CCAI Newsletter November-18 by Sheikh Murad

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Vol. XLVI No. 20 Published on : 28.11.2018

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Coal India has increased its pro duction and supply of coal in comparison to last few month s. Inventory of approximately 8 days are lying except 23 Pow er Plants which are facing crit ical or super critical situation due to low coal stock as of Novem ber, 2018. Industries are yet to rec over from the crisis due to slow materialisation of coal rakes.

Independent Power Producers and Industries have encounter ed many hurdles due to poor ma terialisation from South Easter n and Mahanadi Coalfields due to various reasons. Having the largest coalfields amongst other Coa l Companies of CIL they had bee n the primary source of fuel to ma ny power plants along with imp ortant industries like cement, steel and many more. To add to the woe, reduced e-Auction offerings by CIL have contributed to an increase in premium of Spot e- Auction prices compared to the last year. Union Minister of Coal and Rai lways has said that the govern ment is committed to resolve the issu es impacting production and supply of coal in the country and less coal will be imported in future . To improve the production of indigenous coal, Coal Ministr y is taking measures to make the Auction of Blocks successful. Presently, Ministry has received overwh elming response for the latest invitations for 19 captive min ed. 69 companies have purcha sed the tender documents priced at Rs 5 lakh each. The Rail Ministry is also closely following up the implementatio n of the Freight Convoy Initiative which would help in improving mo bility of rakes required for coal loa ding.

Imported thermal coal had alw ays been costlier compared to the local availability. During Apr il to October soaring Spot Auc tion prices, sharp rupee depreciati on and import dependence res ulted in 20 to 30% rise in cost of coal for domestic players pro cur ing through both imported and indigenous sources. Whether coming months would provide some relief to the consumers will abs olutely depend on the winter coal dem and of the country. Wish all the readers merry Chr istmas and a very happy New Year ahead...........

4 | CCAI Monthly Newsletter November 2018

Content Vol. XLVI No. 20 November 2018

06 Consumers’ Page

Official Organ of the Coal Consumers’ Association of India. Disseminates News and Views on Coal and all other sources of Energy. 4, India Exchange Place - 7th Floor Kolkata - 700 001 Landline : +91 33 22304488 / 22621516 E-mail : sec.ccai@gmail.com Website : www.ccai.co.in

08 Power

Editor : Subhasri Nandi

12 Domestic

Annual Subscription Rs. 400/(including postage) MO/DD to be made in favour of “Coal Consumers’ Association of India” CCAI do not necessarily share or support the views expressed in this Publication.

18 Global 22 |Monthly Summary of Domestic Coal 24 |Energy Generation Report 26 |Production and Offtake Performance of CIL and Subsidiary Companies

28 |Monthly Summary of Imported

Coal & Petcoke

CCAI Monthly Newsletter November 2018

CONSUMERS’ PAGE Present Coal Scenario Coal India has produced 52.09 million tonnes of coal in November 2018 compared to 51.26 million tonnes in the same month of last year, a little growth of 1.6%. Total production for the period of April - November 2018 is 358.33 million tonnes, a growth of 8.8% compared to the same period last year. Offtake stood at 51.01 million tonnes in November 2018 compared to 50.71 million tonnes in same month of 2017, a growth of 0.6%. Thus, total offtake for the period of April-November is 391.82 million tonnes, a growth of 6.5% compared to the same period last year.

Consumers’ Concern 1. Coal Stock Position Coal stock levels in November stood at 12.85mt (8 days of inventory) with 23 plants having critical or super critical levels of inventory. This is an improvement from the last month which saw coal stocks at 10.1mt (6 days of inventory). Industries are yet to recover from the crisis due to slow materialisation of coal rakes. To meet the ongoing coal demand, India’s coal imports rose 9.7 per cent to 156.08 mt in the AprilNovember period of the ongoing fiscal, as against 142.25 MT in the last year. Coal imports in November increased 10.1 per cent to 19.47 mt, over 17.68 mt in the same period 2017.

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2. Supply of rakes from CIL Subsidiaries Coal stock situation at both Power plants and small, medium and even big industries are yet to recover completely from the crisis. Though loading of number of rakes have started increasing in comparison to last few months, but more rakes would be required from all the Subsidiaries of CIL to clear the backlog within a reasonable timeframe.

3. GCV slippage repeatedly found Power Consumers are repeatedly complaining of GCV slippage from different areas of ECL and BCCL.

In spite of Third Party Sampling & Analysis, consumers are not satisfied with the quality specially from these two Subsidiary Coal Companies resulting in loss to the Power Plants.

4. Request for conducting Special Forward and Exclusive Auctions Crunch in supply of the fossil fuel has compelled the consumers to procure coal by auction throughout the year for their survival. Therefore, both power and non-power sectors are apprehending that running of plants may be more crucial without immediate commencement of Special Forward and Exclusive Auctions to replenish any shortfall during operation.

6. Request for allowing maximum period of 24 months Performance Bank Guarantee instead of 64 months Performance Bank Guarantee is required to be deposited by the consumers for 64 months. But recently banks are showing reluctance to issue Bank Guarantees for such a long period of time. Therefore, consumers have requested to review the clause of 64 months Performance Bank Guarantee and allow the same for a maximum period of 24 months instead of 64 months as per agreement lock in period and that can be extended year on year.

7. Delay in refund of excess 3% CST 5. Additional charge for conversion from MCL and SECL of Rail to Road mode Though Coal India has allowed its customers to convert linked and auction quantity from Rail to Road mode on a monthly basis for better evacuation but Coal Companies are charging undue added premium when rail mode is converted to road mode.

