KOLKATA | Oct 23, 2017: Coal India (CIL) is likely to face up private competition well in the first lot of mines to be developed by rivals as the blocks on offer would be difficult to exploit and costly to operate, executives and analysts said. Two of the mines on offer didn’t find any takers when offered for captive mining several weeks ago, they said.

“For extracting every tonne of coal, five tonnes of top soil need to be removed from majority of these blocks. Producers may find it difficult to match prices of same quality of coal offered by Coal India from nearby mines after adding royalty and cess,” a senior executive from a coal mining outfit said. “Mines that Coal India didn’t find too attractive to develop were taken away from the monopoly and these are the ones that are offered under various auctions — either for captive or commercial,” he said.

Niladri Bhattacharjee, partner, strategy & operations, mining & metals at KPMG in India said: “Some of the blocks may be costly due to high stripping ratio and evacuation issues. However, given the current shortage of coal, interest may be there for the blocks. These costly blocks will find buyers only if logistics advantage can be obtained with respect to potential end use plants.” Strip ratio refers to the amount of top soil that needs to be removed before removing coal.

“It would be important for the commercial miners to map the potential end-use plants even at the bidding stage. The bidding amount can then be calibrated keeping an eye on a reasonable and competitive landed cost at the target end-use plants vis-à-vis existing alternate supply from e-auction, Coal India’s contracted supply and imported coal,” he said.

A power sector executive said Durgapur II at Chattishgarh’s Mand Raigarh district was offered under auction for captive mining but it didn’t find any takers. This block, with a total estimated geological reserve of 303 million tonne was allotted to Balco before it was de-allocated by the Supreme Court.

Dongri Tal II at Madhya Pradesh’s Singrauli district holds a reserve of 158 million tonne. It also didn’t find any takers when offered earlier. On offer would be Chendipada I & II and Mahanadi Macchakata blocks, both in Odisha’s Talcher district. They hold 1,812 million tonne and 1,400 million tonne of reserves, respectively.

Both mines were being operated by Adani group companies as mining development operators. According to executives in know of the nature of these two blocks, its viability would depend on how the ministry frames the policy on royalty and final selling price.

Others on offer are Madanpur in Chhattisgarh, with a reserve of 417 million tonne. It was being operated primarily by UltraTech along with 11 other entities before it was taken back by the government following the Supreme Court ruling.

Medinirai coal block at Jharkhand and Shankarpur Bhatgaon II Extension are also on offer for commercial mining. They hold coal reserves of around 81 million tonne and 80 million tonne, respectively.

According to reports, the companies that offers to pay the highest amount of royalty to states for each block will be declared winners.

(Source: https://economictimes.indiatimes.com/)