CONTENTS
6 | COVER STORY
23 Thermal coal offers up in May 24 Coking coal offers move up in May
An unfinished agenda
25 India’s March coal imports up 3% y-o-y
Coal imports rise in 2017-18 after a decline in past two years, but thermal coal continues to fall.
26 Coal India production up 16.64% in April y-o-y 27 SCCL’s Apr production growth almost flat at 0.6%
20 | INTERVIEW
28 Depreciating rupee may hit bid solar project returns
Tajpur Port construction to start in a year’s time
29 India’s cement production up 6.3% in FY18
Kolkata Port has fixed a tonnage target of 65 mt and 10% revenue growth for FY19, says Chairman Vinit Kumar.
32 Pakal Dul power project a boon for J&K 33 Sponge iron production up y-o-y, m-o-m
Value unlocking options for stressed power assets
36 Areas associated with conveyors that employers may overlook 39 US coal production likely to dip 3% in 2018 40 India, Indonesia to promote bilateral cooperation in maritime sector 42 US sanctions: Bleak days for Chabahar? 49 Corporate updates 51 Traffic handled by major ports marginally up 2% in April 52 Indian Railways’ April coal handling up 18% y-o-y 53 No shortage of rakes for coal: ER 54 E-auction data 56 Port data
4 Coal Insights, May 2018
34 | EXPERT SPEAK
38 | CORPORATE
Power sector is expected to lead the list of bank NPAs, says Shardul Kulkarni, MD & CEO, Deesha Power.
Awareness, complicity and ownership a must If senior management insists on safe practices, others will toe the line, says Nandini Chakravarty, MD, Mine Line.
47 | CORPORATE
Post-GST, organised logistics sector is a $50-bn opportunity Orissa Bengal Carrier is eying infrastructure expansion, says Ravi Agrawal, Director.
COVER STORY
Met coal imports up, thermal coal down in FY18
An unfinished agenda Madhumita Mookerji and Arindam Bandyopadhyay
6 Coal Insights, May 2018
COVER STORY
Two years is too little a time to make any dramatic changes in an economy as diverse and incoherent as India is. This is all the more true for sectors like coal which have penetration into multiple industries, some of which comprise the core sector. So when the coal minister announced in 2016 a proposal of cutting down India’s thermal coal imports to zero (well, almost) in a span of two years, i.e. by 2018, there were more nays than ayes in the audience. The industry and consultants had dismissed the government stand on imports as a mere wish, stating that simple economics won’t justify such a move. By 2018, however, the trend in imports seems to suggest otherwise. The continued decline in thermal coal imports for the third straight year, despite an increase in overall coal imports in 2017-18, would not have been possible if the government didn’t make the wish. After all, it was not an ill-conceived idea and could well become a reality in years to come. But, cutting down coal imports would be only half the job done and, unless it is followed up by some more crucial measures, may not bring in any significant change to the economy.
I
ndia’s coal and coke imports through 31 major and non-major ports registered a marginal growth of 0.84 percent to 214.61 million tons (mt) in 2017-18, compared to 212.82 mt reported for the previous fiscal. During April-March, 2017-18, noncoking or steam coal imports, which are mainly done by the country’s thermal power utilities, were at 144.99 mt, slightly lower than 146.49 mt imported in the previous year. Coking coal imports, however, increased to 47.22 mt in this period against 42.04 mt recorded in April-March, 2017-18. Metallurgical coke imports during this period were at 3.99 mt, down against AprilMarch, 2017’s import figure of 4.04 mt. Pet coke imports too were down by a sharp 23.37 percent during this period to 10.98 mt in April-March, 2017-18, against 14.33 mt recorded a year ago. In contrast, PCI and anthracite coal imports showed an increase during the year under review. PCI coal imports were at
5.91 mt in 2017-18, higher against 4.81 mt imported in the previous fiscal. For 2017-18, anthracite coal imports were recorded at 1.51 mt, against 1.11 mt recorded for 2016-17. An analysis of the import numbers for 2017-18 show that the trend was much along the expected lines. It was only expected that coking coal imports would grow in 2017-18, courtesy the healthy growth in the Indian steel industry. The decline in pet coke was also anticipated following the increase in the import duty to 10 percent from 2.5 percent. But, the most important finding is the marginal decline in non-coking coal imports. The drop was much lower (at 1.5 mt) than the decline in previous two years (21 mt and 18 mt in 2016-17 and 2015-16, respectively). However, in view of the low growth in domestic coal production during the year, the marginal decline in imports looks reassuring. Overall, the yearly thermal coal imports by India have dropped by around 40 mt* in the last three years, ever since the
Coal & coke import, India (in mn tons) Coal type
2009 2010
2010 - 11
2011 - 12
2012 – 13
2013 - 14
2014 – 15
2015 - 16
2016 – 17
2017 – 18
Coking coal
27.289
29.372
32.505
32.940
35.797
41.479
44.698
42.040
47.220
Non-coking coal
46.193
83.695
89.140
112.292
136.719
185.350
167.969
146.494
144.990
Anthracite coal
1.746
1.721
1.000
0.752
1.460
0.906
1.110
1.109
1.510
PCI coal
-
-
1.438
1.863
1.835
2.610
3.559
4.813
5.913
Met coke
2.808
1.610
1.121
2.109
2.883
2.563
3.098
4.035
3.990
Pet coke
2.870
2.269
2.836
3.051
2.885
5.787
10.374
14.330
10.981
Coal & coke Total
80.908
118.669
128.041
153.009
181.582
238.697
230.811
212.823
214.606
government announced its decision to bring down imports of the material to save precious foreign exchange. A forced restraint?