While depositing payment against coal value, consumers deposited CST @ 5% instead of 2% against C-Form at requisite Quarter-end. Though they have timely submitted â&#x20AC;&#x2DC;Câ&#x20AC;&#x2122; form against their transactions there is inordinate delay in refund of excess 3% from CST value to the companies from MCL and SECL (since 2011-12).

Consumers have requested to charge only the premium fixed during initial Agreements instead of additional premium being levied on the Auction consumers.

Therefore, consumers have requested for arranging the refund of excess 3% CST charged by MCL and SECL.

CCAI Monthly Newsletter November 2018

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POWER All households to be electrified New power record! Power deby Dec-end under Saubhagya: mand at all-time high in October Power minister Peak power demand of the country breached the Power Minister R K Singh exuded confidence that 100 percent household electrification under the Saubhagya scheme would be achieved by the end of 2018 as only 5 million families are left to be covered. The Union and the state power ministers in a meeting in July had decided to provide electricity connections to all families by December 2018 against the earlier target of March 2019. Singh in an open article said that power consumer base was increasing at a rate of 100,000 per day and estimates suggested that the number of households left was less than 5 million. “At this rate, almost 50 more days required to achieve 100 percent household electrification. If we do it faster, less days to achieve the goal,” he added. India crossed the milestone of electrifying 20 million households under the Saubhagya scheme, which started in October 2017, on November 19, 2018. He lauded that the initiatives of the government have helped the country in achieving 24th rank in 2018 on World Bank’s Ease of Getting Electricity as against 111th rank in 2014.

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180 gigawatt (GW) mark in October — the first time in history — marking the reversal of the trend of tepid growth in energy demand since FY15 and signalling a spurt in industrial activity. The month’s peak demand of 180.4 GW was 9.8% higher than the highest level recorded in FY18. Power demand increased at a compound annual growth rate of just 2.6% between FY15 and FY18. At the same time, the electricity consumed in the country in October was 115.6 billion units (BUs), 14% higher than the corresponding month last year. To put this in perspective, the year-on-year rise in electricity requirement in October 2017 was only 3%. Energy consumed in Telangana this October was up 42% from the year-ago month. Other major states registering high growth in consumption were: Karnataka (31%), Andhra Pradesh (27%), Maharashtra (27%), Odisha (26%), Chhattisgarh (22%), Madhya Pradesh (19%), Gujarat (17%) and Bihar (16%). The rise in power demand coincides with the rampant addition of household connections under the government’s Saubhagya scheme. Apart from a pickup in industrial production, reduction in the average duration of power cuts also played a role.

Govt mulls round 2 of 2,500 Mw medium-term power purchase agreement auction Buoyed by a good response for the first tender of mid-term (3 years) power purchase agreement auction, the power ministry will bring its second round for 2,500 Mw capacities to give relief to stressed power assets, Power Secretary A K Bhalla said. A PPA is a prerequisite for getting coal supplies for power plants. Power sector is facing stress due to coal shortage and other issues. Many power projects are starving for coal in the absence of PPAs. The government’s scheme to auction 2,500 MW medium-term PPAs evoked good response and PPAs for 1,900 Mw capacities were signed under the scheme last month. “We found that a lot of interest is coming up for (the scheme to auction) 2,500 Mw medium-term PPAs. So definitely there would be PPAs coming up (on the block). This was a pilot. We will try to bring a formal scheme for another round of 2,500 Mw medium-term PPAs.

Farakka TPS and Kahalgaon TPS. Plants that have less than a day’s stock are Korba TPS and Kudgi TPS. Joint ventures of NTPC that are faced with zero or near zero days stocks are NSPCL Bhilai plant, NTECL Vallur plant and KBUNL Kanti.

NTPC to operationalise 800 Mw at Odisha’s Darlipalli power plant in FY19 Country’s largest thermal power producer NTPC Ltd plans to operationalise 800 Mw of its 1600 Mw (2x800) supercritical coal-based power plant at Darlipalli in Odisha’s Sundergarh in the current financial year. “The commissioning activities of 800 Mw are going on. The unit will be operational in the current financial year”, said a senior NTPC official. By September 2019, the full capacity of 1600 Mw is projected to start producing power. The total cost of the project is pegged at Rs 125 billion.Odisha will get 50 per cent power of the total capacity.

“We did not have difference between fixed cost and variable cost. There was no escalation (of tariff). Those points will be discussed. Whatever (issues) stakeholders have raised, will be discussed,” he said.

The power major will source coal from its Dulanga coal mine to meet the raw material requirements. For additional requirements, it will source from Mahanadi Coalfields Ltd (MCL), a 100 per cent subsidiary of the Coal India Ltd (CIL). The NTPC project will consume eight million tonnes of coal annually.

Fuel stock at ten NTPC power plants fall to zero

Besides Odisha (800 Mw), West Bengal (423 Mw), Jharkhand (142 Mw), Sikkim (21 Mw) and Bihar (215 Mw) are beneficiary states of the upcoming project.

Ten out of 24 thermal power stations of India’s largest power generation company, NTPC, are stranded with zero fuel inventory or stocks that won’t last a day.

“The power purchase agreements (PPAs) with all the states are already in place”, said the official.

This has hit generation and revenue as the state-run firm is unable to cater to higher demand, company executives said. About 64% or 24,030 megawatts of its capacity of 38,850 megawatts has ‘super critical’ stocks, enough to meet barely three days’ requirement, and almost the entire capacity of its joint ventures totalling 4,610 MW are similarly placed. NTPC plants that have no fuel inventory and are running on stocks arriving on a daily basis are Solapur Thermal Power Station, Sipat TPS, Simhadri TPS,

Sinha panel proposals will help solve sectoral issues: Ajay Bhalla, Power Secretary The empowered committee on stressed assets has made efforts to extensively cover issues raised by private power companies and some of these steps would not have been possible without a discussion at the cabinet secretary level, power secretary Ajay Bhalla told. The suggested reforms along with an increase in demand for electricity through household electrification programme are expected to address CCAI Monthly Newsletter November 2018

sectoral issues and alleviate stress in the power sector to a large extent, Bhalla told. The committee has given suggestions mainly relating to fuel issues and payment from discoms to generation companies, besides certain innovative ways to ensure that power gets sold, both in short and medium term by using an aggregation model. Once we get into implementation of these recommendations, some of the sectoral issues could immediately be addressed, he told. Efforts have been made to cover issues raised by independent power producers extensively.

