Domestic

Commercial mining to free coal sector from decades of lockdown: PM Modi

Prime Minister NarendraModi launched the country’s first auction for commercial coal mining and sale in the open market. This is the first major auction by the government this year in midst of a looming slowdown. Modi said commercial mining would unlock the country’s coal sector from the “lockdown of decades”. “The country’s coal sector was entangled in a web of captive and non-captive. It was excluded from competition, (and) there was a big problem of transparency. Major scams had taken place in coal action earlier, but the system has been made transparent now,” he said. Speaking at the event, Union Minister for Coal Prahlad Joshi said state-owned Coal India (CIL) would continue to be the dominant player in the sector. “We have given CIL a target of 1 billion tonnes by 2023-24, for which they will spend nearly Rs 50,000 crore in the next three to four years on land acquisition, mine development, procuring machinery, and evacuation,” said Joshi. Modi said India should be the world’s largest exporter of coal.Pitching for the flagship scheme of the Centre to battle Covid-induced slowdown, the PM said “AatmaNirbhar Bharat” translated into saving foreign currency on imports. “It entails that India develop resources domestically so that the country does not have to rely on imports. It also means becoming the biggest exporter of commodities that we now import,” he said. Modi also said there would be employment opportunities with investment in the sector. “Eastern and Central India will benefit a lot from this reform. Regions rich in coal and minerals will progress due to these reforms. These are the areas which have aspirational districts. The coal blocks that are getting auctioned today will provide lakhs of jobs in these areas,” he said.

Commercial mining won't hit Coal India, says CMD even as unions plan strike

State-owned mining behemoth Coal India Limited (CIL) said it would continue to be the country's leading coal producer, even after the sector is opened up for the private companies. In a public statement, the company said commercial coal mining would not adversely impact the production or profitability of CIL. “Key issues which will help us stay ahead of the competition include uniform quality of coal, cost efficiency in production and reliable timely delivery schedule, introduction of higher degree of mechanised mining and increased supplies are other focus points,” said Pramod Agarwal, Chairman, CIL. The statement comes at a time when its own labour unions and also state governments are protesting against commercial coal mining. CIL trade unions have announced they will go on a three-day strike from July 2 against Centre’s decision to open the coal sector for private players. BharatiyaMazdoorSangh, Hind MazdoorSabha, INTUC, AITUC and CTU have demanded that auction of coal blocks for commercial mining should stop. At the same time, Jharkhand state government has moved the Supreme Court against commercial mining, after its request to the Centre for delaying the process was denied. The Centre last week commenced India’s first auction of coal mines for commercial mining and sale in the open market by the private companies. This followed a Union Cabinet decision to ease the qualification criteria and auction methodology to attract industry interest in commercial coal mining.

Auction for commercial coal mining begins with investor-friendly rules

Hoping to attract a slew of investors for India’s first auction of coal mines for commercial mining and sale process, the Ministry of Coal has liberalised the terms of qualification. However, the final decision on successful bidders will need government approval. In a tender document uploaded by the Ministry of Coal for commercial coal auctions, the preferred bidder who submits the highest bid in the auction could lose the race if it ceases to meet the qualification criteria. There is effectively no strict eligibility criterion for participating in the auction. The companies/ joint ventures should be registered in India. Bidders who have won coal mine under captive auction and have been convicted of an offence relating to coal allocation are disallowed to participate. The auction is a two-part round — technical and financial. The nominated authority for the coal auction — who is joint secretary-level official from the Ministry of Coal — will evaluate the technical bids. Bidders are supposed to submit their eligibility criteria, along with an initial offer to the nominated authority. The financial bid round comprises two stages; the initial offer of technically qualified bidders is ranked in descending order for determination of qualified bidders. These qualified bidders are eligible to participate in the e-auction and submit their final offer. The highest bidder for a mine selected for evaluation by the government is declared a ‘successful bidder’. There is no restriction on the sale and consumption of coal. “The coal produced from the coal mine may be sold by the successful bidder in any manner as may be decided by the successful bidder, including sale to affiliates and related parties, utilisation of coal for any purpose, including but not limited to captive consumption, coal gasification, coal liquefaction, and export of coal,” said the tender document.