While the continued drop in thermal coal imports, however big or small, comes as a silver lining, questions could be raised about the sustainability of the trend. This is so because much of the decline in imports has actually resulted from forced restraint by the public sector power utilities. This was evident from the mute response of these utilities in the face of continued coal scarcity in the country last fiscal. Some of the PSU utilities ended up importing coal to tide over the shortage, but were not forthcoming when it came to speaking about the crisis. Among the state-owned utilities, Tamil Nadu Generation & Distribution Corporation Ltd (TANGEDCO) and Karnataka Power Corporation Ltd (KPCL) floated tenders to procure imported steam coal during November 2017. While TANGEDCO floated a tender for 2 mt, KPCL sought to import 1 mt. There were a few others who resorted to imported coal, but overall, the utilities were put under pressure to live with the domestic supply. “There is a clear directive from the government to make do with domestic supply. So, even though everybody is facing a coal crisis at the moment, we cannot possibly do much about it other than waiting for the (domestic) supply to increase,” said a senior official of a state-owned utility on condition of anonymity. As per estimates by Central Electricity Authority (CEA), around 25 power utilities did not import any steam coal during 201718. Steam coal imports by Indian power utilities were actually down 13 percent in
Coal Insights, May 2018
7
INTERVIEW
Tajpur Port construction to start in a year’s time
K
olkata Port Trust (KoPT), the first major and only riverine port in the country, is poised to serve the entire trade hinterland of the eastern and north-eastern part of the country through an additional capacity in the form of the Tajpur Port, the consultancy work for which has already started rolling. Madhumita Mookerji and Tamajit Pain caught up with Vinit Kumar, the Chairman of KoPT, who says, the very fact that the port is registering 13 percent tonnage growth is proof enough that industrial growth in this region merits another port and that Kolkata Dock System (KDS) and Haldia Dock Complex (HDC) will not really be impacted. He also says KoPT has fixed a tonnage target of 65 mt and a 10 percent growth in revenues for the current fiscal. Excerpts from an interview:
What are the tonnage and revenue targets for the current fiscal for Kolkata Port Trust? How much did the port notch up in the previous fiscal? We have done 15 percent more than in the previous fiscal in FY18. Traffic-wise, we are 13 percent more than in the previous year and we had the highest output in terms of tonnage at Kolkata Port Trust in the previous fiscal. In terms of tonnage, we handled 58.9 million tons (mt) while in the previous year, we had handled 52 mt. Our target for FY18 had been 55 mt.
Revenue-wise, we recorded revenues of `2,300 crore in FY18 which was a 15 percent growth over the previous fiscal of 2016-17. We overshot out target in FY18 by around 10 percent. And in the current fiscal, we have fixed our tonnage target at 65 mt while revenuewise, we are targeting a 10 percent growth.
products would be around 30-35 mt. And this target should be a growth of 15 percent over the previous fiscal. Which is good news, which means both the segments are improving .
In this 65 mt of tonnage, what would be the share of coal, iron ore and finished steel products?
The draft level has improved. It is 8 metres at Haldia and 7.5 metres in Kolkata.
The share of coal, iron ore and finished steel
What is the status of the Sagar Port?
The share of coal, iron ore and finished steel products would be around 30-35 mt. And this target should be a growth of 15 percent over the previous fiscal. Which is good news, which means both the segments are improving.
20 Coal Insights, May 2018
What is the draft scenario like at present at both Kolkata Dock Systems (KDS) and Haldia Dock Complex (HDC)?
Well, you see, as of now, we are focusing on the Tajpur Port in the first phase. We have formed a special purpose vehicle (SPV) with the West Bengal government. There was an SPV for the Sagar Port, Bhor Sagar Port Limited, in which Kolkata Port held 76 percent and the state government the balance 24 percent. This
EXPERT SPEAK
Value unlocking options for stressed power assets Shardul Kulkarni
T
he Reserve Bank of India’s (RBI’s) circular dated February 12, 2018 on resolution of stressed assets is expected to push the gross non-performing assets (NPAs)of banks to the north of `9 trillion. The stress in coalfired thermal power capacity has increased to an alarming level due to the reasons pertaining to poor feedstock policies, power purchase agreement (PPA) issues, inefficient monitoring and credit lending, unviable tariff etc. Against this background, the power sector is expected to lead the list of bank NPAs. In this article, we will cover on-ground power demand-related aspects, NPA issues, the RBI circular and its impact, stakeholders’ views and Deesha Power’s recommendations on value unlocking. To start with, let’s look at power purchase-related aspects and realistic options therein.