Corporation of India (SECI), a company housed under the Ministry of New and Renewable Energy to facilitate the government’s solar energy projects, to release a tender to add 1,000 MW of solar energy capacity every month from November 2018 to February 2019. The tenders, if successfully bid for by developers, will add 4,000 MW to the already existing capacity of 25,000 MW in India. However, going by the muted reaction to recent manufacturing-linked tenders, it remains to be seen if anyone will bid for them.

2018 a sobering year for renewable energy in India The renewable energy sector in India has had a sobering year in 2018 with the number of new projects slowing down and investors finding that the sector is generating both lower power and financial returns than they expected. A Crisil report in August projected solar installations in FY19 would fall to 7,400 megawatts (MW) from a decadal high of 9,363MW in FY18. The pipeline of projects has weakened as well, with the Solar Energy Corp. of India Ltd looking to cancel bids of 2,400MW this year as tariffs were above its expectations while aggressive bidding by some firms to build portfolios has started to squeeze returns. “It’s not a great time for those who have invested in solar energy right now,” an industry executive said. “We’re seeing some investors let their top teams go for investments being far below expectations.” In the past month alone, three top executives in the renewable space have stepped down: Sanjay Chaturvedi, chief executive officer of renewable energy at Macquarie Group; Vinay Kumar P., managing director and chief executive (renewables) at Brookfield Asset Management; and Rohit Modi, CEO at Essel Infra and Smart Utilities.

India may have a tough time meeting its solar energy capacity targets as developers steer clear of government auctions As it heads into election year, the central government is wary of underperforming on its solar energy mandate. As a result, it has instructed the Solar Energy

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Why is the interest in these tenders waning? It seems that the lack of certainty regarding the demand for solar energy doesn’t justify the investment required. In June 2015, the Indian government announced that it planned to add100,000 MW of solar energy capacity by 2022. What seemed an ambitious target at the time became a lot more realistic over the next few years as a number of solar power projects were com-

missioned and India undertook the stewardship of the International Solar Alliance.

Falling solar power cost lead to pricing disputes The steep fall in the cost of producing solar power in recent years is now causing conflicts between different arms of state and central governments over the buying price of solar power.

Seci appealed against the order to Aptel, which in turn has stayed the matter pending a final decision, and in the interim, directed the discoms to pay Rs 4.50 per unit as Seci wanted. In 2016, Seci conducted auctions for 970 MW of solar projects in Karnataka at which the discovered tariff was Rs 4.43 per unit. With the projects now complete, Seci sought to sign power sales agreements (PSAs) with four of Karnataka’s discoms, including Bangalore Electricity Supply Commission (Bescom) and Hubli Electricity Supply Comission (Hescom), to buy the power at Rs 4.50 per unit. In a letter on September 20, however, to all the four discoms, Kerc’s secretary declared that the commission had “examined the issue and noted that the PSAs do not reflect the tariff as discovered in the transparent bidding process”. “The commission has decided to allow a provisional tariff of Rs 4.36 per unit as payable to Seci for the energy supplied pending a decision on the matter,” the letter said.

Maharashtra govt to tax power consumers to finance solar pumps for farmers The Maharashtra government has imposed an electricity surcharge of 10 paise per unit on industrial and commercial consumers to finance its scheme to provide 25,000 solar pumps to farmers, a senior official said.

On November 2, the Appellate Tribunal for Electricity (Aptel) intervened with a stay order on a dispute between Karnataka’s power regulator and its discoms over the tariff at which to buy solar power from the Solar Corporation of India (Seci), an arm of the ministry of new and renewable energy (MNRE). Seci sought a tariff of Rs 4.50 per unit, but Karnataka Electricity Regulatory Commission’s (Kerc) refused approval for state discoms to buy at that rate, saying discoms should pay no more than Rs 4.36 per unit.

In view of the forthcoming Lok Sabha and Maharashtra Assembly polls next year, state Energy minister Chandrashekhar Bawankule had recently announced that farmers would be provided one lakh solar pumps in three phases between 2019 and 2021, of which 25,000 would be given in the first phase.The Maharashtra State Electricity Distribution Company has applied a 10 paise per unit surcharge from November 1 to collect funds for the farmers. Arvind Singh, principal secretary in the state Energy department, confirmed the move. “The total expense of the scheme is Rs 8.25 billion and since the state has no resources to spend on the scheme, we have decided to collect funds by applying a surcharge on consumers,” Singh said. He added that power consumers, comprising commercial and industrial users and excluding residential users, will have to pay an additional 10 paise per unit to the total consumption of monthly electricity units. CCAI Monthly Newsletter November 2018

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DOMESTIC Government to resolve issues Coal block auctions: Initial impacting coal output, supply: response positive, 69 firms Piyush Goyal purchase the tender documents Union Coal Minister Piyush Goyal said the govern- priced at Rs 5 lakh ment is committed to resolve the issues impacting production and supply of coal in the country.

