, up 38.1% year on year, while supplies to the steel sector increased 15.3% annually to 9.69 MT. The sponge iron sector received 9.91 MT coal in FY24 (up 28.7%), while the supplies to the cement sector slipped 0.98% on year to 8.86 MT.
Out of the 238 MT of total coal imports in FY23, around 125 MT was imported by the NRS users, official figures showed. However, according to an inter-ministerial committee report on coal import substitution published by the Union coal ministry in March, it was not immediately clear whether coal imports by NRS users is done purely due to the shortfall of domestic supply or lack of desired quality of coal.
Although the total estimated resource of coal is more than 378 billion tons, the reserve of coal with high calorific value and low ash content is insufficient in the country. Higher landed price of domestic coal at plants located far away from coal mines due to high railway freight cost is also often cited as a possible reason which compel many NRS users to resort to coal imports.
The report on coal import substitution noted that the bulk of the coal in the country is imported by the NRS users, and domestic coal is procured by them through linkage auctions, which provide them with assured coal supply for an initial tenure of 5-10 years.
However, it was pointed out that NRS coal consumers tend to exit from the fuel supply agreements executed with the coal companies when the international coal prices are low and they import coal to meet their requirements, leading to supply chain disruptions.
Source: The Financial Express