Coal block auctioning to create 2.8 lakh jobs, to attract investment of Rs 33,000 crore

Union Home Minister Amit Shah said the

launching of virtual auction process for 41 coal blocks for commercial mining will create more than 2.8 lakh jobs and attract capital investment worth Rs 33,000 crore. In a series of tweets, Shah thanked Prime Minister NarendraModi and Coal Minister Pralhad Joshi for starting the process of auctioning the coal blocks and said it will help build a prosperous, corruption-free and selfreliant India. "This decision of Modi government will create more than 2.8 lakh jobs, attract capital investment worth Rs 33,000 crore and generate annual revenue of Rs 20,000 crore for the state governments," he said. Launching the virtual auction process for 41 coal blocks for commercial mining, expected to garner Rs 33,000 crore of capital investment in the country over next 5-7 years, the prime minister said it is a major step in the direction of achieving 'self-reliance'. He also said that the coronavirus pandemic has taught India to be self-reliant. The launch of the auction process not only marks the beginning of unlocking of the country's coal sector from the 'lockdown of decades', but aims at making India the largest exporter of coal, Modi said. Presently, despite being the world's fourth largest producer, he said, India is the second largest importer of the dry-fuel.

What Coal India is planning to boost output

MDOs will facilitate R&R issues, land acquisitions, green clearances and coordination with state and central pollution boards. Since contracts to them are on long-term basis, allied infrastructure will also be developed. Coal India Limited (CIL) will engage mine developer cum operators (MDOs) to increase its coal output and reduce import dependency of the dry fuel in the coming years. The Maharatna coal mining behemoth in the process has identified a total of 15 greenfield projects to operate through MDO model of which 12 are open cast and 3 underground, a release by Western Coalfields Ltd (WCL) – subsidiary of CIL – said. Combined, they have a total targeted capacity of around 168 million tonne/year (MTY). While the OC projects have a targeted capacity of 162 MTY, UG projects have close to 6 MTY. The contract period would be for 25 years or life of mine whichever is less. CIL’s board recently has given its nod in regard to standard bid document and request for bids for the engagement of MDOs. CIL is laying out plans to complete the formalities by 2021-22 so that all projects become operational and start yielding the output to contribute in 1 BT by 2023-24,” it said. It further informed that upcoming identified projects of Mahanadi Coalfields Limited, South Eastern Coalfields and Central Coalfields Limited will form major segments for the MDO mode with targeted capacities of 65.5 MTY, 52.4 MTY and 45 MTY, respectively. Eastern Coalfields Limited and Northern Coalfields Limited will have projects with targeted capacities of 3 MTY and 2 MTY, respectively. “Notice Inviting Tender (NIT) for 2 Projects, Siarmal OC of MCL (40 MTY) and Kotre-BasantpurPachmo of CCL (5 MTY) together having a targeted capacity of 45 MTY has been floated in 2019-20. While NIT for 5 Projects for a targeted capacity of 68 MTY will be floated in the ongoing fiscal, for the balance 8 projects NIT will be floated in the fiscal, 2021- 22,” the release said.

Facing tepid demand, CIL to reach cement cos, CPPs to replace imports by domestic coal

"In order to interact with the consumers for substitution of import by the use of domestic coal, a meeting has been scheduled by Coal India Ltd to be held on 18th June, 2020 for consumers of cement sectors through video conference” the notice said. The move would result in curtailing forex outgo arising out of coal imports and help CIL expand its supply volumes. State-owned CIL will this week hold deliberations with the consumers of the cement sector and captive power producers (CPP) on substituting imports with domestic coal, amid the

PSU facing tepid demand for the dry fuel. Coal India (CIL) will hold discussions through video conference, the PSU said in separate notices to consumers of the cement sector and CPPs. The deliberations with CPPs will be held later this week, the PSU said in the notice. “In this regard, consumers (cement and CPP)….are requested to join the meeting to discuss & deliberate on the issue related to the substitution of coal import,” it added. CIL continues to be beset with tepid demand for coal, with most of its customers, like the power sector, shying away from lifting adequate quantities. During May, the power sector lifted 30.15 MT of coal from CIL sources, down 25 per cent from 40.38 MT in the same month last year. Coal India accounts for over 80 per cent of the domestic coal output.

Coal India plans to reopen abandoned mines

Coal India plans to use mine developers and operators (MDO) to reopen mines it abandoned because of safety and viability concerns, company executives said. The company may offer these mines, many of which hold good quality reserves, to MDOs on contract. It will earn additional revenue without fresh investment even if the MDOs operate relatively small quantities ranging between 250,000 tonnes and 300,000 tonnes of quality coal a year profitably, executives said. “These are sunk investments as these mines don’t yield returns any more. CIL has been looking for ways to earn some revenue from them as large number of these pits, mostly underground, hold premium grade coal,” one executive said. Initially, 15-20 such mines would be offered, and the number would increase if the response is good, company executives said. Coal India first planned to reopen abandoned mines in 2011. “We had offered some 15 mines abandoned due to unavailability of suitable technology at the time. The proposal was taken up by Coal India, however, private parties that had shown interest in these pits wanted at least 49% equity stake in them,” said Partha Bhattacharyya, former chairman of Coal India. “There were no such provisions then and stake sale in these mines were not agreed by the government.”