He said the situation in the key sector has improved in the last four years. “We will be importing less coal than what we did four years ago and the quality of coal has never been so good,” he said at the ET Awards 2018 here. The government is committed to resolve all issues related to the sector, he added. Captive power producers coming from sectors like aluminium, steel and copper have been complaining the issue of coal supply to run their plants. In this regard, the Indian Captive Power Producers Association (ICPPA) had earlier submitted a letter to the Prime Minister’s Office (PMO) requesting to address the issue of coal availability and its supply. Supply of coal is a long standing issue for the captive power producers who unlike the independent power producers (IPPs) don’t produce it for commercial purpose.

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After the failure of last two tranches of coal-block auctions, the coal ministry has received “overwhelming” response for the latest invitations for 19 captive mined. A senior coal ministry official told FE that “as many as 69 companies have purchased the tender documents priced at `5 lakh”. The last two auctiontranches for the coal blocks, where 15 mines were offered, had to be cancelled as they could not even elicit three bidders to participate. The official attributed the positive reaction from the industry to the changes incorporated in the auction terms, such as, allowing private companies to sell up to 25% of production from the captive mines in the open market. “There are 11 mines which more than three parties want to bid for,” the person said. To regain the interest of private players, the tender terms were amended as per the recommendations of the high power expert committee formed under the chairmanship of former chief vigilance commissioner Pratyush Sinha. After the Supreme Court, in 2014, cancelled 204 coal

mines allocated to various government and private companies since 1993, 89 coal mines (53 PSU allotment, 31 auction) were successfully allocated for captive consumption for power and non-regulated sectors (steel, cement, fertilisers) through the Coal Mines (Special Provisions) Act, 2015. Out of these, agreements have been terminated for five auctioned mines. Industry sources have attributed the complexities related to procuring environmental and forest clearances to begin coal mining as a major impediment to private participation in the auctions. The last date for receiving final bids for the auctions have been extended to December 16. The ministry official attributed the postponement to the requests from some companies who wanted more time to visit the coal mines and make financial arrangements.

Coal prices soar as CIL reduces e-auction offers Reduced e-auction offerings by Coal India have contributed to an increase of one-and-a-half times in coal prices in the past year. This is twice as much as the increase in international rates. Analysts said the other factors were increased demand for coal from power plants and non-availability from regular channels for non-power companies, including captive power plants. Between April and September this year, Coal India offered 37 million tonnes of coal through its e-auction platform, 19% less than that in the year-ago period. This increased its average realisation 50% to Rs 2,491 per tonne during the period. Despite offering less coal, the company saw a near 21% increase in its income from e-auction to Rs 9,240 crore during the period from Rs 7,652 crore in the year-ago period, as prices shot up owing to lower availability. “Rising import dependence, increased seaborne thermal coal prices, a sharp rupee depreciation and rising spot eauction coal prices are estimated to have led to a 20-34% rise in coal costs between April and October for a player, depending entirely on mix of eauction and imported coal,” said Jayanta Roy, senior vicepresident at ICRA.

Unhappy Piyush Goyal asks Coal India to improve performance

Coal minister Piyush Goyal has asked chairmen of Coal India and its subsidiaries to cancel all travel plans and focus on meeting sales and production targets as the government is not satisfied with the performance of these companies. The directive was conveyed through a letter from the ministry to the top executives. In a separate letter last month, coal ministry directed Coal India to boost production and sales to at least 2 million tonnes a day. However, the company managed to achieve only 1.75 million tonnes of production and sales a day, which the ministry finds unsatisfactory. The ministry feels progress of overburden (top soil over coal seams) removal and stock liquidation is very slow. It was asked to liquidate 10 million tonnes of pit head stock during October. It pulled up Coal India’s top brass, saying poor project management, inordinate delay in floating tenders allowing investment to remain unutilised leading to deteriorating coal stock at power plants, and nonachievement of targets. It warned of strict action against erring, non-performing and poor performing officials of the company.

No coal mine to any private company without transparent auction: Ministry The report on coal block allocation to the Adanis published should have read ‘SC Notice to Centre for Reallotting Cancelled Coal Block to Adanis’. The coal ministry has issued the following clarification on the report: A news item appeared in The Economic Times, which alleged that the central government has been pulled up by the Supreme Court for re-allotting a cancelled coal block to Adanis. The central government led by Prime Minister Narendra Modi has not given any coal block whatsoever to any private company without a transparent auction process. The government had specially enacted the Coal Mines (Special Provisions) Act, 2015 (CMSP Act) to ensure transparency and accountability in the coal sector. Under Section 5(1) of the CMSP Act, coal mines can be only allotted to the Centre/states/PSUs. Parsa East and Kanta Basan coal blocks in Chhattisgarh were allotted to state PSU, Rajasthan Rajya Vidyut Utpadan Nigam (RRVUNL) after inviting applications CCAI Monthly Newsletter November 2018

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from PSUs. RRVUNL was selected on merit from applications received. To mine the coal, RRVUNL had appointed a mine development operator (MDO) which is a joint venture between RRVUNL and a private company. Further, as per Section 11 of the CMSP Act reproduced below, an MDO which was working on the mine before the cancellation of the coal blocks by Supreme Court can be retained by the allottee. Section 11, CMSP Act states: “Discharge or adoption of third party contracts with prior allottees –– (1) Notwithstanding anything contained in any other law for the time being in force, a successful bidder or allottee, as the case may be, in respect of Schedule I coal mines, may elect, to adopt and continue such contracts which may be existing with any of the prior allottees in relation to coal mining operations and the same shall constitute a novation for the residual term or residual performance of such contract.”

