The Coal India (CIL) board has given the management the green signal to step up acquisition of foreign coal mines. Acquiring mines abroad is necessary since coal production at home will fall far of short of demand.
The gap between the power sector?s requirement and domestic coal supplies has been estimated at 292 million tonne in the 12th Plan period ending FY17. The Planning Commission has set a target of 76,000 mw of power capacity to be added in the 12th Plan over the current installed capacity of 1,82,689 mw. The Planning Commission points out that coal supply domestically from CIL and Singerani Collierieswill be only 450 mt, by the end of the 12th Plan period, against a total requirement of 842 mt.CIL has set itself a production target of 556 mt by 2016-17; so, supply to the power sector could be a maximum of 415 mt.
CIL sees this as an opportunity to get into the business of imported coal, preferably through owning and developing overseas coal mines for which it has already earmarked R35,000 crore. The miner has cash reserves of nearly R60,000 crore; the firm’s profit after tax in 2011-12 was R14,788 crore, up 36% y-o-y.
CIL CMD S Narsing Rao said it will speed up activity at its foreign coal block at Mozambique and hopes to start drilling by next fiscal . The miner expects to mine 15 mt a year from its mines at Mozambique spread over 224 sq km. A CIL official said four parties have responded to the bid for capital restructuring of Coal India Africana (CIAL), a wholly owned CIL subsidiary, floated in August 2009 for exploring and drilling two Mozambique mines.
The bids, however, are yet to be opened.
CIL has already signed a memorandum of understanding with the provincial government of Limpopo in South Africa to undertake exploration there. However, excavating from the overseas blocks will take a minimum of four years.
Considering an optimistic production of 100 mt from captive coal mines, the total domestic coal availability is projected to be 550 mt, which still leaves a huge shortfall. In FY12, CIL produced 435.84 mt. At the AGM last week, Rao said CIL is expecting a 6.5% growth in production this fiscal. Coal India will have to look for direct import options, but Rao clarified that imports will depend on orders and will be done safeguarding the company’s financial interest.
