NEW DELHI: At a time when India is trying to ramp up its uranium import, domestic production of the yellow cake has declined by 10-15% after operations in the country’s oldest and richest uranium mine in Jaduguda, Jharkhand, were stopped by the state government.
The department of atomic energy sources said it has taken steps to increase production from other mines to maintain supply, but low quality of ore from other mines has led to a rise in production cost.
“The overall mining production has gone down substantially — by 10-15% — after the mining in Jaduguda has been stopped,” said Pinaki Roy, corporate communications manager of the Uranium Corporation of India Ltd (UCIL).
The government has often cited “mismatch between demand and supply of domestic uranium” as the reason for under-functioning of nuclear power reactors. Of the 20 reactors, 10 use domestic fuel.
The Jaduguda mine was in uninterrupted operation since 1968. Of its daily production of 5000 tonnes, UCIL mined 700 tonnes of ore.
“The mines at Narwapahar and Bagjata have ore, but it is 15-20% less rich than Jaduguda’s,” Roy said.
The Jharkhand government stopped mining of uranium from Jaduguda on September 6 this year as UCIL’s lease had expired. “We had applied for renewal of lease in 2006 and it expired in 2007. Since then, the mines were being operated as a deemed lease. This year, the government said that the concept of deemed lease was no longer applicable and a closure notice was given to us on September 6,” Roy said.
(Source: The Times of India, December 22, 2014)
CENTRE TO HELP WITH GREEN NOD FOR 16 COAL BLOCKS IN ROUND ONE
NEW DELHI: The Centre will help get green nod for 16 of the 65 blocks to be put under the hammer in the first round and which do not have environment clearance.
According to a senior Coal Ministry official, the Government will facilitate clearances for these and 11 more blocks to be allocated to public sector companies. However, it is unlikely that the clearances will be in by the time of the e-auctions, scheduled for March 2015.
The 16 blocks without green clearances have coal reserves of 3.4 billion tonnes. Five of these have been earmarked for non-regulated sectors such as steel and cement and the others for the power sector.
For the power sector, a reverse bid mechanism will be used where the lowest bidder wins, while for the non-regulated sector a forward bid mechanism will be used for the auctions.
It remains to be seen whether the auctions end up being successful. There are mixed reactions within the industry regarding the list of blocks earmarked for auctions and allocations.
“There are many blocks which were linked to captive power units of steel, cement, aluminium, zinc and other plants. But many of these have now been earmarked solely for the power sector. Going solely by the rules, I can’t see who will have an end-use power plant ready for such blocks,” said an official of a private sector aluminium maker.
As per the Coal Mines (Special Provisions) Rules, bidders for already producing blocks will need to have 80 per cent investment complete in the end-use plant while for the blocks ready to produce, investment has to be at 60 per cent.
Some of the big losers from the non-power sector include Hindalco, ArcelorMittal, Tata Steel, Tata Sponge Iron, and Rungta Mines. Blocks that these companies won between 1993 to 2010 have now been reserved for the power sector, which means these companies cannot bid for these assets.
(Source: Business Line, December 22, 2014)
COAL AUCTIONS: JSPL MAY EMERGE A WINNER
Jindal Steel and Power Ltd (JSPL) was clearly one of the biggest losers when the Supreme Court, in September, held all coal mine allocations since 1993 illegal and withdrew their allocation to Indian companies. The Naveen Jindal-led firm lost around eight mines that were allocated to it and this raised a serious question mark on the viability of some of the company’s existing and upcoming power and steel projects.
But an analysis of the potential outcome of the upcoming auction of these coal blocks by brokerage ICICI Securities finds JSPL may emerge one of the biggest winners and recover a lot of lost ground.
The ICICI Securities report segregates the coal blocks on the basis of two end uses – independent power generation (meant for grid consumption) and everything else (including captive power for the concerned firms and other uses like making metals). The government intends to follow a reverse auction process for awarding coal blocks that are meant for independent power producers. This means that a reserve price would be set (based on Coal India prices for a particular grade of coal) and companies that bid the lowest below the floor price would get the blocks.
The report states that companies that have low fixed costs per unit of power generation will benefit under this process, as they would have greater flexibility to bid lower and yet keep their power projects viable. On this criterion, JSPL is a front runner among firms. “The possibility of reverse auction for power end use coal blocks is a significant positive for incumbents like JSPL as it helps them to bid aggressively as the fixed costs are low,” it said. “Also, being an incumbent JSPL is naturally placed to be the favoured party on technical competence.”
For instance, the brokerage compares the fixed price per unit of power generated by 10 companies who are expected to bid for the Gare Palma IV/2&3 block; located in Chattisgarh, and which earlier belonged to JSPL. At 48 paise per unit of power, JSPL has the lowest fixed cost and its closest competitor Sesa Sterlite would have a fixed cost of R1.10 per unit, if it were to utilise coal from the same mine for power generation. “JSPL can quote the lowest production-linked payment in the coal auctions and yet make a sustainable return on the back of this low fixed cost advantage while bidding for power purchase agreements,” the report said.
For other coal blocks that are meant for captive consumption, like Gare Palma IV/1 block, which also belonged to JSPL earlier, the rules would change. Here, the government will look for maximising its own revenues and companies would be expected to bid higher, depending on the economic value they expect to derive from these assets. Even in this scenario, the report finds JSPL may emerge a winner as its expected return on equity after using coal from this block looks better than its closest competitor, Bharat Aluminium Co Ltd (Balco) – a Sesa Sterlite subsidiary.
However, there may be a twist in the tale for the second block if the Odisha government agrees to Sesa Sterlite’s proposal to convert the end use of its 2400 MW power plant in Jharsuguda to captive use for Balco’s aluminium business in the same state.
If Sesa Sterlite can bid for this block as a captive consumer, the economics of the project for Anil Agarwal-led company changes and gives it an edge over JSPL, as the former’s expected return on equity would trump that of JSPL.
The brokerage also expects JSPL to be a frontrunner to acquire other coal blocks it lost in the auction, such as Utkal B1 in Odisha and if it can fend off competition from Sesa Sterlite for Gare Palma IV/1, it expects JSPL’s shares to perform better in FY16 and FY17, rising by 50% from its current market price.
(Source: The Financial Express, December 22, 2014)