Demonstrators demand adequate supply of coal to Odisha industries A large number of people from western Odisha staged a demonstration here demanding adequate supply of coal to industries within the state to save them from being shut. People belonging to different

14 | CCAI Monthly Newsletter November 2018

spheres of life from places like Jharsuguda, Sundargarh and Sambalpur gathered near Master Canteen Square under the banner of “Bisthapit Sachetan Samiti” (BSS) to press their demand. The demonstrators, led by Congress leader and MLA from Jharsuguda, Naba Kishore Das, who is also Convener of the Samiti, also sent a memorandum to the Coal Minister highlighting their demands. The slogan shouting demonstrators held placards with messages like “Odisha’s coal – our right”, “Provide coal and save industries” and “Odisha’s coal for Odisha’s progress.” Das demanded that coal produced in Odisha should be utilised in the state first and requirement of local industries which are the backbone of socio-economic development must be met. The memorandum emphasised the need to increase the production of Mahanadi Coalfields Ltd (MCL) to bridge the demand-supply gap and urgent measures to be put in place by the company. Necessary steps should be taken to ensure coal security for the home-grown industries in Odisha before making allocation for industries based elsewhere. The memorandum also demanded that major portion of the total CSR fund of the industries of this region should be spent in Western Odisha besides employment for the local deserving candidates in MCL. It said 20 per cent of the net profit should be spent on CSR programmes by MCL. The demonstra-

tors had earlier stated staged a dharna outside MCL headquarters in Burla on November 21.

Coal India aims 60k-tonnes-aday output from Rajmahal mine State-run Coal India aims to raise output from its troubled Rajmahal mine in Jharkhand to 60,000 tonnes a day by March 2019, having resolved land-acquisition related problems which had crimped production to 20,000 tonnes per day. Coal from the Rajmahal mine helps NTPC run close to 4,200 mw of power generation plants in eastern India, which supply power to Bihar, Jharkhand and West Bengal, and also to northern India including Delhi and Uttar Pradesh. NTPC’s generation capacities were faced with depleting coal stocks and lower power generation as supplies from Rajmahal dwindled.

around 226 MT of traffic for the period under review as compared to 208 MT during the same period last year.In the year 2017-18, the private ports’ share in overall traffic at non-major ports was about 47 per cent with 97.2 MT of crago handling. The major commodities handled at GMB ports included crude oil, coal, containers and LNG. Notably, the only major port located in the State Deendayal Port Trust (DPT) at Kandla in Kutch registered 8.46 per cent growth for the period April-October 2018 at 68,471 tonnes (provisional). DPT, however, remained the largest port among the major ports in cargo handling.

Reserves at Rajmahal within the land acquired by Coal India were almost exhausted and required expansion to keep production levels intact. However, land acquisition at two villages – Bansbiha and Taljhari—spanning 160 hectares, adjacent to the existing project turned out to be a lengthy process, as sorting out ownership issues resulted in inordinate delay. It led to drastic fall in supplies and stocks at the coalfield, as well as at two critical power plants in the region—at Farakka and Kahalgaon.

Gujarat private ports record 16% traffic growth in April-October Private ports in Gujarat have reported a healthy growth of 16 per cent in cargo handling for the first seven months (April-October 2018) of the fiscal. At 113 million tonnes of cargo handling for the period, the share of private ports in the overall cargo handling at all non-major ports in the State stood at 50 per cent. A Gujarat Maritime Board (GMB) - the state port regulator data revealed that for the month of October 2018, Adani Group-controlled Mundra Port handled 74.4 million tonnes, up 13 per cent on year-on-year basis, while Dahej Port and Pipavav Port witnessed growth of 22 per cent and 21 per cent respectively at 18.9 MT and 5.8 MT of cargo handling for the month respectively. Overall the GMB ports (non-major ports) handled

Rail freight up 8.75% for most commodities Indian Railways increased freight rates by 8.75% for major commodities such as coal, iron and steel, iron ore and raw materials for steel plants. This could possibly lead to a spike in inflation. However, the freight rates for ‘essential goods’ including food grains, flours, pulses, fertilisers, salt and sugar have not been increased, keeping in mind farmers and the common man. Also, the freight rates of cement and petroleum (including diesel) have not been increased. The transporter also increased haulage charges of containers by 5%. Freight rates for other small goods have been increased by 8.75%. The transporter expects an additional revenue generation of Rs 3,344 crore for the revised freight rates. CCAI Monthly Newsletter November 2018

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Steel industry faces coking coal challenge A reduction in the import of coking coal is a challenge before the country’s steel players in meeting the target production of 300 million tonnes by 2030-31. According to the steel industry, around 85 per cent of the coking coal requirement of manufacturers is currently coming from imports, while the remaining is from domestic production, including that of Coal India. However, the National Steel Policy has envisaged an increase in the share of domestic washed coking coal and a lowering of import dependence to 50 per cent by 2030-31. To achieve a target of 300 million tonnes of crude steel production, the estimated coking coal requirement is around 161 million tonnes. But, the bulk of the 34.5 billion tonnes coking coal reserves in the country is not adequate to form good quality coke because of the high impurity in indigenous coal.

Government’s import bill down Rs 8,000 crore on domestic steel procurement policy 16 | CCAI Monthly Newsletter November 2018

The government has been able to save Rs 8,000 crore worth of import bill ever since it has promulgated the policy of preference to domestic steel producers in the case of PSU procurement. Union steel secretary Binoy Kumar said, the policy came into force from May 2017. It has been estimated that the government can save import bills worth up to Rs 39,000 crore per annum if the capital goods industry can source the required steel domestically for manufacturing critical capital goods instead of imports. “This needs transfer of technology for which in the recently concluded capital goods conclave in Orissa there were 11 MOUs signed by various foreign and domestic steel producers. This would boost R&D that would help manufacturing special grade of steel needed for manufacturing critical capital goods,” Kumar said. Tata steel CEO and managing director TV Nadrendran said in the changing scenario the business model for the entire steel sector needs rethinking. Smart, digitally enabled, steel units needs to be put up to bring about a change in the system of production, while the entire model of steel business from carrying raw materials to distribution and marketing of finished steel needs rethinking.

