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Feb. 2 (Bloomberg) -- Coal India Ltd., the world’s biggest producer of the commodity, has put on hold a plan to import as much as 250 million metric tons of the fuel over a decade, three people with knowledge of the matter said.
The company scrapped a proposal to buy 4 million tons of coal this year and suspended a separate plan to import about 20 million tons annually over a decade as it could not agree with customers on delivering the fuel to plants, the people said yesterday, asking not to be identified because they’re not allowed to speak to the media. Coal India spokesman Devendra Prasad didn’t immediately respond to an e-mail seeking comment.
Customers, including utilities, want coal to be delivered at their plants, while the mining company offered to unload shipments at ports, the people said. Coal India typically sells its domestic output to customers at the mines and doesn’t engage in inland transportation, they said.
“Inland movement of coal has been a big issue that needs to be sorted out or it will hurt power production and in turn, economic growth,” said Alex Mathews, head of research at Kochi, India-based Geojit BNP Paribas Financial Services. “Many power producers have kept their capacity addition plans on hold because of coal shortages and Coal India’s decision is another sign that the problem is becoming bigger.”
India’s coal production has trailed demand from utilities, and cement makers because of delays in land acquisition and environmental approvals. Output in the year ending March 31 is expected to reach 559 million tons, falling short of demand by 137 million tons, Coal Minister Sriprakash Jaiswal said in September. Supplies from countries such as Australia, Indonesia and South Africa may be needed to meet the gap.
Coal India sought to buy 20 million tons of the fuel in a tender last year, the country’s single-largest overseas order, as part of a plan to import 250 million tons of coal over a decade, a company official said in April, declining to be identified because the matter was confidential.
The state-owned miner has been seeking construction of at least four railway links for as many as six years, to ease congestion and enable a 66 percent increase in output. Many Indian mines are operating at one-third of capacity as the rail system can’t move more cargo, according to Alok Perti, secretary at the coal ministry.
India has added an average 180 kilometers (112 miles) of railroads every year since gaining independence in 1947, according to the rail ministry. The nation may build a dedicated 3,300-kilometer freight rail network that will connect eastern and western regions by 2017.
Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, rose 3.6 percent in the week ended Jan. 27 to $118.80 a ton from $114.65 the previous week, according to IHS McCloskey data on Bloomberg.
Separately, NTPC Ltd., India’s biggest power producer, may award Adani Enterprises Ltd., India’s largest coal importer, contracts to import as much as 4 million tons of coal, three people with knowledge of the matter said yesterday. The total order from NTPC is worth $475 million, according to calculations based on current Newcastle prices.
--With assistance from Rajesh Kumar Singh, Kartikay Mehrotra and Karthikeyan Sundaram in New Delhi. Editors: Abhay Singh, Stephen Cunningham
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