Centre liberalises coal swapping regulations

The Ministry of Coal has further liberalised the framework under which coal linkages can be swapped in the country. A linkage is a coal supply assurance from Coal India Limited to a consumer. These commitments are binding and the coal cannot be transfered to other consumers. The rigid nature of these commitments resulted in some players ending up with coal that had to be ferried much longer distances. This led to increasing costs and putting more burden on the Indian Railways. To untangle this situation, the Centre has been undertaking a coal linkage rationalisation exercise. "The coal linkages from coal companies have been rationalized in order to reduce the distance in transportation of coal from the coal mines to the consumer. The exercise shall help in reducing the load on the transportation infrastructure and easing the evacuation constraints," an official statement said. Till now, coal linkage rationalization exercises were limited to the power sector and have resulted into altering the movement of 63.12 million tonne of coal with an annual potential savings of around ₹ 3769 crore, the statement said. The new methodology announced on Tuesday for linkage rationalization, covers the power as well as Non-Regulated Sector (NRS), for all types of consumers and coal swapping with imported coal has also been permitted. The transfer of coal quantities will be permitted basis the gross Calorific Value (GCV) equivalence and is applicable for non-coking coal only. This arrangement shall be allowed only within the same sector. So the NRS (non-regulated

sector) can swap linkages with NRS and power (regulated sector) with Power only.

Plans afoot for India’s first Coal Exchange

India has decided to set up a coal trading platform, taking a giant leap towards completely throwing open the sector to market forces as the country gears up for commercial coal mining auctions, which will increase the number of sellers of coal. As per the proposal, entire coal produced in the country will be traded on a ‘Coal Exchange,’ an online platform where pricing is determined transparently through demand and supply. The exchange is being thought out on the lines of commodity exchanges, power bourses or the proposed gas exchange. This could mean the end of new Fuel Supply Agreements (FSA) regime of Coal IndiaNSE 1.24 % where the staterun miner signs contracts for coal supply with consumers. Coal India Ltd is expected to remain a dominant player in the sector given its production target of one billion tonnes by 2024 and will sell incremental capacity at market prices, a senior government official said. Coal consumers and traders welcomed the move but said the exchange should be started only when there are multiple buyers and sellers. The coal ministry is likely to begin auctions of about 50 coal blocks for commercial coal mining this week. The government official said that discussions have begun in the ministry and a coal exchange is certain to be set up after the government addresses all related concerns.

Push for domestic steel

Union steel minister Dharmendra Pradhan urged all stakeholders of the sector to come together to ensure that industries use only domestically produced steel. In the last few quarters, domestic demand for steel has declined because of the economic slowdown followed by the Covid-19 outbreak and resultant shutdowns. “Unless all the stakeholders, including the mining industry, the processing industry, the furnace associations, the secondary steel sector or the integrated steel plants, come together, it will be difficult to take steel to another level,” Pradhan said. He was addressing a virtual summit organised by Hyve India along with other steel industry associations. The minister further said there are many sectors which still do not use domestically produced steel because of various reasons. “The demand for steel in the domestic market is very low, and we will take up all the programmes that will boost the sector. “During the last six years, a majority of the reforms have been undertaken by the government to make the raw materials available for the sector. We all should work towards fulfilling our needs with steel completely made in India,” Pradhan said.

STEEL

India may impose anti-dumping duty on steel products from EU, Japan, US

India may impose anti-dumping duty on imports of certain steel products from the European Union, Japan, the US and Korea for five years with a view to guard domestic players from cheap imports from these countries. JSW Vallabh Tinplate Pvt Ltd and The Tinplate Company of India Ltd have filed the application for imposition of anti-dumping duty on imports of coated/plated tin mill flat-rolled steel products. After conducting a probe, the commerce ministry's investigation arm Directorate General of

Trade Remedies (DGTR) has recommended imposition of the anti-dumping duty on the product from these countries. The duty recommended is in the range of $222 per tonne to $334 per tonne. "The authority recommends imposition of antidumping duty equal to the lesser of the margin of dumping and the margin of injury, so as to remove the injury to the domestic industry. Accordingly, definitive anti-dumping duty...is recommended to be imposed for five years...," the DGTR said in a notification.