Commissioned Capacity (24.5 MW)
Realistic power purchase by discoms
Historically, power purchase by discoms has been governed by three factors, ie, demand growth and load shedding, power exchange prices and their financial health. Of late, there has been improvement on all the factors as mentioned below: ♦♦ I ncreasing economic activities and ease of access to electricity in rural areas with the Prime Minister of India declaring that 100 percent villages having access to electricity ♦♦ R ising power prices at power exchanges (round-the-clock average price of `3.26/ kWh for FY18 and `4.27/kWh for YTD May 24, 2019), that will force discoms to opt for more stable, cheap and reliable power through medium/long term PPAs ♦♦ R educing the gap between the average cost of supply (ACS) and average revenue realised (ARR) which has come down from `1.27/kWh in FY13 to `0.43/kWh in FY18 This will drive power purchase by discoms, going forward. Further, experts Underconstruction Capacity (15.5 MW)
paint a scenario that with supply-side choking for greenfield thermal power capacity and double-digit demand growth, the gap between demand-supply could increase and power planners will be left with brownfield stressed thermal capacity, which could supply power not only when solar goes out of the system, but also on 24x7 basis. A country with a GDP of $2 trillion-plus definitely requires reliable and quality power supply to drive its growth. Under such circumstance, resolution of stressed power appears to be a national requirement. NPA issue: Its size and genesis
A report of the Parliamentary Standing Committee on Energy has identified 34 coal-fired thermal power plants (TPP) as stressed cases. Till June 2017, total gross loan to the sector was `5.69 trillion of which, total NPA accounts for 18 percent (including restructured standard advances). The said NPAs comprised of the generation segment with 91 percent share followed by distribution and transmission at 6 percent and 3 percent respectively. Total stressed TPP capacity is estimated at ~40 GW with outstanding debt of `1.761 trillion. This is further bifurcated in Figure 1. Almost 90 percent of the under-construction capacity is without PPAs which is unlikely to be resolved easily. Some of the major reasons for stress are non-availability of coal due to coal block cancellations or no linkages, no PPAs, unviable tariffs and poor financial health of discoms. In addition, promoter’s inefficiency to infuse equity and less offtake is making the project unviable. Higher than normal credit to the power sector was observed during FY13 to FY15 as seen in Figure 2. Tight monitoring could have reduced the severity of the bad loan issue by at least 30-40 percent. Impact of RBI’s circular
Loan Amount - `1.04 Trillion
Loan Amount – `0.72 Trillion
Figure 1: Magnitude of stress in generation segment
34 Coal Insights, May 2018
The notification issued by the RBI on ‘Resolution of Stressed Assets – Revised Framework’, mandates bank to categorise even one day of delay in debt servicing as default. Experts opine that even better conditioned power plants may find it difficult to service their debt, due to high receivables from financially weak discoms. It is likely to impact more than 51 GW of existing and 28 GW under-construction capacities. New regulations dis-incentivise
CORPORATE
Post-GST, organised logistics sector is a $50-bn opportunity
O
rissa Bengal Carrier Ltd (OBCL) has been in the logistics sector for the past 25 years and is a predominant player in the roads space, catering to various industries that include coal, iron ore and cement. In fact, coal and iron ore contribute almost 20 percent to OBCL’s volumes. Going forward, the company is looking to increase its business volume through a focus on expanding its infrastructure, Ravi Agrawal, Director, OBCL, tells Madhumita Mookerji. Excerpts from an interview:
Please give us an overview of your company as a logistics solutions player. Also, which segments do you cater to as a logistics player? Orissa Bengal Carrier Ltd has been in the transport industry since the last 25 years, catering to various segments like coal, steel, aluminium, cement, FMCG, etc across India. We provide our services to some of the topnotch companies in India. We have our branches in almost all major cities of India. We have more than 100-owned vehicles and thousands of attached vehicles so that we can offer the best services to our customers. We currently have a fleet size of 105 commercial vehicles, including trucks and trailers and many hired from the local
markets. The 45 branch offices across India make OBCL an emerging player in the logistics industry. Orissa Bengal Carrier Ltd was incorporated in 1994 as a private company but later on converted into a public limited company. Our company is certified by ISO 9001:2015 for provision of Quality Management Systems Services. We are also an Indian Bank Association (IBA) approved transporter. We completed our initial public offer (IPO) in April this year and are listed on the Bombay Stock Exchange (BSE).
volume of coal and iron ore you carry per annum and how much of it is by rail, road or any other mode (water)?
How much of your business is contributed by coal and iron ore? What is the total
Where coal is concerned, which segments do you supply the commodity to – cement,
We are headquartered in Chhattisgarh which contributes around 30 percent to India’s steel and sponge iron production and about 15 percent of India’s cement production. So there are a large number of steel and cement companies operating in our belt, providing us an opportunity to easily cater to their transportation needs. We provide our services only by road. Business from coal and iron ore comprise 15-20 percent in terms of volume per annum, which is at about 4.5-5 lakh tons.
Coal Insights, May 2018
47
58 Coal Insights, May 2018
Tear along the dotted line
Tear along the dotted line