Steel industry growth hikes In- Ultratech Cement makes Binani dia’s coal imports by 8% to 134 its subsidiary mt in Apr-Oct A day after the apex court cleared its bid for Binani India’s coal imports rose by 7.9 per cent to 134.46 million tonnes (MT) in the first seven months of the current fiscal, according to mjunction services. The country imported 124.57 million tonnes of coal in the corresponding period of previous fiscal. “During April-October 2018-19, India’s coal and coke imports stood at 134.46 MT, about 7.9 per cent increase over 124.57 MT recorded for the same period last year,” mjunction services, a joint venture e-commerce platform of Tata Steel and SAIL, said. However, there was a 6.8 per cent drop in coal and coke imports in October as compared to 19.77 MT imported during the same month last financial year. Commenting on the coal import trend, mjunction CEO Vinaya Varma said, “India’s thermal coal demand remained buoyant due to the coal shortage in the power sector. However, there was an expectation of further corrections in spot coal prices, which might have delayed some procurement plans. In the met coal segment, a healthy growth in the steel industry and expectation of a price rise led to higher volumes.” Coal and coke imports during October through 31 major and non-major ports are estimated to have increased by 3.55 per cent over September in the ongoing financial year. The government had earlier said that during 2017-18, coal imports increased to 208.27 MT due to increase in demand by consuming sectors.

Cement, Ultratech Cement announced that the Braj Binani group flagship company has become a subsidiary of Ultratech. The board of Binani Cement has also been reconstituted, Ultratech told. “In terms of the Company’s Resolution Plan approved by the National Company Law Appellate Tribunal, the Board of BCL has been re-constituted and BCL has become a wholly-owned subsidiary of the Company with effect from 20th November, 2018,” Ultratech said in a notification to the Bombay Stock Exchange. The Supreme Court held the appellate tribunal’s order that approved Ultratech’s bid for Binani Cement as part of the insolvency law. The NCLAT on November 14 had dismissed rival bidder Dalmia Bharat’s plea on the ground that its offer of Rs 6,932 crore was “discriminatory” against some operational as well as financial creditors. Through its offer of Rs 7,950 crore for the asset, Ultratech has gotten the ownership of a 6.25 MT plant in the state of Rajasthan that comprises an integrated cement unit with capacity of 4.85 MT and a 1.4 MT split grinding unit. Binani Cement has also expanded its operations to Dubai and China and apart from India, enjoys major market share in countries like UAE, Sudan, South Africa, Tanzania, Madagascar and Namibia, according to information on its website.

CCAI Monthly Newsletter November 2018

| 17

GLOBAL energy analyst at Carbon Tracker and More than 40 percent of world Ljungwaldh, co-author of the report. coal plants are unprofitable, says Coal price drops one third as Chireport More than 40 percent of the world’s coal plants are na shuts door on Australian imoperating at a loss due to high fuel costs and that ports until 2019 proportion could to rise to nearly 75 percent by 2040, a report by environmental think-tank Carbon Tracker showed. Institutional investors are increasingly divesting from fossil fuel companies due to the risk their assets will become stranded as tougher emissions cut targets discourage their use and renewable energy becomes even cheaper. London-based Carbon Tracker analysed the profitability of 6,685 coal plants around the world, representing 95 percent of operating capacity and 90 percent of capacity under construction. It found that 42 percent of global coal capacity is already unprofitable. From 2019 onwards, it expects falling renewable energy costs, air pollution regulations and carbon pricing to result in further cost pressures and make around 72 percent of the fleet cashflow negative by 2040. In addition, by 2030, new wind and solar will be cheaper than continuing to operate 96 percent of existing and planned coal plants, the report said. “Our analysis shows a least-cost power system without coal should be seen as an economic inevitability rather than a clean and green nicety,” said Sebastian

18 | CCAI Monthly Newsletter November 2018

China has shut the door on coal imports until at least next year, creating uncertainty in the Australian market, according to one industry analyst. Limits to imports were initially put in place in the middle of this year but now Chinese authorities have stopped all imports of coal from across the globe and the ban is not expected to be lifted until early 2019. Mike Cooper said there was an oversupply of coal in China. He said unless there was a very cold winter, further imports would not be needed for the next couple of months at least. “China has produced so much coal for the winter period the power companies have 30 days worth of consumption on their stockpiles,” he said. “It’s really creating tidal waves of uncertainty in the market.” Thermal coal prices for delivery to China have

dropped significantly as a result, falling from $90/ tonne in February to $60/tonne.

Australian thermal coal price recovery rests on colder Asian winter weather

imports fell 21% year on year to nearly 12m tonnes. Most of the imported coal is used in power generation. Spanish coal-fired generation in September surged 46% from a year ago to 4.1 TWh amid unseasonably warm weather, triggering more air conditioning use, according to TSO data.

China’s appetite for coal is rising again despite a surge of investment in alternative energies, limits on coal use, and the establishment of “no-coal zones” throughout the country designed to help it meet climate pledges.

Higher gas prices could increase coal generation but capacity uncertain: analyst

“China embarked on an energy transformation in terms of cutting coal and developing renewables, but we are now facing difficulties on both fronts,” Li Shuo, senior climate adviser with Greenpeace told.

Higher natural gas prices could theoretically lead to a substantial increase in coal generation, but coal producers and railroads are hardly positioned to deliver, an equity analyst said.

Though some studies have suggested China’s total climate-warming carbon dioxide emissions peaked at 9.53 gigatonnes in 2013, well ahead of its official target of “around 2030”, the environmental group said they could reach a new high this year or next. Coal production has risen 5.1 percent in the first threequarters of this year to 2.59 billion tonnes.

Mark Levin, of Seaport Global Securities, in a research note, said current gas prices mean nearly every coal basin “is in the money,” but coal producers still face plenty of uncertainty.