Steel demand to nosedive 60- 65% in Q1, recovery unlikely before Q3

Steel makers have turned their focus on managing liquidity and cash flows in the near term, as demand is anticipated to contract 60-65 per cent in Q1 of this fiscal. Nearly 60 per cent of the respondents of a survey commissioned by Crisil expect demand to recover in Q3 as infrastructure and construction activities gain traction with the concomitant returning of migrant workers and fiscal measures taken up by the government to improve fund availability. Around 80 per cent of the participants in the survey feel that pent up demand from awarded or ongoing infrastructure activities, especially roads and railways will drive recovery for long steel and galvanised products. Despite the anticipated slowing of the pace of the construction of national highway from an average of 11 kilometres (km) per day in FY20 to nine km in FY21, roads are billed as the frontrunner to revive steel demand. Some uptick is also seen in real estate activity in the near term. Amid demand erosion, capacity utilisation of the steel industry is tipped to fall to 66-68 per cent in FY21. Respondents in the survey are grim on demand for revival of flat steel. By contrast, demand for long steel will gain momentum with pick up in construction activities. Overall, the weakness in end use industries will

shrink steel demand by 13-15 per cent this fiscal.

CEMENT

Pent-up demand, firm prices help cement firms partly offset covid-19 shock

The economy may be contracting and demand has been hit across sectors but the key ingredient that powers the construction sector has managed to defy logic. Channel checks by analysts at three domestic brokerage firms show continued strength in cement prices in June. Cement producers raised prices by a notable 6% in early May to make up for the sharp fall in sales and negative operating leverage. And as the government eased restrictions in May, demand returned, and as it turns out producers have maintained the price hikes. “Cement prices increased by 0.8% month-onmonth in June 2020," analysts at IDBI Capital Markets & Securities Ltd said in a note. “In FY21 so far (i.e. June 2020 vs March 2020), south region prices have increased by 11%, east region has witnessed a price increase of 7%, north by 6% and central/west by 5% each." Contrary to the expectation of a sharp fall, cement dispatches to retailers and sales are estimated to have declined 15-20% last month. This is far better than the massive 80-86% drop in sales in April. “Contrary to our earlier expectations, dispatches of cement companies saw a lower decline for the month of May. Pent up demand and restocking have helped companies post strong volume," IIFL Securities Ltd said in a note. Pent-up retail demand, resumption of construction at existing projects, and off-take ahead of the monsoon season helped sales in May. With a good rabi harvest, sales in rural areas may sustain.

RAILWAYS

Railways’ freight loading in June inches towards the same level last year

Indian Railways’ freight loading in the first three weeks of June has recovered from the adverse impact of Cvid-19 triggered lockdown, according to its top officials. In the first 18 days of June, freight traffic by the Indian Railways recovered to the extent of 90 per cent on a year-on-year basis, Indian Railways’ Chairman Vinod Kumar Yadav said in a webinar. Demand for commodities such as coal, cement, fertiliser, steel and iron-ore has picked up, which clearly indicates that economic activity is picking up, he said. The foodgrain movement has almost doubled. He added that Indian Railway is now moving towards normal loading pattern. Indian Railways expects to clock more revenue through freight movement this (financial) year (as against last financial year), the Chairman said. In the passenger segment, we get around ₹50,000 crore, and in freight segment we get around ₹1,30,000crore (a year), he said. Indian Railways’ is planning and making effort to see that more and more commodities is brought to Railways (from other modes of transport), the Chairman said. In passenger segment, we are running only 230 trains (as of now), he said. The Railways is keeping a close watch. The revenue from passenger segment is uncertain, he added.

Thermal coal imports at major ports decline 36 pc to 12.3 MT in Apr-May: IPA

Amid the coronavirus pandemic, thermal coal imports at India’s major ports saw a 35.94 per cent decline to 12.29 million tonnes (MT) in the first two months of the current financial year, according to the Indian Ports’ Association (IPA). Coking coal imports witnessed a dip of 24.05 per cent to 7.47 MT in April and May this year. The ports had handled 19.19 MT of thermal coal and 9.84 MT of coking coal, respectively, in the April-May period of the previous financial year. The IPA, which maintains cargo data handled by these ports, in its latest report said “percentage variation from the previous year” in thermal coal handling was at 35.94 per cent and 24.05 per cent in coking coal. Thermal coal is the mainstay of India’s energy programme as 70 per cent of power generation is dependent on the dry fuel, while coking coal is used mainly for steel making. Ports, where operations have been hit due to the coronavirus pandemic, recorded a 22 per cent decline in cargo handling to 92.82 MT during the first two months of the current financial year. These ports had together handled 119.23 MT of cargo during April-May period of 2018-19. Ports like Chennai, Cochin and Kamarajar saw their cargo volumes nosedive over 40 per cent, while Kolkata and JNPT suffered a drop of over 30 per cent during April-May.Kamarajar port saw its cargo handling decline by 46 per cent to 3.22 MT in April-May, while Chennai port saw a massive 44.24 per cent fall to 4.56 MT, according to IPA data. Cargo handling at the Cochin port slipped 40.14 per cent to 3.41 MT, while the same at JNPT declined 33.13 per cent to 8.02 MT. The Kolkata port logged a fall of 31.60 per cent to 7.30 MT.