When US President Donald Trump said he was pulling the United States out of the Paris climate accord last year, China reaffirmed its commitments to tackle its use of coal, by far its biggest source of carbon emissions. The country has made progress in cutting the share of coal in total energy use, with the figure expected to drop to 58 percent by 2020, down more than 10 percentage points in a decade. It has also met a 2020 target to reduce the amount of carbon dioxide (CO2) it emits per unit of growth. But the absolute volumes of both coal and CO2 remain by far the world’s highest, and are still set to rise.

Spanish coal imports dive 36% in September Spanish coal imports dived 36% year on year in September to almost 1.3m tonnes, customs data showed . Colombia was Spain’s biggest coal supplier providing more than 435,000 tonnes, compared to just barely 835 tonnes in the same month last year.

Levin noted that every 25-cent change in the Henry Hub gas price equates to a roughly 1% shift in market share from gas to coal, and that each 1% change in market share equals roughly 22 million st of utility coal demand. If gas prices average $4/MMBtu in 2019 and all other factors hold equal, the US could experience a nearly 90 million st increase in power sector coal demand, an increase of 14%, he said. “That’s the theoretical math,” Levin said. “Those type of gains, however, simply aren’t practical. The coal companies aren’t in position to produce that kind of volume, and the railroads likely aren’t ready to handle it.” Through August, coal has averaged 27.3% of total US generation while gas has averaged 34.8%, according to Energy Information Administration data. In 2017, coal averaged 30.1% of generation and gas averaged 31.7%.

Coal prices to extend multimonth lows

Indonesian coal shipments to Spain dropped 39% to 395,000 tonnes, while Russia’s supplies more than halved to 201,000 tonnes.

European coal prices may extend multi-month lows this week as severe restrictions on Chinese imports sent shockwaves across the seaborne market, exacerbating the impact of high European stocks and plunging gas prices, participants said.

For the January-September period, the country’s coal

The API 2 front-quarter contract traded last down CCAI Monthly Newsletter November 2018

| 19

USD 1.60 from close at USD 83.75/t – its lowest since mid-April – while the front year was USD 1.03 lower at USD 84/t, on Ice Futures. The latter contract earlier reached its lowest since early May of USD 83.75/t. On the physical market, the Global Coal Des ARA index was down nearly 10% on the week, at USD 87.92/t. Participants pointed to the bearish impact on international coal prices of China effectively halting coal imports until the end of the year. Montel reported earlier the world’s largest coal consumer will not permit any more imported coal for customs clearance until January, to keep import levels below 2017’s record 271m tonnes. “China is certainly playing the major role,” said a coal analyst with a European trading firm, adding, however, high stock levels at Amsterdam, Rotterdam and Antwerp (ARA) dry bulk terminals were also weighing on API 2 prices.

China coal production rises 7.6% in October Chinese coal production in October rose by 7.6% on the year to 9.8m tonnes/day (305m tonnes), further alleviating any near-term need to increase imports, National Bureau of Statistics data showed. In response – and amid high stocks and government restrictions on imports – Chinese coal and lignite imports last month fell in October to a five-month low of 744,000t/day. Domestic output in the first 10 months of the year was meanwhile a marginal 1.6% higher than in January-October 2017, at 2.9bn tonnes, the data showed. “For the near future, Chinese coal demand is expected to remain bearish,” said an analyst with a trading house, adding the coal burn at coastal plants was lingering at below five-year lows. “Current inventories are adequate and macro data indicates slack [industrial] activity,” she said. Montel reported earlier Asia-Pacific coal prices faced further losses as China imposed stricter restrictions on imports and the market remained well supplied.

20 | CCAI Monthly Newsletter November 2018

Indonesia’s coal reference price down by 2.97pct for November 2018 The Jakarta Post reported that the government has set the Indonesian coal reference price for November at USD 97.90 per tonne, 2.97 percent lower than the price in the previous month, which was set at USD 100.89 per ton as a result of the global coal price, in response to China’s ongoing import quota policy. Energy and Mineral Resources Ministry spokesperson Mr Agung Pribadi said the coal price decline was also sparked by the distribution issue in Australia and oversupply in Indonesia. Mr Pribadi said that “The delay in coal distribution in Australia affected the ICE Newcastle index. There is also an oversupply in in our country as a result of slowing demand from India and China.” This year, the government targets national coal production of 485 million tons, 25 percent of which is for the domestic market obligation, which is equal to 121.25 million tons. Data from the Energy and Mineral Resources Ministry up to September show that coal production had reached 70.9 percent of the annual total target, or equivalent to 344 million tons.

MONTHLY SUMMARY OF DOMESTIC COAL Comparative Price of Domestic Coal: Power/Non-power. *The price shown in the Chart below is without: (a) Surface Transportation Charges. (b) State specific taxes. (c) Coal company or area wise charges if any. (d) Evacuation Facility Charges INR 50 per tonne w.e.f. 00:00 of 20.12.2017 GCV (Kcal/kg) (Mid-value)

G3-6400-6700

G5-5800-6100

G7-5200-5500

G10-4300-4600

G11-4000-4300

G12-3700-4000

Basic ROM price (Rs./te)

3144/ 3144

2737/2737

1926/2311

1024/1228

955/1145

886/1063

Tentative Ex-Mine Price*

4447/4447

3941/3941

2932/3411

1809/2063

1724/1959

1638/1858

coal Amid a sudden rise in coal demand from the power sector, the coal stocks fell to a 5-month low of 21 million tonne (mt) in the month of October, triggering fear of power plant outages, The Indian Express reported. Any inability on the part of the domestic coal sector to meet the rising demand could very well result in increasing burden on the country’s merchandise-trade and overall current account deficits, the report added. The imported coal of comparable thermal grades is nearly a third costlier when compared to the local availability. However, in a few cases, the landed cost of the imported varieties also reaches 1.5 times that of local coal. Shortage of thermal coal supply in India has pushed imports up to 85 million tonnes (mt) in the first half of the current fiscal compared to 75 mt logged in the same period last year.In fact, imports by nonregulated sectors such as cement, aluminium and steel accounted for about 68 % of the incremental thermal coal imports during the period. After the failure of last two tranches of coal-block auctions, the coal ministry has received “overwhelming” response for the latest invitations for 19 captive mined. A senior coal ministry official told FE that “as many as 69 companies have purchased the tender documents priced at `5 lakh”. The last two auctiontranches for the coal blocks, where 15 mines were offered, had to be cancelled as they could not even elicit three bidders to participate. Reduced e-auction offerings by Coal India have contributed to an increase of one-and-a-half times in coal prices in the past year. This is twice as much as the increase in international rates. Analysts said the other factors were increased demand for coal from power plants and non-availability from regular channels for non-power companies, including captive power plants. Between April and September this year, Coal India offered 37 million tonnes of coal through its e-auction platform, 19% less than that in the year-ago period. This increased its average realisation 50% to Rs 2,491 per tonne during the period.

Railways Indian Railways increased freight rates by 8.75% for major commodities such as coal, iron and steel, iron ore and raw materials for steel plants. This could possibly lead to a spike in inflation. However, the freight rates of cement and petroleum (including diesel) have not been increased. The Narendra Modi government has decided to adopt a hands-off approach towards the transportation of coal from mines to non-government generating stations, in a move that is expected to hit private power companies like Reliance Power and the GVK Group. According to people with direct knowledge of the matter, Central Coalfields Ltd (CCL), a subsidiary of Coal India, will no longer play in role in moving coal to ‘rail sidings’ for onward shipment to non-government power stations. ‘Rail sidings’ are low-speed track sections used for carrying shipments of goods.

22 | CCAI Monthly Newsletter November 2018

power The country’s power sector is poised to attract investments worth Rs 11.56 trillion between 2017 and 2022. Investments are expected to flow into thermal, hydro, nuclear and renewables segments. Between April 2000 and June 2018, FDI (foreign direct investment) inflows in the power sector reached $14.18 billion, accounting for 3.64 per cent of the total FDIs drawn by the country. A report by the Indian Brand Equity Foundation (IBEF) attributed the foreign investments into power sector to the 100 per cent FDI allowed in the sector under the automatic route. Power Minister R K Singh exuded confidence that 100 percent household electrification under the Saubhagya scheme would be achieved by the end of 2018 as only 5 million families are left to be covered. The Union and the state power ministers in a meeting in July had decided to provide electricity connections to all families by December 2018 against the earlier target of March 2019. Peak power demand of the country breached the 180 gigawatt (GW) mark in October — the first time in history — marking the reversal of the trend of tepid growth in energy demand since FY15 and signalling a spurt in industrial activity. The month’s peak demand of 180.4 GW was 9.8% higher than the highest level recorded in FY18. The Supreme Court has allowed states that buy power from large projects of the Tata, Adani and Essar groups to approach the central electricity regulator for a tweak in contracts to allow the producers to bill these states for higher cost of imported coal. The decision is seen as a major relief for the ailing power plants, built at a cost of Rs 50,000 crore, and their investors. The shares of Tata Power closed 12.5% higher while Adani Power rose 18.7% on news of the order.

CEMENT Cheaper cement imports from Pakistan are hurting the domestic industry, which is already reeling under the impact of low demand and high GST, cement producers in Punjab and Kerala claim. There’s been no customs duty on cement imports from Pakistan since 2007, making it competitive in comparison to the Indian product, especially in the states bordering Pakistan. Coal costs for the non-regulated sectors, primarily aluminium and cement, have gone up sharply by 2034% between April and October this year. The rising coal costs stems from domestic coal shortage and hardening of seaborne coal prices. The situation for the non-regulated players has also been exacerbated by rupee depreciation. With demand for cement showing recovery in southern India, manufacturers including Chettinad, Ramco and India Cements are readying plans to expand capacities or put up new factories. Cement demand in south India has been damp squib for more than four years on the back of excessive capacity and poor prices. This forced manufacturers to trim production and maintain price line. Organic demand growth has resulted in better capacity utilization. “We are witnessing early signs of demand revival. For now, our cement plants are operating at 80% of rated capacity. A year ago, it was 66%,” said vice chairman & MD of The India Cement, N Srinivasan.

steel Union Steel Minister Chaudhary Birendra Singh said that producing quality steel could help India compete with China, even though China’s total production is around 8-9 times that of India. Singh said that despite having brilliant engineers and scientists, India wasn’t leading innovation in steel technology. “Updating technology is not innovation,” he said. This would help reduce the import bill of an estimated $28 billion that is required to expand capacity to 300 million tonnes from the existing 135 million tonnes by 2030. India’s crude steel production rose 2.1 per cent to reach 8.520 million tonnes (MT) in September 2018, global steel body world steel said in a report. The country had produced 8.345 MT steel during the same month last year, the World Steel Association (world steel) said. According to the report, India’s steel output during January-September 2018 was 6.1 per cent higher at 79.660 MT, as against 75.048 MT during the corresponding period of 2017. CCAI Monthly Newsletter November 2018

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24 | CCAI Monthly Newsletter November 2018

6780

BHUTAN IMP

Source CEA

NOV-2018

63.77

61.58

76.99

TOTAL

5000

1265000

NUCLEAR

BHUTAN IMP

38500

130000

ACTUAL*

58.92

HYDRO

1091500

PROGRAM

274640.27

THERMAL